Opportunities

Investment sectors in South Africa

While investment opportunities abound in all sectors of South Africa's economy, the Department of Trade and Industry (DTI) concentrates on those sectors it has identified as having the highest growth and investment potential. Agriprocessing
South Africa is a food self-sufficient country, with the bulk of the population's food needs produced locally from raw materials. SA's well developed food and beverages industry has also become a global player.

South Africa's agriprocessing sector consists of 11 downstream agricultural sub-sectors, including meat processing, preservation of fruit and vegetables, dairy products, and canning and preserving of fish.

Major international agriprocessing companies with a presence in South Africa include: Cadbury-Schweppes, Coca-Cola, Danone, HJ Heinz, Kellogs, McCain Foods, Minute Maid, Nestlé, Parmalat, Pillsbury, Unilever and Virgin Cola.

Automotive
South Africa's automotive and components industry is on a growth projectile. BMW, Ford, Volkswagen, DaimlerChrysler and Toyota have production plants in South Africa. Component manufacturers like Arvin Exhaust, Bloxwitch, Corning and Senior Flexonics have also established production bases in the country.

The industry is largely located in two provinces, the Eastern Cape (coastal) and Gauteng (inland).

Companies with production plants in South Africa are well placed to take advantage of low production costs, coupled with access to new markets as a result of trade agreements with the European Union and the Southern African Development Community free trade area. Opportunities also lie in the production of materials (automotive steel and components).

Banking and financial services
South Africa's banking industry is dominated by four major commercial banking groups: Absa, First National Bank, Standard Bank and Nedcor. These provide retail and investment banking services in competition with a wide range of niche commercial banks.

There are 55 locally controlled banks, five mutual banks, 12 foreign-controlled banks, nine branches and 60 representative offices of foreign banks in South Africa.

European, Malaysian and US banks with licences in South Africa have concentrated on corporate rather than retail banking. They gained market share rapidly by charging aggressive lending margins which the less cost-efficient South African banks were unable to compete with. However, margins have since stabilised across the industry.

Chemicals
South Africa's chemicals sector (including fine and speciality chemicals, polymers and pharmaceuticals) is the country's largest manufacturing sector, accounting for some 5% of gross domestic product (GDP).

South Africa is a world leader in the manufacture of synthetic fuel from coal. The petroleum and petrochemical industry is dominated by four oil refineries plus the Sasol and PetroSA operations.

The rest of the chemical manufacturing sector consists mainly of AECI, Sentrachem and fertiliser plants such as Indian Ocean Fertilisers and Omnia.

The petrochemical and plastics cluster, which focuses on the chain from production of polymers to plastic products, has significant export potential, particularly in the plastics conversion sub-sector.

The government has moved away from demand side assistance to supply side intervention. This intervention gives existing and new businesses access to more than R2 billion in government funds via approximately 50 schemes in support of exports, innovation, investment, empowerment and job creation.

The potential shortage in the availability of petroleum products and of primate feedstock such as olefins and basic aromatics are becoming critical issues for sustainable growth in the industry. The possibility of a number of feedstock projects such as a Naptha Cracker as well as a new world scale refinery with an aromatics unit are being proposed. This is expected to lead to further downstream investment potential in major imported chemicals such as ethylene, glycol, styrene, and terephthalic acid.

The downstream, fine and speciality chemicals base provides strong opportunities for investors. There are also significant opportunities in product manufacturing, pharmaceuticals, household products and agrochemicals, industrial chemicals.

Fishing
The South African commercial fishing industry is valued at about R2 billion annually. Economically, trawling is the most important activity.

Demersal fish such as hake, Agulhas sole and kingklip comprise the biggest part of the fishery sector, contributing 46%. Pelagic catches have fluctuated in recent years, but on average the pelagic fishery, including anchovy, pilchard and red eye contribute 23%. The rock lobster fishery accounts for 11% and linefish 13%. Smaller contributors are abalone and aquaculture.

Food and beverages
South Africa's well developed food industry is a global player. The following food processing sectors all have turnovers in excess of R2,5 billion: flour and other milled products, beer and malt, slaughtering and preparing of meat, canning and preserving of fruit and vegetables, bakery products, sugar, animal feeds, and wine and distilling.

South Africa has a strong tradition of food research achievements in the areas of cereal science, fruit technology, fish research, biotechnology, genetic engineering and cell cloning, fermentation chemistry, novel synthesis of food additives, as well as essential oils and botanical extractions.

