South Africa
South Africa is a country in the southernmost part of Africa which was officially known as the Republic of South Africa (RSA). It has a population of 58million and covers an area of 471445 sq. Mi. it has three capital cities: legislative Cape Town, judicial Bloemfontein and executive Pretoria. 80% of the population is of black ancestry while the remaining entails different ethnic groups such as Asian, European and multiracial ancestry. However, the black majority claims more rights than the dominant white minority hence contributing much into the recent politics and history of the country. It is a developing country and ranks 77th in Africa and 113 in Human Development Index. It houses most world heritage sites according to UNESCO in Africa. It is central in international affair but also crime, inequality and poverty remains widespread in the nation whereby a quarter of the population is unemployed and lives below 1.25 dollars in a day. The country had strong economic growth evidence in their trade and investment patterns which are needed to confront the poverty and unemployment rates in the country. The paper seeks to understand the economy, politics and culture of the country with an interest in the overall impression of the country for trade investments from United States companies.
Geography
It is located in the southernmost part of Africa with a coastline stretching for more than two thousand five hundred kilometers which are along two oceans: the Indian ad south Atlantic. Most of the parts in the south are flat, plateau surrounded by great escarpments with an altitude of 1000m-2100m. The country has a temperate climate as a result of the oceans surrounding it. However, the climatic zones vary due to the oceanic influence and varied topography. It is bio diverse with numerous animals, fungi and plants. However, it has lost vast of it natural habitats due to deforestation, development patterns and overpopulation as well as invasion of alien species such as lantana, black wattle, hakea and port Jackson willow which are have led to scares water resources and a threat to native biodiversity.
Politics and government
It is a parliamentary republic with the president being the head of the government and state as well as the confident of parliament. The legislature, executive and judiciary act per the constitution while the power to strike down the executive actions is bestowed to superior courts. The national assembly consists of 400 members which are elected after every five years while the national council of provinces entails ninety members (each of the nine provincial legislatures elects ten members). The country since 2004, have had many popular protest due to political repression due to the violation of the constitution. It was the founding nation of UN (United Nations) and AU (African Union) whereby Jan Smuts the prime minister in the time wrote the preamble of the UN Charter.
It has played a huge role in mediating African conflicts such as in Comoros, Burundi, Zimbabwe and the democratic republic of Congo (DRC). On 24th august 2010, President Jacob Zuma of SA and Hu Jintao of China signed a strategic partnership to upgrade the bilateral ties of these nations which enabled the countries to have a comprehensive partnership in political and economic affairs. They have the largest trading partners in Africa.
Economy
South Africa has a mixed economy which is ranked second largest in Africa. It has a high gross domestic product (GDP) compared to other countries in Africa. Despite the nation being burdened by high unemployment and poverty rate, it is ranked among the top ten countries in the globe for income inequality. The country does not have a thriving informal economy as only 15% of the jobs in the country are in the informal sector. Following the inflation in 1994 the government policy has attracted foreign capital and stabilized public finances. The principal international trading partners in South Africa are United States, Spain, Germany, Japan, China and United Kingdom. The agricultural sector contributes to 10% of the formal employments which is low compared to other African countries. However, only 13.5% of the land in SA can be used for crop production due to aridity of the land while only 3% is considered to be a high potential land. The nation had a huge economic potential due to business friendliness, labor market, infrastructure, foreign direct investment strategy and cost effectiveness.
Culture
The nation is known as the rainbow nation due to diverse cultures and religions in the country who are united to form the identity, culture and the heritage of the country. Culture was used as a way to divide the South Africans in the past but understanding it diversity has enabled the people to understand and respect each other which is a part of promoting democracy. The blacks are the majority in South Africa with a huge number living in rural areas. It is among this group that cultural traditions are strongly followed. However, the increased westernization and urbanization has led to a decline of the traditional culture. The middle class is dominated by the whites with a number of Indian, coloured and black people who have similar lifestyles to people found in Australasia, North America and Western Europe. The unique political and social history has contributed to SA literature while cave paintings are among their major art. The commonly used language is English but there are other ten official languages represented in different contexts. They engage in different sports such as athletics, boxing, swing, netball and tennis but football has vast following among the youth while skateboarding and basketball and increasingly becoming popular.
