Editor: Ali B.
Ali-Dinar
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This article is derived from a planning document dated November 1993, prepared at the Commercial Section of the American Embassy - Johannesburg. The article consists of 38 pages and analyzes the country's business and economic climate, giving emphasis to marketing and trade issues. It includes the following topics:
SOUTH AFRICA
COUNTRY MARKETING PLAN FY 1994
I COUNTRY DATA
A. Profile
-Geography: Located at the Southern tip of the African Continent, mostly temperate climate although some extremes in the desert region. Approximate area is 472,359 square miles, about the size of California, New Mexico and Arizona.
-Population: 39.8 million (1991) including the residents of the Transkei, Venda, Bophuthatswana and Ciskei, the so-called "independent homelands". Racial composition: 70 percent Black; 18 percent White; 9 percent Colored (mixed race) and 3 percent Asian.
-Religions: Mostly Dutch reformed, other Protestant and Catholic denominations. Significant Jewish community among Whites and a substantial number of Muslims and some Hindus among the Asian population. Most Blacks are Christians, but a minority still practice African Native religions.
-Government: At present constitutional with a strong executive branch, headed by State President F.W. de Klerk. The three chamber Parliament, based on race, provides limited representation for Asians and Coloreds, none to Blacks whose political participation is limited to the semi- autonomous homelands, segregated town councils, and multiracial regional service councils. The Government and major (mostly Black) opposition groups have agreed to non-racial elections on April 27, 1994 and the transition to a fully representational government. A Transitional Executive Council (TEC) should be in place by the end of 1993.
Although the Government and the ANC have agreed on this schedule, not all of the smaller groups, White and Black, have consented. While most observers are optimistic, the timing and success of the negotiated transition to democracy and majority rule still depends on reaching a consensus that all parties can live with.
-Languages: Afrikaans and English are the official languages. Blacks speak Zulu, Xhosa and several other indigenous languages. Urdu/Hindi and Portuguese also are in use.
-Commercial Environment: South Africa's economy is rather inward- looking and protected, although few commercial restrictions are placed on repatriation of profits and dividends. Mercantile, company and insolvency statutes are based on English law, while the rest of the legal system generally derives from Roman-Dutch law.
-U.S. - South African Trade: South Africa remains the largest market for U.S. products and services on the Continent, taking 44 percent of all U.S. exports to Africa. U.S. exports to South Africa in 1992 totalled US$ 2.4 billion, imports from South Africa were US$ 1.5 billion.
Major U.S. exports included electronic data processing and related equipment, aircraft and aircraft parts, wheeled or tracked mining equipment, construction and agricultural machinery. U.S. imports from South Africa in 1991 were mostly platinum group metals, ferrochromium, ferromanganese, ferrosilicon, manganese, chrome ore and other minerals, and diamonds and other gemstones. The improved political climate offers further opportunities for American suppliers.
-Work Week: Monday through Friday, 8:30 am to 5:00 pm.
The full range of U.S. Department of Commerce programs is available for South Africa. The Agent Distributor Search (ADS), World Trader Data Report (WTDR), Trade Opportunities Program (TOP), Customized Sales Survey (CSS); Gold Key Service and other services and information products are available at post, or from any U.S. Department of Commerce District Office in the United States.
The Overseas Business Report (OBR) for South Africa has been updated and is now available from the U.S. Department of Commerce District Offices or South African Desk Officer, the Superintendent of Documents or the National Trade Data Bank (NTDB). For more information contact a Department of Commerce District Office or the South Africa Desk Officer at (202) 482-5148.
Contacts Phone Fax Senior Commercial Officer: Johannesburg George Kachmar (27)(11)331-3937 (27)(11)331-3937 Commercial Officer: Johannesburg Vicky Eicher (27)(11)331-3937 (27)(11)331-6178 Country Desk Officer: Washington, D.C. Emily Solomon (202)482-5148 (202)482-5198 USFCS Regional Director: Washington, D.C. Charles Kestenbaum (202)482-4836 (202)482-5179B. DOMESTIC ECONOMY (USD BILLIONS)
1991 1992 1993(e) 1994(e) 1995(e)
-GDP (Current) (1) 107.9 114.8 113.2
-GDP projected avg.growth rate
through 1995 (percent) -0.6 -2.1 -0.5 1.6 4.0
-GDP per capita (dollars)(1,3) 2774 2884 2781
-Govt spending as percent GDP 27.7 28.2 31.3
-Inflation (percent) 15.3 14.0 9.7
-Unemployment (percent) (3) 40.3 43.0 46.0
-Foreign exchange reserves(2) 3.0 3.2 2.5
-Avg. exchange rate for
USD1.00 0.36 0.36 0.31
-Foreign debt (2) 19.0 19.0 19.0
-Debt service ratio (ratio of
principal and interest
payments on foreign debt to
foreign income) 7.0 7.0 7.0
-U.S. economic assistance 40.0 80.0 80.0
U.S. military assistance none none none
C. TRADE (USD BILLIONS)
1991 1992 1993(e) 1994(e) 1995(e)
Total S.A. Exports 23.7 23.5 23.5
Total S.A. Imports 17.4 18.2 18.5
Exports to U.S. 1.7 1.7 1.6
Imports from U.S. 2.1 2.4 2.5
U.S. share of S.A. Imports
(percent) 12 12 12
Imports of manufactured goods
-Total (from all countries) 11.00 10.77 10.71
-Projected average annual
growth rate through 1995
(percent) -0.6 -2.1 -0.5 1.6 4.0
-From the U.S. 1.9 1.8 1.9 2.5 2.7
-Projected average annual
growth rate through 1995
(percent) - 6 5 31 8 8
-U.S. share of manufactured
imports (percent) 14 16 17
- Trade balances with three
- leading partners in 1992 GERMANY U.S.A. U.K.
(USD Millions) Imports 2,786 2,420 1,535
Exports 1,999 1,701 1,585
Balances ( 787) ( 721) 50
Principal U.S. exports Automatic Data Processing Equip.
(by tariff line item) (8469/8471/8521)
(U.S. Harmonized Tariff Aircraft & Aircraft Parts
Schedule) (8802/8803/05)
Agricultural Machinery
(8432/8433)
Mining Equipment
(8428/8430/31)
Medical Equipment
(9003/18/30/31/32)
Principal U.S. Imports Platinum Group Metals (7110)
(By Tariff Line Item) Precious Metals (7106)
(U.S. Harmonized Tariff Base Metals (7107)
Schedule) Gold:(7108)
Diamonds (7102/7103)
D. INVESTMENT (USD BILLIONS)
1991 1992 1993(e)
-Total Foreign Direct Investment 7.0 7.1 7.3
-U.S. Direct Investment 0.9 0.9 1.0
(USD Billion and percent
share of total foreign 10.0 11.0 11.0
investment)
Principal Foreign Investors United Kingdom
(three countries) Germany
United States
For the past decade or so the Government of South Africa refused to
divulge statistics on trade and financial flows, to conceal
international sanctions violations and for fear of adverse publicity.
Information now is somewhat easier to obtain, but the veil drawn over
official statistics for South Africa - United States trade has not been
lifted fully. Statistics should be viewed as rough estimates.
