Don’t forget to mention the World Cup in 2010, article on how it will affect German economy this summer (so psyched by the way): http://www.china.ahk.de/articleslibrary/issue4_germany.pdf

Good, in depth report:

http://www.oecd.org/dataoecd/23/45/32430337.pdf

World Cup impact on host country’s economy (old)

Table shows that rich countries who host the world cup tend to show a slight decrease in growth rate, but developing countries like Mexico, Argentina (at the time) showed significant increase. I think it will be the same for SA in 2010.

Among politicians and policy-makers and soccer barons, though, it is a truism that the World Cup automatically results in a great windfall for the host nation(s). The overall economic effect of hosting the 2002 tournament for Japan is estimated to be $24.7 billion. Including training camp facility and new stadium construction, etc., Japan has thus far spent $4.3 billion in preparation for the World Cup. If the national team makes it as far as the best eight, DIHS calculates that overall consumption expenditures will total $636 million. In the short-term, then, it has been a tremendous boon to the local economy. Similarly, the Korean World Cup Organizing Committee (KOWOC) reckons that the net benefit to the local economy will be $8.3 billion; KOWOC is also expecting thirty-five thousand jobs being created as a result of co-hosting the World Cup. During the tournament, people go out to eat and drink more, there are home parties, people feel like spending—all of which will boost consumption

Year HostCountry

Rate of Growth inYear of World Cup

Rate of Growth,Following Year

PercentChange

1970 Mexico 6.9 4.2 -2.7

1974 West Germany 0.2 -1.3 -1.5

1978 Argentina -3.4 7.1 10.5

1982 Spain 1.2 1.8 0.6

1986 Mexico -3.7 1.7 5.4

1990 Italy 2 1.4 -0.6

1994 USA 4 2.7 -1.3

1998 France 3.5 3 -0.5

ForecastFeb 23rd 2006 From the Economist Intelligence UnitSource: Country Forecast

The ruling African National Congress (ANC) is expected to maintain its overwhelming hegemony during the forecast period. However, the party and its leadership will be preoccupied with maintaining party unity and an orderly process of electing a successor to Thabo Mbeki as ANC president at the party's national congress in December 2007. Economic policy will continue to focus on increasing economic growth and investment in order to create employment. Assuming a sound mix of fiscal and monetary policy combined with public-sector wage moderation, weaker administered prices and lower private-sector unit labour costs (owing to productivity gains), the Economist Intelligence Unit expects inflation to remain within the target range of 3-6% set by the South African Reserve Bank (SARB, the central bank) in 2006-07. Fairly strong global demand will help to boost exports, but higher imports will ensure that the current account remains in deficit, at 4.6% of GDP in 2006, although this should narrow to 4% of GDP in 2007.

Key changes from last update

Political outlook

There is no change in the political outlook from last month.

Economic policy outlook

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The decision of the SARB's Monetary Policy Committee (MPC) to leave the repurchase (repo) rate unchanged at 7% at its meeting on February 1st-2nd was based mainly on improved inflation prospects. With inflation remaining lower than official expectations, the MPC is highly likely to leave rates unchanged when it meets on April 12th-13th. However, if oil prices continue to rise and demand for consumer credit remains robust, the prospect of an interest-rate rise in the middle of 2006 will become increasingly likely.

Economic forecast

The rand remained strong in 2005, averaging R6.36:US$1, on the back of rising foreign reserves, high gold prices and strong inflows of foreign direct investment. Over the forecast period the rand is expected to depreciate gently, owing to lower commodity prices and the rising deficit on the current account, to average R6.50:US$1 in 2006, before falling further, to R6.75:US$1, in 2007.

Fixed investment outlook positive

3 February 2006

Fixed investment activity in South Africa has accelerated sharply over the past three years, with growth rates approaching levels last seen a decade ago, according to Nedbank's latest report on capital expenditure in the country.

According to the report, fixed investment in SA has now been growing for 22 consecutive quarters, with impressive growth rates of 8.3% in 2003 and 8.8% in 2004 carrying over into 2005 - and could grow by over 10% a year over the next five years.

This has helped to take fixed investment as a percentage of gross domestic product (GDP) in South Africa up to 16.5% in 2004 from 15.1% in 2000.

