Official Name: Republic of South Africa
Internet Domain: .za
International Dialing Code: +27
| Location and Size | Credit and Collections |
| Government | Risk Assessment |
| Legal System | Business Climate |
| Economy | Business Protocol |
| Comparative Economic Indicators | |
Location and Size
South Africa is located at the southern tip of the African continent. Its total land area is 1.2 million sq. km, making it slightly less than twice the size of Texas. Countries that border South Africa include Namibia, Botswana, Zimbabwe, Mozambique and Lesotho, a tiny country bordered on all sides by South Africa.
Government
South Africa is a Parliamentary democracy with 9 provinces. The branches are as follows:
Executive: Chief of state and head of government Matamela Cyril RAMAPHOSA; Deputy President David MABUZA; Cabinet (appointed by the president)
Legislative: Bicameral Parliament consisting of
- National Council of Provinces (90 seats elected for 5-year terms) with special powers to protect regional interests
- National Assembly (400 members elected for 5-year terms)
Judicial: Constitutional Court, Supreme Court of Appeals, High Courts, Magistrate Courts
Legal System
South Africa has a mixed legal system of Roman-Dutch civil law, English common law (four former British colonies were united to form South Africa) and customary law.
South Africa has not submitted an International Court of Justice (ICJ) jurisdiction declaration. It does accept International Criminal Court jurisdiction.
Economy
South Africa is a middle-income, emerging market with an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors and a stock exchange that is the 16th largest in the world. Even though the country’s modern infrastructure supports a relatively efficient distribution of goods to major urban centers throughout the region, unstable electricity supplies retard growth. The global financial crisis reduced commodity prices and world demand. GDP fell nearly 2% in 2009 but has recovered since then, albeit slowly with 2014 growth projected at about 2%. Unemployment, poverty, and inequality – among the highest in the world – remain a challenge. Official unemployment is just over 51% of the work force, and runs significantly higher among black youth. Eskom, the state-run power company, has built two new power stations and installed new power demand management programs to improve power grid reliability. Construction delays at two additional plants, however, mean South Africa is operating on a razor thin margin; economists judge that growth cannot exceed 3% until those plants come on line. South Africa’s economic policy has focused on controlling inflation, however, the country has had significant budget deficits that restrict its ability to deal with pressing economic problems. The current government faces growing pressure from special interest groups to use state-owned enterprises to deliver basic services to low-income areas and to increase job growth.
Leading Markets (2017): China 9.5%, US 7.7%, Germany 7.1%, Japan 4.7%, India 4.6%, Botswana 4.3%, Namibia 4.1%
Leading Exports – Commodities: Gold, diamonds, platinum, other metals and minerals, machinery and equipment
Leading Suppliers (2017): China 18.3%, Germany 11.9%, Us 6.6%, Saudi Arabia 4.7%, India 4.7%
Leading Imports – Commodities: Machinery and equipment, chemicals, petroleum products, scientific instruments, foodstuffs
Top Industries: Mining (world’s largest producer of platinum, gold, chromium), automobile assembly, metalworking, machinery, textiles, iron and steel, chemicals, fertilizer, foodstuffs, commercial ship repair
Top Agricultural Products: Corn, wheat, sugarcane, fruits, vegetables; beef, poultry, mutton, wool, dairy products
Comparative Economic Indicators ” 2018
| South Africa | Republic of Botswana | Lesotho | Mozambique | Namibia | Zimbabwe | |
| Population* (millions) | 48.3 | 2.1 | 2.9 | 22.9 | 2.1 | 12.1 |
| Population growth rate* (%) | -0.4 | 1.7 | 0.3 | 2.4 | 0.9 | 4.3 |
|
