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It doesn't matter whether it's as close as Windsor or as far as Hong Kong or Zimbabwe, the Michigan District Export Council has someone who's been there and done that.  We encourage you to give us a try.

South Africa

Introduction

Ten years after the historic first general elections that resulted in democracy, South Africa has been a political and economic success story. With a stable political system, robust civil institutions, a consistent growth rate and very respectable investment ratings, South Africa has enjoyed due attention by US businesses. It deserves more. South Africa is unlike the rest of Africa. With first world infrastructure, communications and tertiary industries, South Africa is eminently placed to lead the whole southern African region to the next level in international trade and commercial opportunities.

There are already over 600 US companies represented in South Africa. Established and new U.S. entrants need to carefully explore and develop the local market for outright sales, joint venture and licensing opportunities. At the same time, the country is a logical site for global corporate positioning on the final commercial frontier, the African continent.

Now is the time for US companies to prepare their business development plans in southern Africa, before the US - SACU Free Trade Agreement (FTA) due to be signed in 2005, opens up the market for even more US exports.

A Stepping Stone Into Sub-Saharan Africa

Accessing the South African market is also a cost-effective means of gaining entry to the SACU (Southern African Customs Union: South Africa, Namibia, Botswana, Lesotho and Swaziland) as well as SADC (Southern African Development Community: Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe) markets. With its financial, management and transportation infrastructure, South Africa is the logical conduit for most commercial activities in the region. Retailing, channels of distribution, after sales service, as well as continent-wide strategic planning and project management are logically maintained from South Africa. Increasingly, foreign companies are moving their African head offices from London or Paris to Johannesburg, both for financial and practical reasons. Now is the time to consider doing business in South Africa.

Market Intelligence

1. U.S. TRADE WITH SOUTH AFRICA

US exports to South Africa constitute 9.7% of South Africa's total imports. Germany is South Africa's largest source of imports with 14% of South Africa's total imports. Most of South Africa's top trading partners faced downturns in exports to South Africa in 2002, due to the persistent weakening of the Rand (the South African unit of currency).

 US exports to South Africa are composed of high value-added items and commodities. In past years, US exports were significantly higher than during the last three years due to the sale of commercial aircraft. Main exports to South Africa included industrial machinery and parts; motor vehicles; aircraft and parts; and electric machinery, including telecommunications equipment.

In 2003, the US increased its imports from South Africa by 15%, due to increased demand for diamonds, platinum, and motor vehicles.

2. SOUTH AFRICA'S REGIONAL IMPORTANCE

South Africa is the economic, financial and technology hub in southern Africa. South Africa's economic position is reflected in its role in Africa. In relation to Africa, it accounts for

• 6% of the population
• 50% of purchasing power
• 18% of continent-wide GDP
• 50+% of electricity generated
• 45% of mineral production

South Africa has the largest and most diversified economy in the region and on the African continent. South Africa's geographic position offers access to markets, not only in Africa, but also throughout the Southern Hemisphere. Strong linkages between the domestic and regional economy determine South Africa's commercial interests and organizational objectives in the Southern African region.

As a member state of the Southern African Development Community (SADC), South Africa plays an important role in developing regional trade and cooperation. It also benefits from the SADC Free Trade Agreement that came into operation in September 2000. SADC consists of 14 countries with a total population of approximately 180 million.

South Africa is also playing a leading role in the Southern African Customs Union (SACU) negotiations on a Free Trade Agreement (FTA) with the United States. South Africa and its SACU partners (Botswana, Swaziland, Lesotho and Namibia) regard the proposed agreement as a significant step towards integrating SACU economies into the global economic system and promoting development in the region.

3. MARKETING STRATEGIES TO GAIN ACCESS TO SOUTH AFRICA

Even though the US lost market share in certain sectors during the sanctions years, the stronger Rand does make certain imports from the US again more lucrative. Furthermore, there are opportunities for creative export marketing strategies, such as:

• Piggy-back exporting, where a new market entrant makes use of an existing market player with cross-cutting service and product delivery. Piggy-back exporting into South Africa also ensures that the often mandatory regulatory requirements of Black Economic Empowerment (BEE) are met; a minimum requirement to access large contracts and SA Government tenders.
• Certain industrial participation off-set requirements in large SA Government contracts may present opportunities to increase US export advantages in other sectors.

4. TODAY'S CHALLENGES / OPPORTUNITIES

• Foreign businesspeople are often surprised by the already tight South African market conditions, and the level of sophistication and commitment required to enter the market. For practically all market segments in SA, access is almost as difficult as in most mature foreign markets.
• South African society reflects a very skewed income distribution, where 50% of the population earn only 11% of total domestic income. Therefore South Africa has a dualist economy with high consumption patterns, OECD-quality financial institutions and communications but also a large and unskilled labor pool.
• Many US exporters and investors require a return on investment in the short term that conflicts with the imperative but costly market development phase (marketing, distribution, goodwill, etc.).
• Not only are more and more new suppliers coming to this market, but those already on the market (especially the Europeans and Japanese) are being forced to reduce their margins to fend off new competition. This is leading to radical corporate re-engineering across South African industries. New entrants sometimes resort to introducing loss leaders to the market in order to ensure critical mass within a short period.
• Those with established production facilities in SA are making use of the South African Government's (SAG) industry incentives to off-set import duties against export earnings. This is making access to the market for new entrants without joint-venturing, etc. more difficult.
  

