Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
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South Africa is the most advanced, diversified, and productive economy in Africa. Boasting one of the most pro-business environments in Africa, South Africa is a logical and attractive option for U.S. companies seeking to enter the Sub-Saharan Africa marketplace. The country has a population of 58 million people, covers 1.22 million square kilometers and is the world’s largest producer of platinum, vanadium, chromium, and manganese.
South Africa has enjoyed relative macroeconomic stability but is facing increasingly strong headwinds due to the 2020 COVID-19 pandemic. The economy expanded by 0.8% in 2018 and by 0.2% to $350 billion in 2019. Inflation is low.
The maturity of the South African economy is reflected in the mix of economic sectors:
- Primary (including agriculture, fishing, and mining): 10%.
- Secondary (manufacturing, construction, and utilities): 21%.
- Tertiary (trade, transport, and services): 69%.
The tourism sector in 2019 slowed to 4% growth from previous growth rates as high as 11%. The sector is a major foreign exchange earner, along with minerals, agricultural products, and some niche manufacturing and high-tech sectors.
Parts of the country’s urban areas boast well-developed infrastructure, comparable to OECD standards, but rapid urbanization has led to glaring contrasts. Its growing services sector is a major employer, and the corporate side of the economy has been traditionally well-managed, although it faces low productivity gains. The banking and financial services sector is stable. The Johannesburg Stock Exchange (JSE) ranks among the top emerging market exchanges in the world.
South Africa is well integrated into regional economic infrastructure as formalized by membership in the Southern African Development Community (SADC). In addition, the Southern African Customs Union (SACU) agreement with Botswana, Namibia, Lesotho, and Swaziland facilitates commercial exchanges. South Africa is a member of the World Trade Organization (WTO), the G20, and the informal BRICS (Brazil, Russia, India, China, and South Africa) association of emerging economies. South Africa is also the economically most significant ratifier of the nascent African Continental Free Trade Agreement (ACFTA).
The African Growth and Opportunity Act (AGOA), renewed for a final 10-year period in 2016, provides duty-free access to the U.S. market for most Sub-Saharan African countries, including South Africa. The United States and South Africa signed a Trade and Investment Framework Agreement (TIFA) in 2012. The United States and SACU concluded a Trade, Investment, and Development Cooperation Agreement (TIDCA) in 2008.
The United States is a critical trading and technology partner for South Africa and ranks as South Africa’s third-largest bilateral partner in two-way trade by value. While Europe and Japan have well-established trade links with South Africa, trade with China, also in financial services, is growing fast.
The U.S Department of Commerce chairs the Washington DC-based, President’s Advisory Council on Doing Business in Africa (PAC-DBIA), which advises the President through the Secretary of Commerce, on ways to strengthen commercial engagement between the United States and Africa. For further information on the PAC-DBIA, please see: www.trade.gov/pac-dbia/.
Five reasons why U.S. companies should consider exporting to South Africa:
- The all-of-U.S.-Government initiative, Prosper Africa, is now fully constituted and leverages concerted inter-agency programs to facilitate U.S. commercial access in Sub-Saharan Africa in the face of foreign interests.
- New-to-market (NTM) companies should consider South Africa’s geographic advantages, logistics infrastructure, widespread use of the English language, and relatively transparent legal processes, which make it a low-entry threshold country. The business environment (legal, publicity, marketing, forensics, process outsourcing, etc.) is arguably the best in Africa.
- South Africa is a business incubator for new-to-market ideas; as the middle class in Africa grows, business models launched in and from South Africa will find easier acceptance in other Sub-Saharan Africa markets.
- The penetration of South African companies and agencies into Africa makes finding the right partner to collaborate with in third markets a low-risk business development model.
- South African companies are receptive to various partnering arrangements with U.S. companies, ranging from agency to licensing, joint ventures (JVs), mergers, and acquisitions; some South African companies hope to enter the U.S. market through similar arrangements.