TODAY'S South Africa is one of the most sophisticated, diverse and promising emerging markets globally. Strategically located at the tip of the African continent, South Africa is a key investment location, both for the market opportunities that lie within its borders and as a gateway to the rest of the continent, a market of about 1-billion people.
South Africa is the economic powerhouse of Africa and forms part of the BRICS group of countries with Brazil, Russia, India and China. It has a favorable demographic profile and its rapidly expanding middle class has growing spending power.
South Africa has a wealth of natural resources (including coal, platinum, coal, gold, iron ore, manganese nickel, uranium and chromium) and it enjoys increased attention from international exploration companies, particularly in the oil and gas sector.
It has world-class infrastructure, exciting innovation, research and development capabilities and an established manufacturing base. It is at the forefront of the development and rollout of new green technologies and industries, creating new and sustainable jobs in the process and reducing environmental impact.
South Africa has sophisticated financial, legal and telecommunications sectors, and a number of global business process outsourcing (BPO) operations are located in the country.
It has political and macro-economic stability, an abundant supply of semi-skilled and unskilled labor, and it compares favorably to other emerging markets in terms of the overall cost of doing business. For professional jobs, labor costs are less than half of the cost of European countries. For manufacturing jobs, labor costs are around one-third cost of Europe.
The South African government has introduced wide-ranging legislation to promote training and skills development and fast-track the building of world-class skills and competences.
One of the main reasons for South Africa becoming one of the most popular trade and investment destinations in the world is due to the country ensuring that it can meet specific trade and investment requirements of prospective investors.
South Africa has a host of investment incentives and industrial financing interventions that are aimed at encouraging commercial activity and its trade rules favor a further expansion in South Africa's burgeoning levels of international trade.
The government recently adopted a new development plan ‘Vision 2030: Our Future Our Plan’. It is a bold plan that sets a target for growth of 5.4% per year over the next 15 years to create more than 11 million new jobs.
To achieve this South Africa must address a number of fundamental challenges such as better skills development, better located and maintained infrastructure, a healthier population, sound social safety nets, a capable state that uses resources efficiently and effectively, and a robust and vibrant economy. Higher levels of GDP require better investment; both domestic savings and FDI.
It is a bold and ambitious plan but one that is practical and achievable, but will require hard work and persistent effort. It will also need strong partnerships from our friends in the international community.
Already the Vision 2030 and the National Development Plan are making significant strides in building SA’s economy. The recent report by PricewaterhouseCoopers titled “The long-view: How will the global economic order change by 2050” projects that South Africa will rank amongst the 32 top economies of the world.
Furthermore, in the recently published ‘Kearney Foreign Direct Investment (FDI) Confidence Index’ South Africa makes a comeback due mainly to the long-term investment potential in the country’s manufacturing sector. The report said that while overall FDI flows to Africa decreased 5% in 2016 to an estimated $51 billion, South Africa bucked the overall regional trend, with UNCTAD estimating its FDI inflows increased 38% in 2016.
To make investing easier and less bureaucratic South Africa recently launched an ‘Invest SA: One Stop Shop’. On the occasion of the launch President Zuma remarked that: “We have directed officials to keep the service simple and short. An investor will make an appointment, meet a government representative to explain the services required and be guided by the representative. The One Stop Shop will provide a more co-ordinated, streamlined and professional service to those who wish to set up a business”.
Key departments such as Home Affairs, Labor, Environmental Affairs, Trade and Industry and agencies such as the Companies and Intellectual Property Commission, South African Revenue Service and Eskom, amongst others, will be available at the One Stop Shop.
Processes are also under way to ensure that businesspeople and investors benefited from an accelerated, purpose-orientated visa and permit application process.
Cooperation between South Africa and KSA
During the state visit of President Zuma to Saudi Arabia in March 2016 South Africa and Saudi Arabia made firm commitments to build on the existing economic cooperation through:
Addressing shortcomings hindering progress of the agenda of the Joint Economic Commission
Enhancing trade and investment through the exchange of high level business delegations and participation in trade exhibitions and
Contributing towards strengthening the South Africa – Saudi Arabia Business Council.
The Joint Economic Commission (JEC), which is co-chaired by the respective Ministers of Trade and Industry, provides the mechanism for building socio-economic cooperation and in addressing issues of mutual concern. It focuses on more than 16 sectors including trade, investment, finance, science and technology, civil aviation, health, transport, higher education and training, arts and culture, immigration, agriculture, forestry and fisheries, tourism, labour, environment and cooperative governance.
Saudi Arabia is also a very important source of investment. In addition, investments in the energy, agriculture, manufacturing, housing and others sectors are also underway. On the other hand, Saudi Arabia is keen to learn from South Africa’s expertise, to support the achievement of the development objectives as outlined in Saudi Vision 2030, in a range of areas, including mining technologies, agriculture technologies (aquaculture, fishing), amongst others.
South Africa, therefore views cooperation between South Africa and Saudi Arabia as strategic.
Trade and Investment between South Africa and KSA
Saudi Arabia is South Africa's 2nd largest export market in the GCC region, representing 0.4% of South Africa's total exports. South Africa’s exports to Saudi Arabia showed a healthy increase from R2.6 billion in 2011 to R5.5 billion in 2015, reflecting an average per annum growth of almost 25%.
Saudi Arabia is South Africa’s main supplier of crude oil and supplies more than 50% of South Africa’s oil needs. ACWA Power is the largest Saudi investor in South Africa with a R5 billion ‘Concentrated Solar Power’ (CSP) Project.
South African is encouraging South African companies to invest in and form joint ventures to take advantages of opportunities in Saudi Arabia. The joint South Africa-Saudi Arabia Business Council (SASABC) is an important platform being engaged to create awareness amongst the South African business community about these opportunities.
Next Frontier of Opportunities
The African continent presents exciting opportunities for Saudi investors. Africa features prominently in South Africa’s foreign national policy directives and our growth trajectory is inextricably intertwined with the development of the African Continent.
The Tripartite Free Trade Agreement which is an agreement between the Heads of States of 26 African countries to establish a free trade area will expand intra-African trade, promote collaboration between the Regional Economic Communities (RECs) and facilitate joint resource mobilisation and project implementation.
To place the significance of the Tripartite Free Trade Agreement into perspective it provides Saudi investors with an integrated market with a combined population of six hundred million people (only China and India have larger populations), a total GDP of one trillion US dollars (which would put it on par with Mexico and South Korea, the largest rapid-growth economies after the BRICS), and a long-term GDP growth rate in excess of five percent.
Further to this, the launch of the negotiations of the Continental Free Trade Agreement at the African Union Summit in South Africa in 2015, once established, offers a market of over one billion people and a GDP of two trillion US dollars; a formidable market that simply cannot be overlooked.
And of-course South Africa is a country that is indeed progressive with a well- regulated financial system offering investors a myriad of opportunities across the value-chains of agriculture, infrastructure, mineral beneficiation, services, technology and skills transfer, aquaculture and petrochemicals. — SG