1) - Current prices; increases in GDP at current prices are due to domestic inflation not reflected in the dollar/rand exchange rate.
2) - Year-end.
3) - Statistics are subject to interpretation. Official statistics depending on population are unreliable. Most economists believe that total unemployment in the economically active population now exceeds 50 percent and that Government estimates are on the low side.
Sources: From data available in July, 1993 from the South African Reserve Bank, Nedbank, Standard Bank, Central Statistical Services, Department of Trade & Industry, American Chamber of Commerce, various private forecasts and Post estimates.
II BEST PROSPECTS AND SECTOR EXPORT PROSPECTS
II. BEST PROSPECTS (Rate of Exchange: $1 = R3.22)
A) RANK OF SECTOR: 1
B) NAME OF SECTOR: AIRCRAFT AND PARTS
C) ITA CODE: AIR
D) Total Market Size (US$ Millions)
- 1992 1000
- 1993 (E) 1500
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 8-10
F) Imports, Total (US$ Millions)
- 1992 600
- 1993 (E) 650
G) Est. Avg Annual Growth Rate of Total Imports
(Percent) 8-10
H) Imports from U.S. (US$ Millions)
- 1992 308
- 1993 (E) 320
I) Est. Avg Annual Growth rate (1993-95) of imports from
the U.S. (Percent) 8-10
J-1) On a scale of 1 (lowest) to 5 (highest),
receptivity to U.S. products and services: 4-5
-- The U.S. has always dominated the South African aircraft
-- market, as their products are of a high quality.
-- South Africa imports approximately 50 percent of its
-- aircraft and parts from the United States.
-- American aircraft products enjoy an extremely high
-- reputation in South Africa.
J-2) On a scale of 1 (very heavy) to 5 (very little)
- competition for U.S. exporters from local domestic
suppliers: 3-4
-- Very little at present, but a local company recently
-- signed a multi-million dollar deal with Rolls-Royce
-- Aerospace Corp. of Britain to manufacture aircraft
-- engines and gearboxes in South Africa.
J-3) On a scale of 1 (very heavy) to 5 (very little)
competition for U.S. exporters from third-country
suppliers: 3
-- France is the major competitor. United Kingdom and
Germany are the lesser competitors.
J-4) On a scale of 1 (very severe) to 5 (very few)
overall effect of trade barriers on U.S.
exports of products and services: 4
-- No trade barriers exist except for the export of
-- aircraft and parts to military and police entities.
- Import duties range from O to 20 percent.
K) Comments: Light aircraft are used extensively to reach outlying areas of South Africa, i.e. ranches, mining sites and neighboring countries in Africa. U.S. products enjoy an excellent reputation. With South African air routes opening up, more large aircraft are needed to cater for the increase of passengers.
Note: South African Airways took delivery of two Boeing 767 aircraft during 1991. Two additional Boeing 747-400s and three Airbus 320s are due for delivery in 1993.
L) Most promising subsectors:
Airplanes of unladen mass exceeding 2,000 kg but not exceeding
15,000 kg
Market size: USD 200 m (e)
A) RANK OF SECTOR: 2
B) NAME OF SECTOR: INDUSTRIAL CHEMICALS
C) ITA CODE: ICH
D) Total Market Size (US$ Millions)
- 1992 1800
- 1993(E) 1810
E) Est. Avg. Annual Growth Rate of Market 1993-1995
(Percent) 8
F) Imports, Total (US$ Millions)
- 1992 1280
- 1993(E) 1408
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 8
H) Imports from U.S (US$ Millions)
- 1992 187
- 1993(E) 195
I) Est. Avg. Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 8
J-1) On a scale of l (lowest) to 5 (highest),
receptivity to U.S. products and services: 3
-- South Africa's receptivity to U.S. imports does not
-- differ from any other country, provided the country
-- supplies the desired chemical and the price is
-- competitive.
J-2) On a scale of 1 (very heavy) to 5 (very little)
competition for U.S. Exporters from local domestic
suppliers: 3
-- There are approximately 80 local manufacturers of which
-- 5 are major players in this sector.
J-3) On a scale of 1 (very heavy) to 5 (very little)
competition for U.S. exporters from third-country
suppliers: 2
-- Germany, United Kingdom and Japan also supply these
-- products.
J-4) On a scale of 1 (very severe) to 5 (very few),
the overall effect of trade barriers on U.S.
exports of products and services: 3
-- Certain chemicals require import permits. Customs
-- duties range from O to 25 percent.
K) Comments: South Africa imports about 70 percent of chemicals. Most domestic suppliers of chemicals are subsidiaries or agents of international companies.
L) Most promising subsectors:
a) Water treatment chemicals.
b) Pollution control chemicals
c) Chemicals utilized in polyurethane manufacture
d) Chemicals used in paint industry.
Market size: a) USD 85 m (e)
b) USD 60 m (e)
c) USD 24 m (e)
d) USD 15 m (e)
A) RANK OF SECTOR: 3
B) NAME OF SECTOR: COMPUTERS & PERIPHERALS
C) ITA CODE: CPT
D) Total market size (US$ Millions)
- 1992 800
- 1993 (E) 900
E) Est. Avg. Annual Growth Rate 1993-1995
(Percent) 8
F) Imports, Total (US$ Millions)
- 1992 490
- 1993 (E) 550
G) Est. Avg. Annual Growth Rate (1993-95) of Total Imports
(Percent) 8
H) Imports from U.S. (US$ Millions)
- 1992 155
- 1993(E) 160
I) Est. Avg. Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 5
J-1) On a scale of 1 (lowest) to 5 (highest),
country's receptivity to U.S. products and
services: 4
-- Although American companies lost their market share
-- because of sanctions, U.S. computers and peripherals
-- have high status in South Africa.
J-2) On a scale of 1 (very heavy) to 5 (very little)
competition for U.S. exporters from local
domestic suppliers: 3
-- No local production of computer hardware is done in
South Africa. Only assembly of no-name clones with
components imported from the Far East.
J-3) On a scale of 1 (very heavy) to 5 (very little)
the competition for U.S. exporters from third-
country suppliers: 2-3
-- Far Eastern countries are the main suppliers.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services : 5
-- There are no restrictions or quotas on computer
-- imports into South Africa. Customs duties range from
-- 10 to 15 percent and 5 percent surcharge on FOB prices.
K) Comments: South Africa imports most of its low-end computer hardware from the Far East. The market for PCs is changing in that computers are being sold directly to the public instead of channeling through dealerships. A number of U.S. based firms have entered South Africa and are importing established brand name products at highly competitive prices. The Taiwanese and locally assembled clones should face stiffer competition from the United States.
L) Most promising subsectors:
Digital ADP machines with central processing
input-output units
Market Size: USD 300 m (e)
A) RANK OF SECTOR: 4
B) NAME OF SECTOR: COMPUTER SOFTWARE
C) ITA CODE: CSF
D) Total Market Size (US$ Millions)
- 1992 400
- 1993 (E) 420
E) Est. Avg Annual Growth Rate of Market (1993-1995)
(Percent) 10
F) Imports, Total (US$ Millions)
- 1992 260
- 1993(E) 270
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 10
H) Imports from U.S. (US$ Millions)
- 1992 180
- 1993 (E) 220
I) Est. Avg Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 10
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 5
-- American products, technology and skills are rated high in
-- South Africa.
