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BUSINESS

  Economic Overview

   US/SA Trade Relations

   International Trade Relations

   Country Investment Rating

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ECONOMIC OVERVIEW

South Africa is a middle-income developing country with an abundant supply of natural resources, well-developed financial, legal, communications, energy, and transport sectors, a stock exchange which ranks among the 15th largest in the world, and a modern infrastructure supporting an efficient distribution of goods to major urban centers throughout the region. South Africa is the largest, most sophisticated economy in Africa with a GDP (gross domestic product) almost 4 times that of Egypt, the next largest economy in Africa. Although occupying only 4% of the land of the African continent, South Africa has more than half the cars, telephones, banks, and industrial facilities on the continent.

Formerly dependent primarily on gold and the mining industries, the economy is now more broadly based, with manufacturing, the largest sector, contributing nearly one quarter of GDP. South Africa has a modern, well-diversified economy in which agriculture, mining, manufacturing, commerce, and a broad structure of service establishments contribute to the wealth of the nation.

The South African Government has taken a number of steps to make its markets more attractive to foreign investment. Included in these efforts are:
  • The reduction of tariffs and subsidies to local firms
  • The elimination of both the discriminatory non-resident shareholders tax, and certain limits on hard currency repatriation
  • Cutting the secondary tax on corporate dividends in half

Foreign investors are permitted 100 percent ownership and the government treats it the same as domestic enterprise for various investment incentives such as export incentive programs and tariffs, tax allowances and other trade opportunities.

For foreign investors, South Africa offers: a substantial market with significant growth potential, a market-oriented tradition, access to other markets in Africa, excellent communication and transportation links, liberal repatriation of profits and earnings, lower labor costs than in Western industrialized countries, and availability of inexpensive electrical power and raw materials.

Business customs in South Africa are generally similar to those in the United States and Western Europe.

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US/SA TRADE RELATIONS

In 1998, US exports to South Africa totaled $3.6 billion with machinery and transport equipment comprising two-thirds of this total. Other leading U.S. exports to South Africa are: chemicals, electronic and telecommunications equipment, foods, pharmaceutical and medicinal products.

South African exports to the U.S. totaled $3.1 billion in 1998 with nonferrous metals, iron, steel, and nonmetallic minerals leading the way. Besides raw materials, clothing, wood and paper products, hides and skins, fruits and vegetables, and leather products are exported to the U.S.

With South Africa's skilled labor force and favorable exchange rate, many South African products have marketing potential in the U.S.

The following organizations are focused on US/SA trade opportunities:

Contact our Economic Office in New York  to learn more about trade and investment opportunities in South Africa.

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INTERNATIONAL TRADE RELATIONS
 

South Africa is a contracting party to the Generalized Agreement on Tariffs and Trade (GATT) and is a member of the World Trade Organization (WTO). South Africa follows the Harmonized System (HS) of import classification and receives Generalized Schedule of Preferences (GSP) treatment from the U.S. which means that thousands of South African products may be imported 'duty free' under this program.

In keeping with its World Trade Organization (WTO) commitments, South African Government has sought to reform a formerly complex tariff structure. In the past two years, the government has been quite successful in simplifying and reducing its overall tariff code such that the average tariff rate has fallen from a level in excess of 20% to just over 12% in just 2-3 years.


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COUNTRY INVESTMENT RATINGS

International credit ratings are an opinion by a rating agency of the future ability, legal obligation, and willingness of a bond issuer or other obligor to make full and timely payments due to investors.

Three USA agencies, Standard & Poor's, Moody's Investor Service and Duff & Phelps, are now awarding "investment grade" ratings for South Africa.

  • Moody's Investor Service:

    Currently has a Baa3 investment grade ceiling for South Africa's foreign currency debt. Moody's also upgraded South Africa's outlook from "stable" to "positive".

  • Standard and Poor's:

    In February 2000, Standard & Poor's gave South Africa a credit rating of 'BBB-' (triple B minus) with a "stable" outlook. This new rating, BBB-, is an "investment grade" rating. According to Econometrix, "this new rating  should give foreign investors the assurance that the South African government is in a position to service any foreign-currency denominated debt, issued in the form of bonds".

  • Duff & Phelps: Its rating for South Africa of 'BBB-' (triple B minus) and higher are considered "investment grade". This agency rates South Africa's long-term debt at BBB+ (triple B plus) with a "stable" outlook.
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USEFUL LINKS
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