While this investment-to-GDP ratio still lags the 20% and higher levels seen in high-growth developing countries, "there is increased optimism that the current investment boom will be sustained over the longer term," Nedbank senior economist Nicky Weimar said in a report highlighting the findings of the recently updated Nedbank Capital Expenditure Project Listing.

New capital projectsFixed capital formation appears set to grow at a rapid pace over the next two to five years, Weimar said.

"Nedbank's project listing shows a sharp increase in new capital expenditure plans in 2005 which, coupled with the massive infrastructure projects announced in 2004, should produce strong growth rates in overall investment activity over the next few years."

Weimar said the 2010 Football World Cup was a major influence on capital expenditure plans, but that there was also a general rise in new projects in the manufacturing and mining sectors.

"This suggests that confidence in the economy has improved and that businesses remain determined to maintain and expand their penetration of export markets," she said.

Nedbank's listing shows that 106 new projects worth around R166-billion were announced in 2005, compared with 64 new projects worth R60-billion in 2004. (The 2004 figure excludes the government's announcement of a major infrastructure upgrade drive, including the R40-billion and R95-billion plans of state companies Transnet and Eskom.)

The listing comprises capital projects valued at over R20-million that lead to an expansion in output rather than just a replacement or upgrade of existing capacity.

ManufacturingThe bulk of new projects announced in 2005 came from South Africa's private sector (projects worth around R134.9-billion), with the manufacturing sector recovering strongly (projects worth around R68.2-billion).

According to Weimar, many industries in the country plan to expand capacity on growing expectations of rising building and construction activity ahead of the 2010 World Cup and on hopes of continued strong global demand for commodities.

Five big projects announced in the basic iron and steel industry in 2005 were:

Mittal Steel's R8-billion expansion and upgrade of its Vanderbijlpark, Newcastle and Saldanha steel plants.

The IDC's R3.3-billion titanium project. Highveld Steel and Vanadium's R1.6-billion upgrade of its Witbank plant. International Ferro Metals' R1.4-billion plan to construct a ferrochrome smelter near

Buffelsfontein in North West province. Tata Steel's R650-million plan to construct a high-carbon ferrochrome smelter in Richards

Bay.

Cement and building suppliesSouth Africa's cement and building supplies industries have also started to gear up for the expected construction boom, with new projects worth around R4-billion announced in 2005. These include:

PPC's R1.3-billion expansion of its Dwaalboom cement factory in Limpopo province. Lafarge's R1-billion expansion at its Lichtenburg cement works. The PG Group's plans to construct a new glass manufacturing plant in Springs and upgrade

its plants in Port Elizabeth and Garankuwa near Pretoria.

Vehicle manufacturingMotor vehicle manufacturers in South Africa remained aggressive investors in 2005, according to Nedbank's listing, with confidence levels high despite uncertainty over the future of the state's Motor Industry Development plan.

Projects worth around R7-billion were announced in 2005, with DaimlerChrysler, General Motors, Toyota and Volkswagen either improving flexibility of operations or expanding capacity to produce new models for both the domestic and export markets.

MiningSouth Africa's mining sector was also prominent among the new projects in Nedbank's listing, with around R32-billion worth of investments planned for the next five years. While the platinum mining industry again featured strongly, the new projects were spread more evenly and capital expenditure plans in the gold and iron ore mining industries increased sharply in 2005.

Gold mining projects included:

Harmony Gold's R600-million Elandsrand project to exploit a potential 9.8-million ounces of reserves.

DRD's ambitious R8-billion Argonaut Project to extend the Central Rand Goldfields. Gold Fields' R1.8-billion Driefontein depth-extension project.

Two iron ore mining projects were announced: Kumba Resources' R3-billion expansion of its Sishen operations, and a R1-billion development of a new open-pit mine in the Kgalagadi region of the Northern Cape.

Government projectsNedbank's listing shows a strong rise in government plans, with 10 new projects worth R17.5-billion announced in 2005 - mostly infrastructure upgrades and expansions ahead of the 2010 World Cup, but also to address anticipated future infrastructural bottlenecks.

The focus of these plans is on upgrading areas around major sporting venues and tourist attractions, as well as on expanding water and road infrastructure.

The Airports Company South Africa is also busy preparing for 2010, with the announcement in 2005 of R3.4-billion worth of expansions to both the domestic and international terminals at the Johannesburg and Cape Town airports.