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 5
-- There is very little competition from local suppliers.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 4
-- Competitors are Germany, United Kingdom and France,
J-4) On a scale of 1 (very heavy) to 5 (very little),
overall effect of trade barriers on U.S. products
and services: 5
-- There are no restrictions or quotas on computer software
-- imports into South Africa. Intellectual value is exempted
-- from duty; a 15 percent duty is imposed on diskettes only.
K) Comments: Seventy-five percent of PC software originates from the United States; most of the balance comes from Germany. America leads the rest of the world with technology and skills, and enjoys a high profile in South Africa.
L) Most promising subsectors:
PC Software
Market Size: USD 195 m (e)
A) RANK OF SECTOR: 5
B) NAME OF SECTOR: DRUGS AND PHARMACEUTICALS
C) ITA CODE: DRG
D) Total Market Size (US$ Millions)
- 1992 939
- 1993 (E) 985
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 5
F) Imports, Total (US$ Millions)
- 1992 210
- 1993 (E) 218
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 10
H) Imports from U.S. (US$ Millions)
- 1992 19
- 1993 (E) 21
I) Est. Avg Annual Growth Rate (1993-95) of Imports from the
U.S. (Percent) 5
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 4
-- South Africa has high regard for the U.S. pharmaceutical
-- industry. Of the 45 foreign-owned pharmaceutical
-- companies in South Africa, nine are American.
J-2) On a scale of 1 (very heavy) to 5 (very little), the
competition for U.S. exporters from local domestic
suppliers: 2
-- Local production is taking place in South Africa
J-3) On a scale of 1 (very heavy) to 5 (very little), the
competition for U.S. exporters from third-country
suppliers: 2
-- United Kingdom, Germany, Switzerland. By ignoring
-- sanctions European companies were able to enhance
-- their market share.
J-4) On a scale of 1 (very severe) to 5 (very little), the
overall effect of trade barriers on U.S. exports of
products and services: 4
-- Certain chemicals require import permits, and customs
-- duties range from O to 25 percent.
K) Comments: Consumer resistance to the high cost of drugs is growing. Generic substitutes are not often requested, except for selected government tenders. The next government may create a state-controlled utility which would manufacture a wide range of basic generic drugs.
L) Most promising subsectors:
a) Anti-tuberculosis drugs
b) Anti-Biotics,
c) Anti-Inflammatory Drugs
d) Anti-malarial drugs
Market size: a) USD 34 m (e)
b) USD 29 m (e)
c) USD 19 m (e)
d) USD 17 m (e)
A) RANK OF SECTOR: 6
B) NAME OF SECTOR: MEDICAL EQUIPMENT
C) ITA CODE: MED
D) Total Market size (US$ Millions)
- 1992 250
- 1993(E) 265
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 5
F) Imports, Total (US$ Millions)
- 1992 210
- 1993(E) 220
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 5
H) Imports from U.S. (US$ Millions)
- 1992 35
- 1993(E) 45
I) Est. Avg Annual Growth Rate (1993-95) of Imports from the
U.S. (Percent) 5
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 4
-- South Africa has high regard for American products and
-- imports the latest in medical technology from the U.S.
J-2) On a scale of 1 (very heavy) to 5 (very little),
the competition for U.S. exporters from local
domestic suppliers: 4
-- There is little local manufacture of medical equipment.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 2
-- Major third country suppliers include Germany,
-- United Kingdom, Japan. Germany gained market
-- share in the X-Ray imaging sector, with Japan following
-- closely.
J-4) On a scale of 1 (very severe) to 5 (very few),
the overall effect of trade barriers on U.S. exports
of products and services: 4
-- Medical equipment is free of import restrictions.
-- Duties range from O to 20 percent.
K) Comments: Private hospitals are one of the fastest growing industry sectors, despite South Africa's recessionary climate. Day clinics in particular seem to be a strong growth area. South Africa imports almost all electro-medical equipment, and there is a special need for transportable medical equipment in some rural Black areas where electricity is not available. The medical profession complains about insufficient technical back-up and support; U.S. companies can use these services to a great competitive advantage.
L) Most promising subsectors:
a) Intensive care equipment
b) Diagnostic ultrasound equipment
Market Size: a) USD 40 m (e)
b) USD 30 m (e)
A) RANK SECTOR: 7
B) NAME OF SECTOR: AIRPORT & GROUND SUPPORT EQUIPMENT
C) ITA CODE: APG
D) Total Market Size (US$ Millions)
- 1992 400
- 1993 (E) 450
E) Est. Avg. Annual Growth Rate of Market 1993-1995
(Percent) 5
F) Imports, Total (US$ Millions)
- 1992 200
- 1993 (E) 250
G) Est. Avg. Annual Growth Rate (1993-95) of Total Imports
(Percent) 5-6
H) Imports from U.S. (US$ Millions)
- 1992 90
- 1993 (E) 100
I) Est. Avg. Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 5-6
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 5
-- U.S. avionic products are rated as one of the best in
-- the world, and enjoy a high reputation in South Africa.
J-2) On a scale of 1 (very heavy) to 5 (very little),
the competition for U.S. exporters from local
domestic suppliers: 5
-- Very little competition from local manufacturers.
J-3) On a scale of 1 (very heavy) to 5 (very little),
the competition for U.S. exporters from third-
country suppliers: 4
-- Major competitors include France, Germany and the U.K.
J-4) On a scale of 1 (very servere) to 5 (very few),
the overall effect of trade barriers on U.S. exports
of products and services: 4
-- No trade barriers exist for commercial use. Sales to
-- military and police entities are prohibited under current
-- U.N. resolutions. Customs duties range from 0 to 20
-- percent.
K) Comments: Airports are being upgraded and expanded to cope with the increase of light aircraft traffic. The international Government airport, Jan Smuts in Johannesburg, is expanding and upgrading to accept increasing numbers of flights and passengers. The upgrading of these airports should create business opportunities for equipment, airport design and engineering construction.
L) Most promising subsectors:
a) Flight simulators and parts thereof
b) Flight instruments
Market Size: a) USD 40 m(e)
b) USD 18 m(e)
A) RANK OF SECTOR: 8
B) NAME OF SECTOR: FRANCHISING
C) ITA CODE: FRA
D) Total Sales (US$ Millions)
- 1992 1200
- 1993(E) 1300
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 10
F) Sales by Foreign-Owned Firms (US$ Millions)
- 1992 800
- 1993(E) 900
G) Est. Avg Annual Growth Rate (1993-95) of Sales by
Foreign-owned firms (Percent) 10
H) Sales by U.S-owned firms (US$ Millions)
- 1992 630
- 1993(E) 750
I) Est. Avg Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 10
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 5
-- American franchise operations rate highly in South Africa.
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 4
-- Franchises are popular and growing rapidly in South
-- Africa. There are many local franchises operating
-- in this country.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 5
-- There is little or no competition from third-country
-- suppliers.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 5
-- No trade barriers exist.
