Department of Trade and Industry’s Doing Business in Africa Guide
The Department of Trade and Industry (the dti) has introduced a new guide on doing business in Africa. South African’s trade with the region has grown significantly over the past two decades to overtake both Europe and Asia as our more important trading bloc. Manufactured exports to the region also represent more than 50% of total exports, reflecting high value-added activities.
The pace of business should pick up further with the adoption of the Southern African Development Community (SADC) Industrialisation Action Plan, which emphasises the structural transformation of the region based on the pillars of industrialisation, regional integration and enabling infrastructure. The emphasis on developing value chains offers a focus on key opportunities in the mining, agro-processing and pharmaceutical sectors.
An important shift in thinking will be to encourage deeper relationships between South African companies and partners in our neighbouring countries. In that regard, the dti has created an important entity, Trade Invest Africa (TIA), which focuses on supporting and creating connections in the region. This will provide support to traders and investors to increase market access and facilitate higher levels of productive investment in the region.
This booklet aims to provide companies with useful contacts to be able to access the complete range of services available from the South African Government, its partners and key agencies.
The booklet Doing Business in Africa is a publication of the dti, developed in consultation with Government and the private sector to facilitate South African business across the continent by increasing awareness of the Government’s offerings.
There is a general perception that South African companies go it alone, without a “team SA” approach. This booklet aims to provide the connections that will allow a coherent approach between private sector players and the South African Government.
South Africa Highlights
ranked the largest economy in Africa and 33rd largest in the world (World Bank, 2016)
ranked 75th in the world in the 2014 Index of Economic Freedom
ranked 53 out of 148 countries in the World Economic Forum’s (WEF) Global Competitiveness Report 2013/14
increased its tax revenue from R100 billion in 1994 to R1 trillion in 2014
is the second largest exporter of fruit in the world (The Economist)
ranks first in platinum, second in palladium, third in gold, sixth in coal and ninth in wool outputs (The Economist)
ranked 24 out of 192 countries in the Largest Gold Reserves Index 2013 (The Economist)
is the economic powerhouse of the African continent and was named fDi Magazine’s African Country of the Future 2013/14
ranked 10 out of 189 countries for good practice in protecting investors in business (World Bank Doing Business Report 2014)
Background and Purpose
Since 1994, Africa has risen dramatically in importance as a trading bloc to South Africa, overtaking Europe in 2013 and on par with Asia since 2014. This has gone hand in glove with the required integration agenda, both at an economic community level via SADC, and the tripartite and continental free trade agendas. South Africa’s exports to the region comprise a high proportion of manufactured goods and value-added services, with a trade balance heavily in the country’s favour, while its imports are largely commodity-based (oil and minerals).
A new priority is to encourage South African companies to establish more substantial positions in their key markets through joint ventures and investments that contribute to expanding the productive base of our key trading partners and ensuring a more sustainable growth path. This aligns closely with the objectives of the continent’s industrialisation agenda, which has taken centre stage.
The structural transformation of Africa’s economies is seen as resting on regional integration and the building of critical infrastructure to provide the means and economies of scale to facilitate industrialisation. Regional integration includes implementation of the SADC Free Trade Area to cover all member states; a gradual phase-down and abolition of rules of origin by 2025; liberalisation of exchange controls to allow free movement of capital within SADC by 2030; and ratification of the SADC Protocol on Trade in Services for implementation by 2020.
The Tripartite Free Trade Area (TFTA) is aimed at fostering integration in the three regional economic communities (RECs), namely the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and SADC.
The Continental Free Trade Area negotiations are well under way and focused on drawing together the continent of more than one billion inhabitants into a single free-trade area.
Africa’s transformation is to be centred on commodity-based industrialisation through agro-industries, minerals and pharmaceuticals, which will encourage the creation of regional value chains and participation in global processes. The African Union (AU), United Nations Industrial Development Organisation (UNIDO) and United Nations Economic Commission for Africa (UNECA) continue to address the industrialisation challenges of the continent, particularly the need to shift from a dominance of commodities/extractives goods towards higher value-added and more complex goods and services.
South Africa’s position at the southernmost tip of the continent provides access to the other 14 countries in SADC with a combined market of more than 250-million people, and can be considered the economic powerhouse of the continent. The fast-growing emerging economies and work on the continental and tripartite free trade areas will provide further opportunities for South African businesses.
South Africa’s Position in Africa
Africa is on track to establishing a continental free trade area and it is in South Africa’s interest to ensure that it remains a major player within this expanding market. SADC accounts for more than 86% of South Africa’s exports to Africa.
African countries have a concentration of unprocessed (raw material) commodities that are exported, resulting in low levels of intra-African trade of approximately 12%. It is for this reason that the focus is on adding value to exports and diversifying products to enhance both regional and global integration.
In terms of manufactured products, there is a low market share in agro-based manufactured products, with significant players such as Egypt, Kenya and Nigeria competing for the African market. South Africa is in an unique position to benefit from a larger and integrated African community.
Summary of main trade agreements between South African and the rest of Africa
South Africa, via its established agreements led by the dti, utilises strong government-to-government relations and mechanisms to advance a developmental agenda in Africa that focuses on:
identifying and establishing joint investment projects in partner countries;
promoting two-way trade;
coordinating South African technical cooperation and assistance to support policy and institutional development in partner countries;
promoting cross-border infrastructure development, notably on the basis of the SDI methodology;
promoting regional integration through the strengthening and consolidation of the Southern African Customs Union (SACU) and SADC free trade agreement; and
Negotiating agreements on investment protection and economic cooperation.
Of greater importance, will be the accelerated conclusion of enabling agreements under negotiation, and the implementation measures of those that have been ratified.