However, capital expenditure plans by state companies declined sharply in 2005, coming as they were off a very high base.

"However, actual investment spending by public corporations should remain strong during the next five years as Transnet and Eskom start to roll out their massive R135-billion expansion programme," Weimar said.

Much depends on government deliveryFixed capital formation in South Africa appears set to grow at a rapid pace over the next two to five years, Weimar concluded.

"However, much will depend on the public service's ability to deliver on the ambitious plans set out for general government, Eskom and Transnet.

"The political will and urgency appear to be in place, but real constraints remain in the form of severe shortages of skilled labour and project expertise.

"If these challenges can be overcome, if the manufacturing sector is able to withstand the effects of the strong rand, and if conditions for external financing remain favourable, growth in fixed investment of over 10% per annum seems achievable over the next five years."

SA business climate 'favourable'

15 December 2005

A joint survey by the World Bank and Department of Trade and Industry has found the investment climate of South Africa to be "favourable" in comparison to that of other African countries, and other middle-income countries throughout the world.

Conducted by Cape Town-based Citizen Surveys, the survey asked 800 South African enterprises to assess specific factors that shape opportunities and incentives for firms to invest productively, create jobs, and grow. These were benchmarked against countries at the same level of development, such as Malaysia, Kenya, Brazil, Poland and China.

"On many dimensions, South Africa has a good investment climate," the World Bank said. Legal protection of property, labour productivity, low tax rates, reasonable regulation, a low level of corruption and good access to credit were seen as factors contributing to the country's investment climate.

But challenges remain.

"Firms appear to be particularly concerned about at least four areas: skills and education of workers, labour regulation, exchange rate instability, and crime," said Vijaya Ramachandran, a World Bank enterprise development specialist.

"These are problem areas the government is aware of and has already targeted in its overall development planning."

Property, power and productivityAccording to the survey, most firms believe the courts in South Africa are able to protect their property rights and court cases are quickly resolved.

Losses to power outages in South Africa were modest in 2004, and the cost of power low by international standards. The country's tax rates are low and have been declining over time. Although the burden of regulation is not particularly low, it is comparable to that in most middle-income countries.

Few firms reported paying bribes to get government services or win contracts in South Africa. And most of the large formal firms in the survey did not see access to finance as a serious concern, with few reporting that they were credit constrained.

South African firms were found to be more productive than those in other countries where World Bank surveys have been conducted. According to the survey, the country's labour productivity is far higher than in Senegal and Kenya, the most productive low-income countries in sub-Saharan Africa.

Labour productivity is higher in South Africa than elsewhere in Africa and is higher than, or comparable to, other middle-income economies and the most productive areas of China. (Source: World Bank)

South Africa's labour productivity also compared favourably with other middle-income countries such as Lithuania, Brazil, Poland, and Malaysia - all of which, other than Brazil, have higher per capita income. Productivity was also found to be over three times higher than in China, although slightly lower than in the most productive cities in that country.

The challenges"Although the investment climate for large formal firms in South Africa appears favourable in many ways, some challenges remain," said Ritva Reinikka, the World Bank country director for South Africa.

"Wages for managers, professionals, and skilled workers are high by international standards, eroding South Africa's competitiveness. Exchange rate volatility makes exporting difficult - and yet for a high growth rate exports are critical."

The survey found that while the cost of crime in South Africa is lower than in the worst performing middle-income economies, it remains higher than in many of the country's competitors.

"Addressing these issues will help towards achieving the target growth rate of 6% per annum to stimulate development and job creation," Reinikka said.

Labour costs and skills Most managers said worker skills were a serious obstacle to their operations and to growth. Despite South Africa's greater productivity, the cost of labour is high - over three and half times that of the most productive areas of China, two and half times higher than in Brazil and Lithuania, and 75% higher than in Malaysia or Poland.

Wages are particularly high for highly skilled workers and managers. An additional year of education is associated with an 11% to 12% increase in wages in South Africa - compared to about 5% to 7% in developed countries.

The premium paid for education results in salaries for skilled workers and managers that are high by international standards. Although wages are similar for unskilled workers in Poland, managers' wages are over two and a half times as high in South Africa.