K) Comment: The United States is the recognized world leader in franchising and South Africa follows the American example with great enthusiasm. The rapidly expanding franchise sector attempts to capitalize upon the dramatic growth in Black consumers' disposable income, as compared to that of other market sectors.
L) Most promising subsectors:
Fast Food outlets
Market size: USD 250 m (e)
A) RANK OF SECTOR: 9
B) NAME OF SECTOR: MACHINE TOOLS & METALWORKING EQUIPMENT
C) ITA CODE: MTL
D) Total Market (US$ Millions)
- 1992 300
- 1993 (E) 310
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 6
F) Imports, Total (US$ Millions)
- 1992 195
- 1993 (E) 200
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 6
H) Imports from U.S. (US$ Millions)
- 1992 40
- 1993 (E) 42
I) Est. Avg. Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 3-4
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 2-3
-- South Africa imports few American products in this
-- category.
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 3
-- Local manufacturers supply smaller equipment.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 2
-- The major competitors are Far East, China, Germany,
-- Spain and Italy.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 4
-- No trade barriers exist, customs duties range from 0 to
-- 25 percent. Major barrier is the Rand/Dollar exchange
-- rate.
K) Comments: The recession has also hit this industry and cut the demand for locally produced and imported machine tools. If there is an upsurge in South African manufactured exports, it will generate demand for machine tools. Opportunities exist for American suppliers.
L) Most promising subsectors:
a) Forging or die-stamping machines
b) Planing, milling and molding cutting machines:
Market size: a)USD 60 m (e)
b)USD 65 m (e)
A) RANK OF SECTOR: 10
B) NAME OF SECTOR: TELECOMMUNICATIONS EQUIPMENT
C) ITA CODE: TEL
D) Total Market Size (US$ Millions)
- 1992 300
- 1993(E) 320
E) Est. Avg. Annual Growth Rate of Market 1993-1995
(Percent) 10
F) Imports, Total (US$ Millions)
- 1992 98
- 1993(E) 109
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 10
H) Imports from U.S. (US$ Millions)
- 1992 30
- 1993(E) 34
I) Est. Avg Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 8
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 4
-- South Africa has high regard for American telecommuni-
-- cations equipment, but because of sanctions, the U.S. has
-- not been able to supply this market. Interest in U.S.
-- telecommunications equipment is however growing.
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 3
-- Telecommunications services and some equipment in
-- South Africa are mainly provided by Telkom SA Ltd., -
-- a state-owned corporation.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 2
-- Germany, France, Japan, and United Kingdom are the major
-- suppliers.
J-4) On a scale of 1 (very severe) to 5 (very few),
the overall effect of trade barriers on U.S. exports
of products and services: 4
-- Most telecommunications equipment is free of import
-- restrictions, although certain items e.g. telephones and
-- two-way radios, require an import permit. Duties range
-- from 5 to 15 percent.
K) Comments: South Africa's high regard for American technology and business practices provide opportunities for U.S. exporters, particularly in mobile communications. Demand in this category is expected to boom in the near future. Private operators will be granted licenses for mobile communications.
L) Most promising subsectors:
Mobile communications
Market size: USD 45 m (e)
A) RANK OF SECTOR: 11
B) NAME OF SECTOR: TEXTILE MACHINERY & EQUIPMENT
C) ITA CODE: TXM
D) Total Market Size (US$ Millions)
- 1992 180
- 1993 (E) 190
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 5
F) Imports, Total (US$ Millions)
- 1992 145
- 1993 (E) 150
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 5
H) Imports from U.S. (US$ Millions)
- 1992 9
- 1993 (E) 10
I) Est. Avg Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 4
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 2
-- Up to the present, U.S. products have not made an impact in
-- this sector.
J-2) On a scale of 1 (very heavy) to 5 (very little), the
competition for U.S. exporters from local domestic
suppliers: 5
-- There is very little local textile machinery production
-- in South Africa.
J-3) On a scale of 1 (very heavy) to 5 (very little), the
competition for U.S. exporters from third-country
suppliers: 2
-- Major competitors are Switzerland, Germany, and Italy,
-- with lesser amounts from Taiwan and France.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 4
-- No trade barriers or restrictions. Customs duties
-- range from 5 to 20 percent.
K) Comments: Europe is South Africa's traditional supplier, excelling in after-sales service and installation. The South African textile industry is protected because it creates jobs.
L) Most promising subsectors:
Textile weaving machines
Market size: USD 55 m (e)
A) RANK OF SECTOR: 12
B) NAME OF SECTOR: SECURITY AND SAFETY EQUIPMENT
C) ITA CODE: SEC
D) Total Market Size (US$ Millions)
- 1992 170
- 1993 (E) 175
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 8
F) Imports, Total (US$ Millions)
- 1992 95
- 1993 (E) 100
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 8
H) Imports from U.S. (US$ Millions)
- 1992 33
- 1993 (E) 40
I) Est. Avg Annual Growth Rate (1993-95) of Imports from the
U.S. (Percent) 5
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 4
-- American products are well received in South Africa
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 3
-- South Africa produces the basic security equipment.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 2-3
-- United Kingdom, Taiwan, Japan, and South Korea are the
-- major suppliers.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 3
-- No barriers exist, other than the U.N. prohibition of
-- sales to military, police and security forces. Customs
-- duties range from 5 to 20 percent; import permits are
-- required for certain equipment.
K) Comments: Political uncertainty, increasing levels of violence, and a prolonged deep recession have resulted in an escalating crime wave in South Africa, and heightened security awareness. This has created a demand for security and safety equipment for personal and perimeter security. Under sanctions the United Kingdom and Taiwan developed a market, but opportunities exist for American exporters.
L) Most promising subsectors:
Burglar, fire alarms
Market size: USD 25 m (e)
A) RANK OF SECTOR: 13
B) NAME OF SECTOR: COSMETICS & TOILETRIES
C) ITA CODE: COS
D) Total Market Size (US$ Millions)
- 1992 290
- 1993(E) 310
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 10
F) Imports, Total (US$ Millions)
- 1992 105
- 1993(E) 120
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 10
H) Imports from U.S. (US$ Millions)
- 1992 45
- 1993(E) 55
I) Est. Avg Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 5
J-1) On a scale 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 3
-- South Africans, particularly the Black population,
-- prefer American cosmetics and haircare products.
J-2) On a scale 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 3
-- Local manufacturers are hampered by the unavailability of
-- some raw materials, and the poor quality of local s
-- substitutes. Five local manufacturers cater mainly for
-- the White population.
J-3) On a scale of 1 (very heavy) to 5 (very little)
competition for U.S. exporters from third-country
suppliers: 3
-- Major competitors are France, Britain and Germany.
-- American manufacturers are still the dominant players
-- in the ethnic haircare market.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 2
-- High import duties and the present exchange rate have
-- reduced imports overall.
K) Comments: Haircare and cosmetics represent an ever-increasing percentage of Black consumer monthly household purchases. This will continue to increase due to rural-to-urban population shifts and a growing Black middle class, affirmative action, and a continued emulation of Western fashions and grooming.
