Stability marks South Africa as a viable investment option


Stability and normality may not be words that excite but when they apply to a country in which you’re considering investing, they’re precisely the words that engender confidence. In its latest annual Global Competiveness Report, the World Economic Forum (WEF) ranks South Africa 53rd of 148 economies.

South Africa is now a $400bn economy whose Johannesburg Stock Exchange (JSE) broke the technically important 49,000 point barrier in May 2014. Interestingly, this occurred the day after the national election that marked 20 years of democracy. Critical thinkers point to this as a clear indication of just how normal the country’s political life has become, adding to a high level of stability.

With the most efficient infrastructure network in Africa, sub-Saharan Africa is South Africa’s second highest export market after Europe and on a par with China, which is itself increasing significantly; China has made no secret of its interest in actively capitalising on and supporting South Africa’s economic growth. Not only does this make South Africa a practical and efficient platform as the base to launch an African strategy, it gives investors an export market that is growing at 5.6% according to a recent and comprehensive Goldman Sachs report into the country.

It is worth noting that, for four consecutive years, the Word Economic Forum has ranked the JSE first in regulation of securities exchanges, an unexpected indication of the quality of the country’s business infrastructure, institutions, efficiency, and market
sophistication. Above all, it speaks to South Africa’s international business sensibility; it is a member of the G-20 and experienced at taking its place at international tables while actively contributing to growing economic stability in its region.

Excellent economic and financial management teams are among the hallmarks of the country’s success. Adding to investor confidence is the fact that South Africa’s local investment community is well-developed with access to capital, while the market has a high level of participation from foreign investors. Name almost any large multi-national and you will find it active and, indeed, thriving in South Africa. Importantly, the country has the support of organisations like the IMF, which is all too aware of the significance of its success to the stability of the region.

Whilst increasing employment is high on South Africa’s list of priorities and is innovatively supported by both government and business, the rise of the African middle class is an important demographic shift.

Trade agreements
Southern African Customs Union (SACU)
• South Africa is a member of the SACU which allows for duty and quota-free access to the markets of member states.
• The SACU comprises of Botswana, Lesotho, Swaziland, Namibia and South Africa.
• SACU entered into a free trade deal with the four-nation European Free Trade
• Association on 1 July 2006 but its negotiations with the United States for a free trade agreement have stalled.

The Southern African Development Community (SADC)
• SADC members include Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.
• The SADC Trade Protocol was developed as part of a strategy to stimulate industrial development, boost trade and investment and to liberalise intra-regional trade in goods and services among member states.
• The SADC Free Trade Agreement was fully implemented in 2012 which will make more than 90% of the trade in this region duty-free.

 East African Community (EAC)
• The EAC has its own customs union that rationalises investment and investment incentives through promoting the community of Burundi, Kenya, Rwanda, Tanzania and Uganda as a single investment area.
• With a population of more than 120 million, the EAC is one of the largest single bloc regional markets in Africa which is made even bigger by a series of mutually beneficial partnerships with regional blocs such as SADC, boasting a combined population well over 400 million.

The African Growth and Opportunity Act (AGOA)
• The African Growth and Opportunity Act (AGOA) provides duty-free access to the USA market for almost all products exported from more than 40 eligible sub-Sahara African countries, including South Africa.
• AGOA covers over 7 000 products, including mineral fuel (coal), machinery, vehicles, agricultural products, fruit and vegetables, iron, steel and certain automotive components.
• A survey of 80 of the largest 600 US companies operating in South Africa has revealed that they have created more than 150 000 jobs and contribute to a combined yearly revenue of over R233-billion to South Africa alone through AGOA.
• The AGOA Act expire as US law in 2015 but submissions by the South African government and other interested parties are currently under way to extend it by another 15 years.
• President Barak Obama in a 2013 visit to South Africa made a commitment to try and help extend AGOA.