Age Structure (%)
(15 to 64 years old)
|
65.8 | 62.2 | 61.1 | 51.1 | 61.7 | 54.3 |
|
Age Structure (%)
(65+ years old)
|
6.1 | 3.9 | 5.4 | 3.0 | 4.1 | 3.8 |
| Literacy (%) | 93 | 81.2 | 84.8 | 47.8 | 85.0 | 83.6 |
| Unemployment rate (%) | 51.5 | 7.5 | 45.0 | 21.0 | 51.2 | 7.6 |
| Inflation (%) | 5.8 | 7.1 | 6.1 | 13.5 | 4.6 | 5.0 |
| Population below poverty line (%) | 31.3 | 30.3 | 49.0 | 70.0 | 55.8 | 68.0 |
| GDP** (USD billions) | 559.0 | 28.5 | 2.1 | 21.8 | 14.6 | 5.5 |
| GDP real growth rate (%) | 2 | 8.6 | 2,4 | 7.0 | 4.4 | 9.0 |
| GDP per capita** (USD) | 11,500.0 | 14,000.0 | 1,700.0 | 1,000.0 | 6,900.0 | 500.0 |
| Public debt (% of GDP) | 45.4 | 22.6 | 52.5 | 40.9 | 20.0 | 149.0 |
| Exports (USD billions) | 91.05 | 4.4 | 1.0 | 2.5 | 4.3 | 2.5 |
| Imports (USD billions) | 99.55 | 31.5 | 1.8 | 3.5 | 5.2 | 4.0 |
| Reserves of foreign exchange and gold (USD billions) | 48.4 | 7,834.0 | 0.9 | 2.0 | 2.0 | 0.4 |
| Currency | Rand ZAR |
Pula BWP |
Loti LSL |
New Metical MZN |
Dollar NAD |
Dollar ZWD |
| Exchange rates (per USD) | 9.5 | 6.6 | 7.0 | 26.6 | 7.0 | 373.0 |
| Exchange rates (per EUR) | 8.2 | 9.5 | 10.0 | 38.3 | 10.0 | 538.0 |
| Rating in 2013 Corruption Perceptions Index*** | 7.6 | 5.8 | 3.5 | 2.7 | 4.4 | 2.4 |
| Rating in 2014 Index of Economic Freedom**** | 62.5 | 68.8 | 47.9 | 56.8 | 62.7 | 22.1 |
* July, 2017 estimates
** PPP ” Purchasing Power Parity
*** 2019 Corruption Index: 10=Very Clean; 0=Highly Corrupt
**** 2019 Index of Economic Freedom: 100-80=Free; 49.9-0-Repressed
Economic Data from CIA World Factbook
2019 Corruption Perceptions Index, Tranparency International
2019 Index of Economic Freedom, Heritage Foundation
Credit and Collections
Dispute Resolution
Dispute settlement and enforcement of commercial contracts is relatively easy and not as costly as in other countries in the region. This reflects the confidence of companies operating in South Africa in the integrity of the judicial system.
South Africa is a member of the New York Convention of 1958 on the recognition and enforcement of foreign arbitration awards, but is not a member of the World Bank’s International Center for the Settlement of Investment Disputes. South Africa recognizes the International Chamber of Commerce, which supervises the resolution of transnational disputes. South Africa applies its commercial and bankruptcy laws with consistency and has an independent, objective court system for enforcing property and contractual rights.
Risk Assessment
Coface Country Rating: A3 ” Changes in general are good but somewhat volatile as political and economic environment can affect corporate payment behavior. A basically secure business environment can nonetheless give rise to occasional difficulties for companies. Corporate default probability is quite acceptable on average.
Coface Business Climate Rating: A3 ” same as above
Coface: Strengths
- Economic and political heavyweight on the continent; Extensive natural resources (coal, platinum, diamonds, coal); Diversified industry and effective financial services
- Public-sector finances and indebtedness under control; Good foreign debt profile: essentially medium-long term and rand-denominated; Satisfactory business environment
Coface: Weaknesses
- Outlying geographic location; Sensitivity to raw material prices; Sensitivity to economic conditions in Europe and United States and to Asian competition; Deficient transport and energy infrastructure
- Dependence on foreign capital inflows which are volatile in nature; Severe inequality; high unemployment and shortage of skilled manpower; 11% AIDS prevalence rate
Credendo Political Risk: 3 – Fairly low
Credendo Commercial Risk: B – Moderate
Business Climate
South Africa is the largest economy in the region, with a large private sector and a growing private tax base. The government has openly committed itself to a liberal economic course with a focus on macroeconomic stability, financial discipline, and an increase in foreign direct investments.