L) Most promising subsectors:
Cosmetics for the ethnic market.
Market size: USD 30 m (e)
A) RANK OF SECTOR: 14
B) NAME OF SECTOR: SPORTING GOODS
C) ITA CODE SPT
D) Total Market Size (US$ Millions)
- 1992 130
- 1993(E) 135
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 6-8
F) Imports, Total (US$ Millions)
- 1992 65
- 1993(E) 70
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 6-8
H) Imports from U.S. (US$ Millions)
- 1992 8
- 1993(E) 9
I) Est. Avg Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 4-5
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 4
-- American products are rated very highly in South Africa.
J-2) On a scale of 1 (very heavy) to 5 (very little),
the competition for U.S. exporters from local
domestic suppliers: 3
-- Some sports equipment is manufactured in South Africa.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 3-4
-- Major competitors include the Far East and United Kingdom.
-- The United States dominates the golf equipment market
-- in South Africa. Most major golf equipment suppliers have
-- South African representatives.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 4
-- No trade barriers exist. Customs duties range from
-- 0 to 30 percent.
K) Comments: South Africans love sports, but the prolonged recession has reduced spending on sporting equipment and goods. Once South Africa pulls out of the recession, these expenditures will increase. Gyms and health clubs are very popular and are growing rapidly. Since the United States is the leader in this type of equipment, major opportunities exist in this category.
L) Most promising sub-sectors:
a) Health/exercise equipment
b) Water sport equipment: surfboards; sailboards
Market Size: a)USD 30 m (e)
b)USD 15 m (e)
A) RANK OF SECTOR: 15
B) NAME OF SECTOR: COMMERCIAL FISHING EQUIPMENT
C) ITA CODE: CFE
D) Total Market Size (US$ Millions)
- 1992 65
- 1993(E) 70
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 5
F) Imports, Total (US$ Millions)
- 1992 30
- 1993(E) 35
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 5
H) Imports from U.S. (US$ Millions)
- 1992 5
- 1993(E) 6
I) Est. Avg Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 4
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 4
-- Well received, particularly the marine engines.
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 3
-- Some fishing equipment is being manufactured locally.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 4
-- Taiwan, United Kingdom, Denmark and Spain are the major
-- third country suppliers.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 5
-- No trade barriers exist, and duties range from 5 to 20
-- percent.
K) Comments: South African fisheries yield approximately 1 million tons of fish per year, and has the potential of 5 million tons per year. Market is open to U.S. exporters in this category.
L) Most promising subsectors:
a) Marine diesel engines,
b) Fish landing nets.
Market size: a)USD 18 m(e)
b)USD 9 m(e)
SECTOR EXPORT PROSPECTS (SEP)
A) RANK OF SECTOR:
B) NAME OF SECTOR: AUTOMOTIVE PARTS & SERVICE EQUIPMENT
C) ITA CODE: APS
D) Total Market Size (US$ Millions)
- 1992 2000
- 1993(E) 2800
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 8-10
F) Imports, Total (US$ Millions)
- 1992 1000
- 1993(E) 1300
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 8-10
H) Imports from U.S. (US$ Millions)
- 1992 3
- 1993(E) 3.5
I) Est. Avg Annual Growth Rate (1993-95) of Imports from the
U.S. (Percent) 2-3
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 2
-- South Africa imports very little automotive parts
-- from the United States.
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 2
-- Over 500 different automotive components are manufactured
-- locally.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 1
-- Major competitors are Japan, Germany and United Kingdom;
-- lessor competitors include Korea, Taiwan, Italy and France.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 2
-- No trade barriers exist, but this is a very
-- protected industry. Customs duties range from 0
-- to 25 percent.
K) Comments: America lost market share because of sanctions- related disinvestment by major car manufacturers, e.g. Ford, Chrysler and General Motors. At present there are 158 component manufacturers and 7 car manufacturers. A recent press release announced that Chrysler was considering a joint venture with BMW S.A. to manufacture a new 4x4 jeep. Some opportunities for American exporters exist in this industry. Before disinvestment took place, the American automotive products were extremely well received, especially the Ford V8 engine.
A) RANK OF SECTOR:
B) NAME OF SECTOR: BUILDING PRODUCTS.
C) ITA CODE: BLD
D) Total Market Size (US$ Millions)
- 1992 125
- 1993(E) 130
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 5
F) Imports, Total (US$ Millions)
- 1992 15
- 1993(E) 16
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 4
H) Imports from U.S. (US$ Millions)
- 1992 1
- 1993(E) 1.2
I) Est. Avg Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 2
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 2
-- American products are well received in South Africa,
-- although not much is imported from the U.S. in this
-- category.
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition to U.S. exporters from local domestic
suppliers: 2
-- A large percentage of the building products are being
-- manufactured in South Africa.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 2
-- Zimbabwe, Italy, Germany and Taiwan are the major suppliers.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 5
-- No trade barriers exist. Customs duties on some
-- products range from O to 20 percent.
K) Comments: The South African building industry has been depressed for some time. The Building Industry Federation anticipates a strong upturn in cement sales for 1993, accelerating through 1994 and 1995. Should their forecast of boom conditions in the black housing sector materialize, there will be opportunities for American companies, especially providers of design and technology for low-cost housing units. Most of the South African Black population live in sub-standard housing, a problem which the new government will have to address.
L) Most promising sub-sectors:
a) Building design
b) Construction technology
Market size: a)USD 20 m (e)
b)USD 18 m (e)
A) RANK OF SECTOR:
B) NAME OF SECTOR: ELECTRICAL POWER SYSTEMS
C) ITA CODE: ELP
D) Total Market Size (US$ Millions)
- 1992 600
- 1993(E) 630
Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 6
F) Imports, Total (US$ Millions)
- 1992 268
- 1993(E) 278
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 6
H) Imports from U.S. (US$ Millions)
- 1992 45
- 1993(E) 48
I) Est. Avg Annual Growth Rate (1993-95) of Imports from the
U.S. (Percent) 5
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 4
-- U.S. products are well received in South Africa.
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 4
-- There is some local production.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 2-3
-- Germany, United Kingdom, France and Japan are the major
-- competitors.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 4
-- No trade barriers exist. Customs duties range from 5 to
-- 25 percent.
K) Comments: Eskom, the State power utility, plans to electrify an additional 3 million homes in South Africa over the next few years. Major opportunities exist for American exporters in this area.
A) RANK OF SECTOR:
B) NAME OF SECTOR: POLLUTION CONTROL EQUIPMENT
C) ITA CODE: POL
D) Total Market Size (US$ Millions)
- 1992 60
- 1993(E) 64
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 6
F) Imports, Total (US$ Millions)
- 1992 43
- 1993(E) 50
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 5
H) Imports from U.S. (US$ Millions)
- 1992 20
- 1993(E) 22
I) Est. Avg Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 5
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 4
-- Well received. According to the Central Statistics Services
-- Dept, South Africa imports a substantial amount of
-- pollution control equipment from the United States.
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 3
-- Some local production exists.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 3
-- Germany, Switzerland and Far East also supply the market.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 4
-- No trade barriers exist and customs duties range from
-- 0 to 25 percent.
