SOUTH AFRICA’S TRADE AND INVESTMENT OPPORTUNITIES

1. SOUTH AFRICA’S TRADE AND INVESTMENT OPPORTUNITIES TRADE AND INVESTMENT WITH AGOA COUNTRIES CONFERENCE MONTEREY, 27 FEBRUARY 2009

2. CONTENTS • Contextualizing the South African economy • South Africa’s trade with the US (AGOA) • Imports • Exports • Industrial policy framework • Investment opportunities • Investment incentives

3. CONTEXTUALISING SOUTH AFRICA • 5x size of UK, 2x size of Texas • Population: 48.5 million • 27th largest economy in the world (GDP) • Largest economy in Africa • Total GDP US$283bn (2007) • GDP 2007 per capita: (US$ 5 815) • 1st world infrastructure + financial services • 18th largest securities exchange globally • BBB+ (Fitch + S&P) • SA holds 80% of global manganese reserves, • 72% of chrome, 90% of platinum-group metals, • 40% of gold and 27% of vanadium. • 2008/9 WEF Global Competitiveness Index • (134 countries ranked): • Overall competitiveness, ranked 45th • Macro- economic stability, ranked 50th

4. SADC and South Africa

5. STRATEGIC GEOGRAPHIC POSITION TO GLOBAL SHIPPING ROUTES

6. SOUTH AFRICA’S ECONOMIC GROWTH HIGHLIGHTS South African economy growing. Current upswing currently in 8th year. Real GDP growth averaging around 4.5% projected to be at 3.5% in 2009 (decline in global demand for exports). Strong growth of middle class driving consumer demand Management of the economy remains in line with best international practice.

7. SOUTH AFRICA’S MACRO-ECONOMIC MANAGEMENT HIGHLIGHTS

8. SOUTH AFRICA’S MACRO-ECONOMIC MANAGEMENT HIGHLIGHTS

9. INVESTMENT CLIMATE Abundant natural resources Economic stability & sound macro-economic management Excellent transport & logistical infrastructure Competitive sectors/industries World class financial system Labour Availability Favourable cost of doing business

10. FAVOURABLE TAX REGIME

11. DOING BUSINESS (178 COUNTRIES RANKED)

12. SOUTH AFRICA’S ECONOMIC GROWTH HIGHLIGHTS Macro-Economic Stability: Budget deficit < 2% Inflation within target band 3-6% Interest rates relatively low (prime lending rate is 10.5%) Accelerated inflow of foreign capital (over US$15,5 bn in 2007) US$5.5bn by Industrial & Commercial Bank of China’s 20% stake in Standard Bank US$4.5bn by UK Barclays Bank’s 56% stake in ABSA Bank US$1.5bn by US Ford Motor Company to expand next generation pick-up truck + diesel engine production

13. SOUTH AFRICA’S ECONOMIC GROWTH HIGHLIGHTS Main growth drivers: Commodities boom Domestic consumption growth (partially linked to growth of the black middle class): 55000 dollar millionaires by 2007. Increased investments (public & private) Positive net job creation: 1mn jobs created last 3 years strong employment growth construction and financial services unemployment rate down from high of 32% to around 26%

14. MAIN CONTRIBUTORS TO GDP

15. SOUTH AFRICA – US TRADE • AGOA currently the most important legislation for US trade and investment with SSA. • South Africa AGOA eligibility: 02 October 2000 • SA exports to US under GSP and AGOA • AGOA has contributed to SA’s export growth into the US market • Top 5 AGOA exporter (with Chad, Angola, Gabon, Nigeria) • Top destination for US exports in Africa: 24% growth in 2007 • SA currently exports the widest range of products in SSA: • automotive products • wine • citrus fruit, processed foods (juices, jams), fish (lobster) • Cut flowers • Footwear, leather, textile and apparel goods

16. US TRADE WITH AGOA ELIGIBLE COUNTRIES

17. US TRADE WITH AGOA ELIGIBLE COUNTRIES

18. TOTAL SOUTH AFRICA – US TRADE Source: US Department of Commerce

19. SOUTH AFRICA – US TRADE • Top 10 SA exports to US (4-digit HS Code) • Platinum • Motor vehicles • Ferro-alloys • Centrifuges + centrifugal dryers • Titanium ores and concentrates • Diamonds (rough, polished or set) • Acyclic hydrocarbons • Aluminum, plates, sheets and strip • Parts and accessories of the motor vehicles • Hydrogen, rare gases and other non-metals Source: Department of Trade and Industry, south Africa

20. SOUTH AFRICA – US TRADE • Top 10 SA imports from US (by sections) • Turbo-jets, turbo-propellers, gas turbines • Telephone sets, incl. for cellular network • Self-propelled bulldozers, angle dozers, graders, levellers • Motor vehicles for the transport of goods. • Passenger motor vehicles • Medical + surgical appliances • Automated data processing machinery • Petroleum coke • Motor vehicle parts & accessories • Petroleum oils

21. SOUTH AFRICA – US TRADE • TREND: Value added imports from US vs mainly commodities exports to the US by South Africa • The dti challenge: ensuring product diversification and increased value added + beneficiated exports to the US and globally. • How? • Industrialisation to encourage value-added exports. • Sustainable investments by SA and foreign companies/entities. • Infrastructure development to reduce cost of doing business + facilitate trade (US$78bn committed by government for infrastructure development). • Reforming trade policy to complement industrial policy • Increasing overall competitiveness: aim to increase share of global trade, create a skilled workforce and attract job-creating investments

22. SA National Industrial Policy Framework (2007) Aim: increase SA’s competitiveness, build manufacturing capacity, ensure industrialisation, diversification and value-added output. Key sectors/industries: Agro-processing Automotives and components Chemicals and allied industries Clothing, textiles and footwear Electro-technical industries BPO and IT-enabled services Mining and metal-based industries Capital equipment and allied services Transport equipment Aerospace Tourism Energy (renewable) Film + creative industries

23. INVESTMENT OPPORTUNITIES IN SOUTH AFRICA

24. AGRO-PROCESSING • Wine production, confectionary (sweets, choco + baking products) indigenous meat processing (ostrich, venison, crocodile), indigenous teas (rooibos, honeybush), fruit + vegetable processing plants, floriculture, freshwater fisheries + aquaculture (tilapia, African catfish, oysters, abalone).

