General South Africa is the most advanced, diversified, and productive economy in Africa. Boasting one of the most pro-business environments on the continent, 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 over 58 million covers 1.22 million square kilometers and is the world’s largest producer of platinum, vanadium, chromium, and manganese.

Economy 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 percent in 2018 and by 0.2 percent to $350 billion in 2019. However, the Covid-19 pandemic has led to a 7 percent contraction to $302 billion in 2020; as a result, GDP per capita has dropped to 2005 levels. Inflation is low and interest rates are at record lows.   

The maturity of the South African economy is reflected in the mix of economic sectors: 

• Primary (including agriculture, fishing, and mining):  10 percent.
• Secondary (manufacturing, construction, and utilities):  21 percent.
• Tertiary (trade, transport, and services):  69 percent.

Industry Sectors The foreign inbound tourism sector that in 2019 slowed to 4 percent growth, came to a halt in March 2020. The sector is a major foreign exchange earner, along with minerals, agricultural products, and some niche manufacturing and high-tech sectors.

Advantages Parts of the country’s urban areas boast well-developed infrastructure, comparable to OECD standards, but rapid urbanization has led to glaring contrasts. The 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.

Regional Agreements 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).

U.S. Agreements 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.

Trade Relationships 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 is growing fast, including in financial services.

PAC-DBIA 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: https://www.trade.gov/presidents-advisory-council-doing-business-africa

Four reasons why U.S. companies should consider exporting to South Africa:

1. 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.
2. 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.
3. 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.
4. 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.