K) Comments: The industry is likely to expand because of the increasing awareness of the need to protect the environment. Opportunities exist for American exporters.
A) RANK OF SECTOR:
B) NAME OF SECTOR: APPAREL
C) ITA CODE: APP
D) Total Market Size (US$ Millions)
- 1992 4500
- 1993(E) 4670
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 5
F) Imports, Total (US$ Millions)
- 1992 900
- 1993(E) 934
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 5
H) Imports from U.S. (US$ Millions)
- 1992 2
- 1993(E) 3
I) Est. Avg Annual Growth Rate (1993-95) of Imports from the
U.S. (Percent) 3
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 2
-- South Africa does not import much apparel from the United
-- States.
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 2
-- South Africa manufactures 80 percent of its apparel.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 1
-- China, Taiwan, Zimbabwe, India and Hong Kong supply the
-- market.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 2
-- Import licenses are required, and there is a high import
-- duty on finished garments.
K) Comments: Because of the depreciation of the Rand, the industry expects a decrease in clothing imports in 1993. Although South Africa produces the bulk of the wearing apparel sold, the industry still is short of capital. Sanctions effectively cut the United States out of the South African market. With the lifting of sanctions, more new and important markets should open. The market is greater for American investment than for American exports.
A) RANK OF SECTOR:
B) NAME OF SECTOR: LABORATORY SCIENTIFIC INSTRUMENTS
C) ITA CODE: LAB
D) Total Market Size (US$ Millions)
- 1992 235
- 1993(E) 240
E) Est. Avg Annual Growth Rate of Market 1993-1995
(Percent) 5-6
F) Imports, Total (US$ Millions)
- 1992 190
- 1993(E) 200
G) Est. Avg Annual Growth Rate (1993-95) of Total Imports
(Percent) 5-6
H) Imports from U.S. (US$ Millions)
- 1992 130
- 1993(E) 140
I) Est. Avg Annual Growth Rate (1993-95) of Imports from
the U.S. (Percent) 4
J-1) On a scale of 1 (lowest) to 5 (highest), country's
receptivity to U.S. products and services: 4
-- South Africa imports more than half of its equipment from
-- the United States.
J-2) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from local domestic
suppliers: 4
-- More equipment is imported than locally produced.
J-3) On a scale of 1 (very heavy) to 5 (very little),
competition for U.S. exporters from third-country
suppliers: 3
-- Germany, United Kingdom and Spain also supply the market.
J-4) On a scale of 1 (very severe) to 5 (very few), the
overall effect of trade barriers on U.S. exports of
products and services: 4
-- Import licences are required for some equipment.
-- Tariffs range from 0 to 23 percent.
K) Comments: South Africa imports a fair portion of the instruments from the United States. There are opportunities for expansion in this industry.
III. COMMERCIAL ENVIRONMENT
A. Political Factors: Progress continues towards transition to a non- racial democracy. In February 1990 President F.W. de Klerk unbanned most black political organizations and began to release political prisoners, most notably Nelson Mandela. Then in December 1991, 19 political groups, including the governing National Party and the African National Congress (ANC), convened the Congress for a Democratic South Africa (CODESA) to negotiate procedures to draft a new constitution. Sixty-nine percent of White voters approved F.W. de Klerk's reform initiatives in a historic referendum in March 1992, and the process appears irreversible, despite second thoughts among many Whites. Parliament approved the Transitional Executive Council (TEC) bill in September 1993, and Blacks will vote for the first time on April 27, 1994. But many of the economic and social inequities of apartheid have become entrenched structural problems which the new government will have to address on an urgent basis. Priorities will probably include job creation, provision of adequate housing and basic health care, plus an overhaul of the educational facilities.
Economic recovery and the business climate over the next few years will depend as much on political and social factors as on economic ones. The commercial environment will hinge on a peaceful political transition and, in the short term, on what steps the Transitional Executive Council or Government of National Unity take to reinvigorate the economy.
Many foreign governments and foreign and domestic private groups are active in facilitating peaceful change and economic growth in South Africa. The National Peace Accord and the National Economic Forum are two of the best known local entities. As neutral observers providing fora for multi- racial, non-political talks and interplay, these groups provide positive encouragement for peaceful change. The National Economic Forum aims for a negotiated consensus on critical economic issues among government, labor and business groups at the national, regional and local levels. Although slow to show concrete results, Churchill's adage that "jaw jaw is better than war war" well describes the attitudes of the participants, all of whom see the Forum and similar entities as making a real contribution to peaceful change, redressing the damage of apartheid and reconstructing the economy.
B. Economic Factors: The South African economy has been in recession for close to four years, complicating and hindering the historic political changes now underway. Gross domestic product (GDP) decreased by 2.1 percent in 1992, with large declines recorded in manufacturing, construction, commerce, and transport. In addition to short-term factors, stagnation in the South African economy results from long- festering structural problems: little real competition in the domestic market, shortages of skilled labor, protectionist trade policies, concentration of economic power and the high cost of inherent inefficiencies of duplicative apartheid institutions. Supporting the governments and economies of the so-called independent homelands has been an enormous drain on the country's finances. Slow growth in real non-farm production and a rapid population increase have resulted in a steady decline of real GDP per capita.
Most economists anticipated an economic upswing towards the end of 1992, but this and previous optimistic projections did not materialize because of the worst regional drought of this century. The timing and strength of any recovery also depends on the world econony, continued growth in the country's exports, and greater access to foreign capital following the lifting of trade and financial sanctions. Stubborn inflation, high interest rates, and a weak gold price may dampen prospects for a strong recovery. Gold prices surged to over US$ 400 an ounce in June 1993, before settling at approximately US$ 355 an ounce. Economists expect this and the firming of other commodity prices to continue into 1994.
Restrictive monetary and fiscal policies pursued to contain and reduce inflation lowered the rate to about 10.0 percent in 1992, but price indices are once again rising. The intransigence of inflation is blamed largely on increasing the VAT from 10 to 14 percent. Wage increases have moderated slightly because of the length of the recession, declining corporate profits, and high unemployment. Some of these problems are complicated by the two-tier exchange rate system. Many economists believe that the Commercial Rand used for most transactions is artificially overvalued and that the Financial Rand, used mainly for foreign investment, is closer to the real value of the currency. In September 1993, the Financial Rand was worth about a third less than the Commercial Rand.
While South Africa is mainly a free enterprise economy, state-owned firms have monopolies or near monopolies in telecommunications, postal services, water supply, television, rail and ports. In 1993, this began to change in the telecommunications and air transport sectors as private firms now offer cheaper long-distance telephone services and alternate airlines fly domestic routes.
Six groups control 85 percent of the companies listed on the Johannesburg Stock Exchange, but this year two of these firms began to divest themselves of some of their holdings. In addition, during the second half of 1993, the Johannesburg Stock Exchange began an educational program to entice Black capital into the market and to list Black companies on the exchange.
C. Commercial Factors: South Africa has a relatively sophisticated and modern economy based on manufacturing, mining and agriculture. It has a fairly efficient and well developed infrastructure, an adequate financial structure and a large commercial sector.
