South Africa's chemicals industry
South Africa is ranked among the top 25 chemical producing countries in the world, and is a world leader in coal-based synthesis and gas-to-liquids technologies.South Africa's chemicals exports have been growing at an annual average rate of around 19% since 1999, on the back of new trade agreements and heightened competitiveness as a result of low manufacturing costs and plentiful mineral and organic supplies for manufacturing. In addition to low energy costs, the sector benefits from efficient, cost-effective access to water and steam.
SA's chemicals industry is dominated by the basic chemicals sector, with major production of liquid fuels, olefins, organic solvents and industrial mineral derivatives.
Primary, secondary and tertiary products are divided into: petroleum refineries and products (44%); basic chemicals (16%); fertilizers and pesticides (7%); synthetic resins and plastic materials (8%); paints, varnishes and lacquers (4%); medicinal and pharmaceutical preparations (6%); and cleaning, toilet preparations and cosmetics (7%).
South Africa is among the lowest-cost producers of ethylene and propylene in the world, thanks to abundant access to low-grade coal and leading edge process technology.
While the industry remains dominated by local companies, a number of multinationals have local distribution points for their parent companies and several have become involved in local manufacture.
Competitive advantages
South Africa's chemicals sector offers investors a number of competitive advantages.
Feedstock - inorganic
South Africa has abundant mineral feedstock for chemical manufacturing. The country is ranked internationally among the top five producers of several major industrial chemicals. Phosphate rock is benchmarked as the highest quality available for processing.
Raw materials - organic
Apart from liquid fuels and petrochemicals, agricultural raw
materials available in abundance include sugar, molasses, starch, essential oils such as lavender, buchu, khakhi-bush and lemon grass, and dissolved pulp.
Cost of electricity
Electricity costs of around US 1.7cents/kwh are among the lowest in the world, making South Africa a highly competitive location for energy-intensive industries.
Infrastructure
Besides the country's well-developed transport, energy and communications infrastructure, areas such as Durban and Richards Bay in KwaZulu-Natal offer excellent locations for chemical industries, with existing industry infrastructure and competitive rates for water, steam and electricity.
Environmental awareness
South Africa subscribes to the major international environmental conventions, including the Basel Convention on the Trans-boundary Movement of Hazardous Wastes. The government has introduced regulations to promote cooperative environmental management and provide guidelines for
the disposal of hazardous waste.
Trade agreements
South Africa's chemicals sector is benefiting from increased market access to its key trading partners, the EU and the US, as well as to sub-Saharan countries, through a number of trade agreements:
African Growth and Opportunity Act - extends to South Africa and other sub-Saharan US generalised system of preference (GSP) benefits for more than 1 800 items beyond the standard GSP list of 4 600 items. The Act remains in force until 30 September 2008.
- More information: Agoa website
SADC trade protocol - The Southern African Development Community (SADC) trade protocol, which came into effect in September 2000, provides for the phasing down of tariffs of 11 of the 14 SADC member countries. Participating countries are from the sub-Saharan region, excluding Angola, the Democratic Republic of Congo and Seychelles. This trade bloc has a combined population of around 135-million.
South Africa Customs Union - Under the present Sacu agreement, participating member countries South Africa, Botswana, Lesotho, Namibia and Swaziland have totally abolished internal tariff barriers.
SouthAfrica.info reporter, incorporating material from the Department of Trade and Industry