25. AUTOMOTIVE INDUSTRY • Engine parts/components, vehicle interiors (natural fibre trim), electronic drive chain components, body parts (lights, painted plastic components, glass, airbags), aluminum forgings + castings.

26. CHEMICALS + ALLIED INDUSTRIES • Pharmaceuticals: R&D, active pharmaceutical ingredients. • Beneficiation of polypropylene, used in auto + construction industries. • Production of titanium dioxide pigment, beneficiation of fluorspa

27. ELECTRO-TECHNICAL INDUSTRIES • Software + mobile applications, pre-paid smart metering solutions, upgrading of microchip manufacturing, radio frequency identification, security and monitoring solutions, financial software, defense-related electronics.

28. MINING + METAL-BASED INDUSTRIES • Downstream processing + value addition of iron, steel, aluminum, ferro-alloys, platinum group of metals, diamonds. • Conversion of metal products: metal fabrication, pipe & tube, foundry products, wire, jewellery.

29. CAPITAL EQUIPMENT + ALLIED SERVICES • Manufacturing + assembly of mining, agricultural and construction equipment. • Recapitalisation of equipment (boilers, tool dies + moulds, petrochemical equipment). • New investments in turbine assembly + components, machine tool manufacturing.

30. TRANSPORT EQUIPMENT • Rolling stock: locomotives, wagons, coaches. • Permanent infrastructure + equipment: railways, bridges, harbours. • Ship and oil-platform building and maintenance.

31. CLOTHING AND TEXTILES • Large-scale manufacturing of industrial textiles using polyester. • Manufacturing of synthetic + natural fibre textiles. • Wool + mohair production + knitwear. • Cotton spinning, weaving, knitting

32. BPO + IT-ENABLED SERVICES • Call centres, Back Office Processing, Shared Corporate Services (legal, accounting etc.) • Enterprise solutions: fleet management, knowledge + asset management.

33. AEROSPACE • Aviation related services, including maintenance, repair and overhaul + training • Specialised manufacturing of aviation components + systems. • Unmanned arial vehicles, satellite –related services, design expertise.

34. TOURISM • Adventure, eco-, sport-, business- and cultural tourism. • Leisure complexes + world class golf courses. • Harbours + waterfront developments, cruise liners. • Transfrontier conservation areas.

35. ENERGY • Power generation (solar, hydro, nuclear, wind etc.) • Energy infrastructure. • Alternative energy / ‘green’ energy.

36. FILM + MEDIA • Establishment of film studios. • Production + co-production ventures: film, still photography, documentaries, commercials, multimedia. • Distribution infrastructure. • Services for foreign productions

37. DESIGN • Jewellery manufacturing and design. • Fashion design + production.

38. INVESTMENT INCENTIVES • The Enterprise Investment Programme: Manufacturing • An investment incentive cash grant for locally-based manufacturers who wish to establish a new production facility, expand and existing facility or upgrade and existing facility in manufacturing industries. • The Enterprise Investment Programme:Tourism Support • Investment incentive cash grant, payable over a period of 2-3yrs, to support development of tourism enterprises so as to stimulate job-creation and encourage geographical spread of tourism investment country-wide. • Accommodation services, passenger transport services, tour operators, cultural services, recreational and entertainment services.

39. INVESTMENT INCENTIVES • Foreign Investment Grant • To compensate qualifying foreign investors for the cost of moving new machinery and equipment from abroad to South Africa. • Critical Infrastructure Programme • A cash grant for projects designed to improve critical infrastructure in South Africa, including: • Rail and road transport systems • Electricity transmission and distribution systems • Telecommunications networks – cabling and signal transmission systems • Sewage systems – network and purification • Waste storage, disposal and treatment systems • Fuel supply systems – piping for liquid, gas and fuel conveyer transportation.

40. INVESTMENT INCENTIVES • Industrial Development Zones • Purpose-built industrial estates linked to international ports that leverage fixed direct investments in value-added and export-oriented manufacturing industries. Benefits include: • Quality infrastructure • Expedited customs procedures • Duty-free operating environments • Business Process Outsourcing and Offshoring Investment Incentive • Comprises an Investment Grant and Training Support Grant towards costs of company-specific training. Incentives offered to both domestic and foreign investors establishing projects that aim primarily to serve offshore clients.

41. INVESTMENT INCENTIVES • Location Film and Television Production Incentive • Incentive programme consisting of a Large Budget Film and Television Production Rebate Scheme. • Foreign owned qualifying producers are rebated a maximum of R10million for the production of large budget films and television productions. • Automotive Production and Development Programme Key elements: • Local assembly allowance • Production incentives • Automotive investment allowance

42. Contact Details Lerato D. Mataboge Trade and Industry Office Embassy of the Republic of South Africa Washington, DC Tel: +1 202 274 7973 / 5 / 7 Email: Ldmataboge@saembassy.org www.thedti.gov.za www.saembassy.org