Best Prospects for U.S. Companies:

The traditional main U.S. export commodities are petroleum, aircraft, ICT, transportation, power generation and transmission equipment, machinery, organic chemicals and pharmaceutical products. U.S. companies are making inroads in environmental technologies, safety and security and motor vehicles. U.S. brands are increasingly enjoying broad consumer awareness and acceptance.

 U.S. exports in the following best prospects' sectors have immediate possibility of success in South Africa:

• Energy (production and distribution)
• Transportation Infrastructure
• Aerospace and Defense
• Safety and Security
• Health Care Equipment and Technology
• Packaging
• Information and Communication Technology (ICT)

Growth sectors with good prospects for the future include:

• Automotive
• Environmental Technologies
• Tourism Infrastructure Development
• Energy
• Textiles
• Mining and Minerals

For more information on the South African best prospects, please contact Commercial Officer Wanda Barquin at Wanda.Barquin@mail.doc.gov.

Michigan Exports to South Africa

News Feature

South Africa: Sub-Saharan Africa's Engine of Growth
by Finn Holm-Olsen

It has been a decade since the end of Apartheid in South Africa-10 years since Nelson Mandela was elected president on that historic day in 1994, when millions of South Africans went to the polls in the country's first multiracial, multiparty election...

Major Projects in South Africa

There are few massive construction projects in South Africa. The SA Government is wary of subsidizing low employment, capital-intensive projects that do not benefit the local economy or add to the over-centralization of the primate economy of Gauteng province (which includes the cities of Pretoria, Johannesburg and Vereeniging) that accounts for approximately 65% of all economic activity. The U.S. Government has been instrumental in providing the initial support for many other projects in the country with the facilities of US Trade and Development Agency (US TDA).

The following are some large development projects under way or close to completion:

• SASOL Refineries Turbo upgrade
• Coega deep-sea port and aluminum smelter
• Maputo Corridor (rail and road upgrade to Mozambique)
• Off-shore oil and gas exploration
• Taxi vehicle recapitalization project
• Gautrain high-speed commuter rail network
• Motor Industry Development Plan (MIDP)
• Dube / La Mercy International Airport in Durban, a greenfields multi-modal transportation hub development.

For additional information on these and other projects please contact Lance Ludman, US TDA Manager for Africa. Email: ustda@work.co.za

Trade Events in South Africa:

Africa Aerospace and Defense Show 2004
Africa Aerospace and Defense 2004, held September 21-25, 2004 in Pretoria, is the premier air show in Africa. It showcases the significant South African aerospace and defense industry capacity and attracts official delegations from throughout the African continent.

CS South Africa will be actively engaged in a variety of activities matchmaking programs at the show.

Learn more about this show: http://www.aadexpo.co.za

FUTUREX
Held May 18-21 in Johannesburg, Futurex is Africa's Premier International Telecommunication exhibition.

 Please contact email Luisa.D.Santos@mail.doc.gov for more details.

AUTO AFRICA 2004
Africa International Automotive Trade Exhibition and Conference
Auto Africa has established itself as an exhibition of international statue. The last event drew approximately well over 280 exhibitors and about approximately 150,000 visitors.

Please contact Trade Specialist Luisa Dos Santos at Luisa.D.Santos@mail.doc.gov for more details.

Beauty Africa 2004
Beauty Africa is an annual event, recognized as the most comprehensive exhibition of cosmetic, hair, health, nail and beauty industry of Africa. The show will be held July 17-19 in Johannesburg.

Exhibitors at Beauty Africa include a large number of South African manufacturers, distributors and service providers as well as international exhibitors from the UK, USA, Taiwan, India, Pakistan, Jordan, Germany, Bulgaria, China and Ghana.

For more information on this event please see: http://www.beautyafrica.com.
Email Bheki.Ndimande@mail.doc.gov for more information.

Contact us:

Senior Commercial Officer: Johnny Brown

Johannesburg
The Ronald H Brown Commercial Center
15 Chaplin Road
Illovo 2196
Johannesburg
Tel: (27)(11) 778-4800
Fax: (27)(11) 268-6101
Email: johannesburg.office.box@mail.doc.gov

Cape Town
Montecarlo Building, 4th Floor
Heerengracht St., Foreshore
Cape Town, South Africa 8001
Tel: (27)(21) 421-4280
Fax: (27)(21) 425-4151
Email:cape.town.office.box@mail.doc.gov

Durban
Old Mutual Building
30th Floor
303 West Street
Durban, South Africa 4001
Tel: (27)(31) 305-7600
Fax: (27)(31) 305-7650
Email:durban.office.box@mail.doc.gov

For More Information:

Please see our companion: South Africa WebGuide

Date Updated: March 27, 2007