Trade and investment in South Africa (TISA)
TISA is responsible for promoting investments in the country as well as exports to the global market. It is divided into three units that deal with investment, trade and support services. The facilitation unit helps in import and export procedures: it assist the investors in SA. The logistic Unit helps in reducing costs such as transport by liaising with the South African Airways air-cargo, Transnet, Telkom and the department of Public Enterprises to make sure that the exporters and investors prices are competitive. TISA noted a decline of foreign Direst Investments (FDI) but is working on ways to reverse the tide. Disturbances from the neighboring countries such as Zimbabwe are a cause for the decline of potential investors but TISA is appealing with parliamentarians to normalize the situation. It is focusing on industrial Development Zones (IDZs) for investors to invest.
Major trading partners in South Africa
South Africa is open to international trade which encompasses 59.4% of the gross domestic product in the country. The top trading partners in the country are United States, China, India, Germany, Saudi Arabia and the United Kingdom. It is the largest trading partner in EU compared to other African countries as their exports have grown and are becoming diverse which have moved from commodity-based to manufactured products. It mainly exports platinum (8.4%), coal and similar solid fuels (6.6%), motor vehicles (6.6%), gold (5.8%), and iron ores (4.6%). The main imports in the country are petroleum oils (16.7%), motor vehicles (4.2%), transmission apparatus for radio-telephony (3.3%), automatic data processing machines and units (2.3%), and medicaments (2.1%).
Economic and trade arrangements in South Africa
The trade policy is reported by the department of trade and industry (DTI) as a tool for industrial policy as it supports employment growth, industrial developments, upgrading and increasing the value-added exports. SA has an open economy which is protected by tariffs whereby 56% of duties were set at 10%. There had been tariff liberalization in SA whereby the exports in the country increased and were dominated by commodities. SACU is a trade agreement with SA, Swaziland, Lesotho, Botswana and Namibia being the members who focused on revenue sharing arrangements, industrial development, trade negotiations, trade facilitation and establishment of common institutions. In 2008, SADC which is a free trade area was established and implemented in 2012 with a aim to consolidate FTA based on ministerial task force recommendations. It has recently entered into two free trade agreements: the European Union and the South African Development Community (SADC). The EU ought to eliminate the subsidies on agricultural export destined by SACU. SADC comprise of sixteen members with an aim of achieving economic development, alleviating poverty and enhancing the quality of life in the countries. The imports and exports in SA are determined by population, GDP and distance. The trade agreements in South Africa give insight on how the country is trying to move from commodity exports to adding value to products hence creating more job opportunities. The trade policy was to create regional value in Africa hence contributing to industrial development, employment growth and supporting industrial policy. South Africa plays a huge role in developing countries based on the terms around the agreements.
Attractiveness of South Africa for investment of trade for U.S. companies
Compared to other African countries, South Africa has a high potential attractiveness. According to UNCTAD’S 2020 World Investment Report, the FDI attraction is relatively week due to it decrease by 15.1% in 2019. However, the FDI stocks in 2018 increased by one hundred and fifty one billion above the one hundred and twenty seven billion USD in 2018. There are many assets fostering attractiveness of investments in the country such as diversity, demography, abundant natural resources, productive and advanced economy, political stability and a transparent legal system. There is a big potential in tourism and retail sectors whereby the country has shifted to financial and production services. Mining makes up a huge percentage of SA economy whereby it is largest producer of vanadium, chrome, manganese, platinum and vermiculite. It is the 2nd producer of zirconium, ilmenite, rutile and palladium as well as the third largest coal exporter of coal in the globe. SA is strategically located, which makes it an ideal hub for investors to access the sub-Saharan markets.
However, the country is struggling from increasing social unrest due to demonstrations and strikes, high crime rates, structural issues in logistics and electricity supply and high levels of corruption. The SA government is working to make the country attractive to foreign investment by ensuring certainty and consistency in their policies, consolidating fiscal debt and improving the performance of state-owned enterprises. The foreign investment grant provides 15% of new machinery and equipment, the industrial policy program offers tax allowances and the skills support program provides up to 30 of workers’ salaries and 50% of the training costs. The industrial development zones lower the VAT of imported production-related materials in SA. There are many forms of investment aids in South Africa which make it attractive for investors.
What specific adjustments U.S. companies might have to make in order to operate effectively in this South Africa environment.
South Africa has special trade agreements with United States. They signed a Trade and Investment Framework Agreement (TIFA) in 20122 which offer cooperative work and consultative discussions on different trade issues. In addition to (South Africa Customs Union) SACU, the signed Trade, Investment, and Development Cooperative Agreement (TIDCA) in 2008 which focus on trade and investment promotion, customs and trade facilitation, sanitary and phytosanitary measures and technical barriers to trade.