South African economy is the second-largest in Africa and is a hub for industrialised and technologically advanced products. The country has a lot of advantage in the sectors of mining, agriculture, fisheries, food processing, telecommunication, clothing, real estate, transportation, tourism, manufacturing products and more. The economy is diverse, making it a lion’s share for the Western world. Let’s take a brief look at the varied sectors.
• Natural Resources
Mining is the key driving force behind the development of the economy in Africa. Large-scale mining started when a diamond was discovered in Orange River banks in 1867. Since then, this country has been the pioneer in mining and mineral-processing and South Africa procurement has caught the eyes of the Western countries.
Though mining has drastically fallen to 6% in 2011, it still provides with approximately 60% of exports. Besides, it has also become the 3rd largest coal exporter. The country has almost 5% share of polished diamonds globally and has 46% of hafnium, 13% gold, 23% vanadium, 18% fluorspar, 27% zirconium and more
• Agriculture and Food Processing
The agriculture industry contributes to almost 2.8% of GDP. Due to its arid climate, only 13.5% of crops can be used with only 3% considered to be high potential. Maize production contributes to almost 36% but also faces a lot of challenges because of climate change. However, despite the adversity of the weather, South Africa is one of the largest producers of cereals, castor oil seeds, sisal, fibre crops, chicory roots, green maize, grapefruits and more.
Preserved food, edible nuts and fruits, meat, sugar, malt and starch, beverages, tobacco, wool and miscellaneous food are the most exported products from South Africa. The dairy industry provides employment to 60,000 farmers and has around 4,300 milk producers. The food sub-sector within the agro-processing sector contributes to 1.4% of jobs.
Though the manufacturing industry offers only 15% to the GDP, it is growing as one of the emerging markets. Western countries are investing in South Africa procurement due to low labour costs, cheaper transport cost and better communications. The automotive industry contributes to almost 7.5% to the GDP and provides employment to 36,000 people. Vehicle exports were mainly done to Japan, the US, the UK and Australia. Toyota, Ford, Nissan, BMW, Volkswagon, General Motors and Daimler-Chrysler have their production units in this country.
• Service Industry
The domestic telecommunications provide advanced and effective service to cities and towns. Internet and cellular services have also increased in the past few years. With more than 20 million subscribers and five major cellular providers (Virgin Mobile, MTN, 8ta, Cell and Vodacom), South Africa has become the fourth country with the most advanced network globally.
• Business Process Outsourcing
Cape Town has already established itself as a hot destination for BPO and call centre. The labours are highly skilled, and the region shares cultural infinity with Britain and various international firms. Delta Airlines, Carphone warehouse and more have opened their inbound call centres in Cape Town.
South Africa is a popular tourist spot amongst global travellers. The country accommodates millions of international arrivals each year and contributes to the country’s GDP, supporting 10.3% of jobs. The beautiful landscape and the local wines are the key centres of attractions.
• Financial Services
This country has a proper financial structure with a large active stock exchange. The banking industry has four major players- First Rand, ABSA, Nedbank and Standard Bank that offer both retail and investment banking services. The sector is highly competitive.
Trade and Investment
Spain, China, the United States, Japan, Germany and the United Kingdom are of the international trading partners of South Africa. Fruits, corn, diamonds, sugar, metals, minerals and wool are mainly exported whilst imported goods include petroleum, manufactured goods and chemicals. The government has allowed US investors in the market with services like, loan, loan guarantees and political risk insurance. The country has signed various multinational deals and has achieved positive economic stability. South Africa has seen an economic boost in 2005 when Barclays brought a majority of share on Absa Group Limited. In 2006, British-based Vodafone made a multimillion-dollar deal with Vodacom. In 2010, more deals were made, one by Walmart to purchase Massmart Holdings and second by HSBC to acquire Nedbank.
Comparison With Other Markets
South Africa is compared well to other markets in terms of finance, affordability and availability of funds, infrastructure and business tax rates. However, the country is poor on the cost and availability of labour, the use of technology and education. Though the country has expertise in the Space industry, with proper support, it can increase employment in the manufacturing sector along with the testing and analysis domain.
South Africa has the 2nd most sophisticated financial market and 2nd lowest business tax rate according to a survey conducted by Brazil’s National Confederation of Industry in the year 2010. The country ranked 4th for easing access to funds, 6th for the infrastructure of transport, 4th for the cost of capital and 7th for FDI as a GDP percentage. Transport infrastructure is considered better than Mexico, Poland, China, India and Brazil.
Though the economy of South Africa falls behind other emerging markets like, China and India, it has shown promising growth in various sectors, leading to South Africa procurement. The country is relatively small but has a pool of labours, manpower, transport and communication facilities. In 2011, it has also joined the BRICS at the summit held in China.
With the rising economy, many western powers are considering South Africa a major country to invest in trade and procurement. Many countries are striking million-dollar deals with this country owing to its fast-paced economy and rapid development in many sectors. If you are too looking for a low-cost country and planning to invest in procurement, South Africa is a wise choice amongst all other rising markets. Get in touch with sourcing agents or distributors and reach the right manufacturers in the market.