Although the economy is oligopolistic and of modest size by world standards, it is both the most open and the largest in Africa, and by far the most broadly developed. Economists believe that South Africa has the potential to grow at an annual rate of more than five percent, rather than the less than one per cent of recent years.
The 1991/92 drought in Southern Africa was the worst in this century, resulting in total failure of the country's corn crop and curtailment of other harvests for those years. The long term effects of the drought are profound, and include population migrations within and to South Africa. Many farmers are abandoning the countryside for the cities, where the population increase has resulted in a steady decline of real GDP per capita.
A decade of economic stagnation capped by four years of deep recession, fear and uncertainty about the next government's economic and land reform policies have led to pessimism and caution in the business community. Combined with concerns about escalating crime and violence and the slow pace of negotiations towards a peaceful transition to majority government, it also has produced frustration for the Black middle class and a trend towards White flight. Although exaggerated in media accounts, the loss to the country of those with education, skills and capital is great enough to cause Nelson Mandela and other Black leaders publicly to reassure South African Whites, and encourage them to stay.
ANC President Nelson Mandela made a powerful appeal for massive foreign investment and guaranteed foreign companies against expropriation or nationalization. In addition, he pledged that no restrictions would be placed on investments and that they would be able to recover their profits and dividends.
Early in 1993, the ANC endorsed the very successful "Made in USA" exhibition which was held September 7 - 11 1993 in Johannesburg. In May, the organization praised and thanked Digital Equipment Corporation (DEC) for bringing its technology and commitment to equal opportunity and community involvement to South Africa. The Treasurer General of the ANC made these remarks at DEC's opening reception, hosted by American Ambassador Princeton Lyman, and encouraged other American firms to follow Digital's lead. A number of other American companies already have returned to or entered South Africa; many others will come once state and local sanctions begin to disappear.
As a result of the reform process and ANC President Nelson Mandela's September 24, 1993 public call for a lifting of economic sanctions, South Africa is accepted again into the international community. Even before this, businesses from around the world started investigating the South African market and major airlines established passenger and freight services.
South African trade fairs in Dubai and Kenya in 1992 and 1993 were highly successful. During 1993, Germany and Thailand staged trade fairs in Johannesburg, and a Chinese trade fair will open in October. South Africa has also welcomed Trade Missions from a number of countries, including France, Belguim, Egypt, Nigeria, Spain, Poland, Korea, India and Germany.
South African trade missions have also successfully explored the markets in the Far East, Zambia, France, the United Kingdom, Turkey, Morocco and the United States. A buying mission from Poland will visit in October.
The American Chamber of Commerce
There is an active American Chamber of Commerce in Johannesburg, comprising most of the 106 U.S. companies that remained in South Africa as well as those who have entered or returned in the past two years. Affiliated AMCHAMS exist or are in formation in Namibia, Swaziland and Zimbabwe. The American Chamber of Commerce has been in the vanguard of positive change in Southern Africa. It was an early foe of apartheid and has been a major fund-raiser for the National Peace Accord. The contact address is:
Parastatals and Privatization
Government or quasi-governmental enterprises dominate or control telecommunications, postal service, water supply, railways, harbors, electricity generation, air services, and radio and television broadcasting. The manufacturing, mining, agriculture, commercial and financial sectors are mostly private, but the sale and distribution of agricultural products still is controlled largely by agricultural boards.
The Government and parastatal companies own an estimated 33 percent of the country's fixed assets, perhaps the highest such figure for any non- socialist country. The major parastatals include:
ESKOM: Has a near-monopoly in electricity generation, transmission and distribution.
TRANSNET: Air, road, rail and sea transport. Its principal companies are:
South African Airways - airline
Autonet - road transport
Spoornet - rail transport
Portnet - sea transport
Petronet - pipelines.
ARMSCOR & DENEL LTD: Arms and ammunition
TELKOM: Telephone and telecommunications services, formerly the Telecommunications Division of the Department of Posts and Telecommunications.
SOEKOR: Oil exploration.
THE INDUSTRIAL DEVELOPMENT CORPORATION (IDC) is state-funded, but with a non-political agenda. Its main function is to stimulate industry and investment and to promote the financing of new industries. The IDC planned to start selling off its Rand 2.7 billion in investment holdings in 1992 as part of the Government's restructuring program.
ALUSAF, the Aluminium Company of South Africa, is the country's only primary producer of aluminium. GENMIN, the second largest mining firm in South Africa manages and hold controlling interest in ALUSAF, and the IDC holds approximately 25 percent of the shares.
FOSKOR LIMITED, the Phosphate Development Corporation, mines phosphate rock and produces phosphate end-products. Wholly-owned by IDC, it has not been scheduled for privatization because of the recession.
In 1988 the Government embarked upon a widespread program to privatize and deregulate public enterprises. By 1990 the program resulted in the privatization of Sasol Three Ltd., Iscor Ltd., and Alusaf and the "commercialization", or removal of Government subsidy, of Transnet.
Although the South African Government still favors a privatization policy, the implementation is on hold except for ABAKOR, the state-owned abbatoirs. Telkom is expected to be the next candidate for privatization. Foskor Ltd. also is scheduled to be privatized. Many analysts believe that privatization must continue if the country is to survive and prosper; the issue is still unresolved.
D. Social and Cultural Factors: South Africans are very familiar with American culture and brand names, due in large part to American television, movies, recording artists and CNN. During the early years of South African television, i.e. the late '70's, American programming dominated the airwaves. This cultural flow continued during the sanctions era, and became even more popular and available following the 1991 lifting of sanctions. As a result, South Africans prefer American consumer products. American marketing techniques are also familiar because major American public relations firms operate in South Africa.
Blacks make up 80 percent of the population, but the potential of the Black consumer market traditionally has been underestimated. Black purchasing power has strengthened greatly as a result of wage improvements, urbanization and the dismantling of apartheid. Urbanization and electrification of black townships is creating new demand for products formerly bought mainly by Whites; Blacks now account for nearly 60 percent of all consumer spending in South Africa.
The repeal of the Population Registration Act, Group Areas Act and race- based restrictions on land ownership and use created new opportunities for Black entrepreneurs. At the same time, the South African Government's recognition of the importance of new and small businesses in job creation may open new avenues for Black business development.
Current economic and political debate is shaped by Black aspirations for rapid improvement in living standards, and by White apprehensions of loss of income and economic power. The debate has largely moved away from capitalism vs socialism, and nationalization rhetoric towards more constructive discussions among Government, the private sector, labor and political groups. These discussions now focus on how to allocate resources, maintain economic growth and a sound infrastructure, while also addressing urgent political and social problems. The National Economic Forum and other non-government organizations have assisted by providing a system for labor, business and government to reach accords by negotiations and consensus.
IV. FINANCING ENVIRONMENT
Documentary credits, essentially Letters of Credit, are the normal way to finance imports in South Africa. The most commonly used forms are irrevocable credits and confirmed irrevocable credits. Exporters concerned only about the reliability of the importer, should use an irrevocable letter of credit; if one also is concerned about the standing of the issuing bank or the importer's country, use a confirmed irrevocable letter of credit.