ICT and electronics
The South African IT industry growth outstrips the world average. It has ready access to cutting edge technologies, equipment and skills and has the advantage of access to the rapid expansion of telecoms and IT throughout the vast African continent.

Internet and cellular telephony penetration in South Africa is among the highest in the world. The country has three cellular network operators and a base of some 5 million mobile users that is projected to triple by December 2003.

South African software developers are recognised as world leaders in innovation, production and cost efficiency backed by an excellent local infrastructure. Some of the world's leading telecommunication brands like Siemens, Alcatel, SBC Communicatons, Telecom Malaysia, Cell C and Vodaphone have made significant investment in the country.

Investment opportunities lie in the development of access control systems and security equipment, automotive electronic subsystems, systems and software development in the banking and financial services sector, silicon processing for fiber optics, integrated circuits and solar cells.

There are also significant opportunities for the export of hardware and associated services as well as software and peripherals.

Mining and minerals
South Africa holds the world’s largest reserves of gold (35%), platinum group metals (55.7%), manganese ore (80%) chrome ore (68.3%) titanium metals (21%). It also produces a large share of the world’s diamonds and mineral deposits.

Lucrative opportunities exist for downstream processing and value adding of iron, carbon steel, stainless steel, aluminium, platinum group metals and gold.

Beneficiation of minerals before export is a major growth area. The Department of Minerals and Energy has embarked on a small-scale mining programme aimed at encouraging and facilitating the development of economically viable small-scale mining and mineral-based industries, in line with the government's desire that small miners gain access to mineral rights suited to small mining activity.

Relationships between individual mining companies and the controlling mining houses are being reevaluated. Mergers, restructuring and unbundlings have created much optimism for the industry in recent years, driven by the need to develop black ownership, to expand abroad and by a languishing gold price.

Property
Investors face a wide array of possibilities when choosing land for development in South Africa. Private, state, provincial, municipal, and parastatal landholdings are all potentially available for commercial development - each with their own application process. In practice, the specific details of this process are determined and administered by the relevant municipality concerned.

Commercial real estate is well developed in South Africa, with private landholdings in both urban and outlying areas. The availability of industrially zoned and serviced land varies by location.

Property owners, brokers, managers and developers who are members of the Property Council of South Africa are available to assist investors in locating, buying and selling private property. Any of these companies can be located through the Property Council of South Africa.

Telecommunications
South Africa is the telecommunications leader on the African continent with 4,03 million installed exchange lines, representing around 100 lines for every 1 000 inhabitants.

South Africa has a large transmission area, necessitated by the country's geographical spread of 1,2 million km2 utilising 125 million km of transmission circuits. Digital microwave and optical fibre serve as main transmission media for the inter-primary network interconnecting all the major centres.

Over the next five years, the current 4,03 million exchange lines will grow to around 7 million. About 2 million of these additional lines will be aimed at increasing telephone penetration in under-serviced urban and rural areas. The remaining 1 million lines will cater for growth in developed areas.

Textiles
The textile industry has evolved into a capital-intensive industry offshoot, producing synthetic fibres (man-made fibres) in ever-increasing proportions. A major boost to the industry has been approval of South Africa by the United States for benefits under the Africa Growth and Opportunity Act (Agoa), and are permitted duty-free access for clothing exports into the USA.

These latter provisions encompass an effective visa system, legislation to permit US Customs Service access to the countries of export, reportage provisions, full co-operation with the United States, complete record keeping and reports on manufacturing capabilities. At present, Agoa only provides for the duty-free access of clothing under strict rules of origin to the US. Various categories of duty-free access for clothing articles are provided for.

Tourism
The South African tourism industry is valued at $10 billion a year and is expected to rise sharply as the government and the private sector invest in a marketing and promotion drive.

The country's tourism infrastructure is sophisticated and developed, but key opportunities exist in this arena given the rise in demand. Eco-tourism promises excellent investment and development potential.

General
  • Airport systems
  • Franchising
  • Healthcare services and equipment
  • Safety and security equipment
  • Water treatment equipment
  • Packaging equipment
Informatica: Lists projects and opportunities per sector that exists in South Africa.

SA Chamber of Business: Lists the latest trade enquiries received from around the world.

Trade World: Home to a vast pool of trade leads and other business opportunities.

International Trade Centre: The technical co-operation agency of the United Nations Conference on Trade and Development (UNCTAD) and the World Trade Organisation (WTO) for operational, enterprise-oriented aspects of trade development.

The ITC supports developing and transition economies, and particularly their business sector, in their efforts to realise their full potential for developing exports and improving import operations.

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