As a middle-income, emerging market, South Africa has an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors; a stock exchange that is the 18th largest in the world; and modern infrastructure supporting a relatively efficient distribution of goods to major urban centers throughout the region.
Economic Freedom: The 2019 Index of Economic Freedom rates South Africa’s economic freedom score is 58.3, making its economy the 102nd freest in the 2019 Index. Its score is 4.7 point lower than last year, as a result of a steep plunge in the score for judicial effectiveness and declines in fiscal health, property rights, government integrity, and investment freedom. South Africa is ranked 6th out of 46 countries in the Sub-Saharan Africa region, and its overall score is higher than the world and regional averages. Over the 20-year history of the Index, South Africa’s economic freedom score has advanced by 1.8 points. Gains in market openness, measured through trade freedom and financial freedom, and the management of public finance have been corroded by declines in freedom from corruption, business freedom, and investment freedom that keep the economy “moderately free.”
Market Access: The government of South Africa is open to foreign investment as a means to drive economic growth, improve international competitiveness, and obtain access to foreign markets for its exports. Virtually all business sectors are open to foreign investors. No government approval is required to invest, and there are few restrictions on the form or extent of foreign investment.
Regulatory System: Although the regulatory environment in South Africa is continuously being improved, some public services are still characterized by high levels of red tape.
Intellectual Property Rights: South Africa is a member of the WIPO (World Intellectual Property Organization) and a signatory to the Paris Convention for the Protection of Intellectual Property.
Exchange Control: The South African Reserve Bank’s (SARB) Exchange Control Department administers foreign exchange policy. An authorized foreign exchange dealer, normally one of the large commercial banks, must handle international commercial transactions and report every purchase of foreign exchange that is received by South African residents or companies. Generally, there are only limited delays in the conversion and transfer of funds.
While non-residents may freely transfer capital into and out of South Africa, transactions must be reported to authorities. Non-residents may purchase local securities without restriction. To facilitate repatriation of capital and profits, foreign investors should make sure that an authorized dealer endorses their share certificates as “non-resident.” Foreign investors should also be sure to maintain an accurate record of investment.
Corruption: According to the Business Anti-Corruption Portal, the level of corruption in South Africa is not as pervasive as in other African countries, largely due to the country’s relatively well-functioning government institutions. However, business surveys indicate that corruption still presents an obstacle to business operations. Transparency International’s Corruption Perceptions Index 2018 gives South Africa a score of 43, which is moderately corrupt. It’s score is 73 out of 180 countries.
Political Violence: Political violence is not currently an issue. However, criminal violence remains at a high level. National and provincial governments are pursuing programs to diminish the level of criminal violence. Some forms of crime, including murders, armored vehicle and mall robberies, have declined over the past five years, while others, including burglaries and small business robberies have increased.
Business Protocol in South Africa
South Africa is one of the most multicultural countries in the world. Many different ethnic groups make up the population in urban areas. In addition to the indigenous black peoples of South Africa, colonialism and immigration have brought in white Europeans, Indians, Indo-Malays, Chinese and many other peoples. As such, it is difficult to generalize South African etiquette and culture.
- South Africans do not need to establish long-standing personal relationships before conducting business.
- There are major differences in communication styles depending upon the individual’s cultural heritage.
- For the most part, South Africans avoid confrontations.
- Most South Africans, regardless of ethnicity, prefer face-to-face meetings to more impersonal communication mediums such as email, letter, or telephone.
More information on Business Protocol: Kwintessential
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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including South Africa. For further information, contact [email protected].
This report represents a compilation of information from a wide variety of reputable sources.
Comparative Economic Indicators: CIA World Factbook
Risk Assessment information: Coface Country Rating and Credendo.
Exchange Rates: OANDA.com The Currency Site.