In South Africa all credits are subject to exchange control regulations and, where necessary, a South African import permit. Payment for imports can be effected only by authorized banks against submission by their customers of documentary proof that the goods were imported into South Africa, including invoices and shipping documents stamped by South African customs.
An exception is when South African banks have opened documentary import letters of credit in favor of foreign exporters. Payment in those instances may be effected against presentation by the exporter of invoices and shipping documents to the foreign negotiating bank before the goods have arrived in South Africa.
If credit is available, payment will take place on the presentation of the documents. The method of payment can be by either teletransmission or air mail, depending on the reimbursement clauses. The advising bank should, if possible, be the same bank as the exporter's bank. If the exporter's bank is unknown, the South African bank will advise the credit through a correspondent bank known to it in the United States, in the exporter's city if possible.
Barter/Countertrade: Although South Africa has no laws, regulations, or published policies regarding barter and countertrade, the Government views them as second-best alternatives for use only when normal trade cannot be conducted. There is no specific approval process for such transactions, but South African exporters must obtain prior approval from the Reserve Bank before concluding a barter transaction.
The U.S. Export-Import (Exim) Bank once again offers its programs in South Africa. A questionnaire on employment practices must be reviewed by the U.S. Department of State before approving loans for purchases by White- owned businesses.
V. TRADE AND INVESTMENT ISSUES/BARRIERS
A. Major Trade Barriers: There are few major trade barriers. Traders are subject to exchange control approval, administered by the South African Reserve Bank. This is only a formality. The Ministry of Trade and Industry is empowered to regulate, prohibit or ration imports to South Africa in the national interest and most goods may be imported into South Africa without restrictions. Import permits are required for various categories of goods and are obtainable from the Director of Import and Export.
Importers must possess an import permit prior to the date of shipment. Failure to produce a permit could result in the imposition of penalties. In recent years the list of restricted goods has been reduced.
The South African Government and banking system recognizes the need to turn the country from an isolated import substitution regime to a competitive, export focused market economy. In anticipation of the lifting of sanctions, companies from around the world have been introducing their products to South African distributors and end-users. As a result, many South African firms must adapt to genuine competition for the first time in years. To survive and to develop markets abroad, South African firms must institute quality and cost controls, practice aggressive marketing techniques, and become customer and service oriented. Many will become more competitive, but many that are not economically viable without protectionist measures will not survive. For products where price is the major factor, the steady devaluation of the rand will ensure that even inefficient industries continue to operate.
Tariffs and Surcharges: Progress towards the goal of changing the focus of the economy from import substitution to exports requires improving the competitiveness of the heavily protected industrial structure. Reduced tariffs and a realistic exchange rate would be steps in the right direction.
The Commissioner of Customs and Excise bases tariffs imposed on imported goods on the Harmonized Commodity Description and Coding System. Importers may determine the applicable customs tariff by reference to the Customs Tariff Book. Approximately 80 percent of specified tariff subheadings carry duty at rates between 5 percent and 25 percent. Surcharges at rates between 7.5 percent and 40 percent are levied on the import of selected products.
B. Major Investment Barriers: The Government of South Africa encourages foreign investment and treats it essentially the same as domestic enterprise, with only a few areas of economic activity reserved for domestic ownership. Foreign investors face differences regarding access to domestic financing, and local borrowing restrictions imposed by exchange control authorities, but have access to the two-tiered foreign exchange system. Using the Financial Rand is very advantageous for importing capital, as profits and dividends are remitted in Commercial Rand. Foreign investors can use the Financial Rand to purchase fixed assets, e.g. machinery, property, etc., and the Commercial Rand to remit income to non- residents, including dividends, interest and royalties.
Companies that are 25 percent or more owned or controlled by non- residents face limits on local borrowing. The primary purpose of these restrictions is to ensure the adequate capitalization of foreign investments and to prevent excessive gearing, i.e. a company borrowing against its share capital. The definition of local borrowing includes overdrafts, financial leasing of capital equipment, mortgage bonds and local shareholders' loans in excess of foreign shareholders' loans.
The main barrier to increased foreign investment is South Africa's uncertain political future. Substantial domestic markets with significant growth potential, a good infrastructure, access to other markets in Africa, liberal repatriation of profits, inexpensive power and abundant raw materials are attractive inducements which appeal to foreign investors. Although returns are fairly high, the risk factors of violence and political uncertainly continue to divert foreign money elsewhere and to generate outflows of domestic capital.
Foreign companies incorporated in South Africa operate under the same laws, rules and regulations as domestic firms. All business organizations of more than 20 persons that operate for gain must be registered under the Companies Act of 1973, which is based on British Company Law. Foreign companies that choose not to incorporate in South Africa must register with the Registrar of Companies, then file the year-end financial statements of both the parent and local companies, which then become public documents. Most foreign companies apply for an exemption from filing, which usually is granted.
U.S. State and local sanctions still hinder American trade and investment in South Africa. These sanctions include procurement bans, selective contracting and purchasing statutes, and mandatory divestment by pension funds, and they have varying conditions regarding termination. Now that ANC President Mandela has called for a lifting of economic sanctions, the process of repealing them has begun.
Once a Transitional Executive Council is in place, many anti-apartheid activists in the United States are likely to shift gears to work towards lifting sanctions and encouraging responsible business ties with South Africa.
VI. MARKET ANALYSIS PLAN (MAP)
A. Industry Subsector Analyses (ISAs)
B) Schedules Periodic Reports (SPR)
Report Title Due Date:
1218 Annual Listing of Holidays 1994 11/15/93
1219 Annual Listing of Trade Shows 1993/94 11/15/93
1205 Market share report - U.S. & 3 main
competitors (statistics and brief when available
analysis on the top three main but not later
exporting countries to South Africa, than 6/30/94
and top three main countries to which
South Africa exports.)
0004 Foreign Economic Trends
(Part 2: Implications for U.S. Business) Annual.
C) International Market Insight Reports (IMI) will focus on:
Post has given two Event I.D's and the names of both of the recruiting personnel as this event is listed twice in the Export Promotion Calendar FY 1993/94. There are two separate event I.D's and two different dates for this event.
Post has notified PRMS of this error.
MatchMaker Services
Matchmaker Services Limited (MMS) is a not-for-profit company funded privately by donors, participants and sponsors of its events, dedicated to matching black entrepreneurs with business opportunities. US&FCS South Africa established MMS in 1986 and provided strong support over the years by seconding an employee as its Executive Director. The rest of the US&FCS staff spent substantial amounts of time supporting MMS, particularly its annual "MatchMaker Business-to-Business" fair staged to foster contact between small black suppliers and buyers from large domestic and foreign companies in South Africa. The 1992 fair, featuring 125 black businesses, was the most successful ever. Many exhibitors concluded contracts for continuing business.
With the return to more normal commercial relations with South Africa, the US&FCS privatized this project. Since May 1993 Matchmaker Services Limited is supported jointly by the Soweto and Johannesburg Chambers of Commerce and Industries and the recently formed National Economic Initiative. USFCS continues in an advisory and supporting role, and will operate Business Information Officers (BIOs) at future MatchMaker fairs.
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