Labour regulationAccording to the World Bank, rigid labour regulations can discourage the hiring of new workers and slow employment growth. Close to a third of surveyed managers said labour regulations were a problem. Labour regulation is more rigid in South Africa than it is in many other middle income countries, the World Bank says.

In the most recent global Doing Business report, a World Bank report that compares the burden of regulation across countries, South Africa ranked 28th in the world overall - higher than many developed economies. But in the areas of regulations related to hiring and firing workers, South Africa ranked 66th.

Exchange rate Despite South Africa's relatively strong macroeconomic performance - GDP growth and moderate inflation - about a third of managers said macroeconomic instability was a serious problem. This is due to exchange rate instability. This is particularly problematic for exporters, who are paid in dollars or euros, but must pay their workers and suppliers in rands.

Close to three-quarters of enterprises that export to the US - the country whose currency has been most unstable against the rand - rated macroeconomic instability as a serious obstacle.

CrimeEnterprises in South Africa also rated crime as a major problem. Direct losses to crime and the cost of security were found to be higher in South Africa than they are in other middle income countries such as China, Poland, Brazil and even Russia.

Although this suggests that crime is a serious concern in South Africa, it was found to be less problematic than in the middle-income countries of Honduras, Guatemala, Nicaragua or Ecuador.

Incentives for investors

Several investment incentives have been created for the potential investor in South Africa. All business sectors are open to investors, no government approval is required, and there are almost no restrictions on the form or extent of foreign investment.

The current tariff reform programme is specifically aimed at lowering input costs for the producer, while import controls have been relaxed in line with South Africa's General Agreement on Tariffs and Trade (GATT) and World Trade Organisation (WTO) obligations.

Exporters are granted incentives such as export marketing assistance, zero rating for value added tax (VAT) on exports of goods and services and relief from various customs and excise duties.

In his February 2001 budget speech, Finance Minister Trevor Manuel announced a R3-billion incentive package for inventors in strategic industrial projects for the next four years. This will entail tax allowances of either 50% or 100% of an approved investment, and will be managed through the Strategic Industrial Project (SIP) programme.

The trade and industry department announced in April 2002 that the SIP programme had come on stream after finalising the criteria for the evaluation of projects. See: SIP incentives on stream

More recently, the reserve bank released its guidelines for inward listings by foreign entities on South African exchanges.

This follows an announcement by Finance Minister Trevor Manuel in his February 2004 budget speech that foreign companies will be allowed to list on the Johannesburg Stock Exchange and the Bond Exchange of South Africa.

This is expected to help local financial markets attract greater market capitalisation, attract foreign direct investment, support the New Partnership for Africa's Development (Nepad) and support exchange control objectives of enhancing foreign investment diversification through domestic channels.

Regional incentivesTo encourage investors to establish or relocate industry and business to areas throughout South Africa, the country's various regions (provinces) have development bodies that offer incentives.

These incentives, which vary from area to area, include reduced interest rates, reduced rentals for land and buildings, cash grants for relocation of plant and employees, reduced rates for basic facilities, railage and other transport rebates and assistance in the provision of housing.

Industrial, technology and agro-tourism strategic development initiatives have been planned in various provinces and include the Maputo Corridor in Mpumalanga, the Gauteng special economic zone and the Wild Coast and Fish River areas in the Eastern Cape.

State financing bodies

Industrial Development Corporation of South Africa Limited (IDC)The state-owned Industrial Development Council promotes investment by funding viable projects with development impact. It operates throughout South Africa and offers a range of financing services for small, medium and large scale industries, so as to assist businesses in the establishment of manufacturing concerns in South Africa and the Southern African region.

The most common form of financing given by the IDC is a medium to long-term low interest rate loan. The IDC has in certain cases taken equity stakes in industrial entities.

Industrial Development Corporation

Department of Trade and IndustryThe Department of Trade and Industry (DTI) has developed a package of incentives, which include the following schemes:

Investment support Small business development Competitiveness fund Innovation and technology

Export assistance Industrial Development Zone programmes

Department of Trade and Industry

Tax break for inner city upgrades

18 October 2004

The National Treasury has launched an urban renewal tax incentive to encourage the refurbishment and construction of commercial and residential properties in South Africa's 16 major cities.

The incentive translates into considerable financial benefits for investors, especially for refurbishing existing buildings. Companies that redevelop buildings in the country's inner cities will get a 20% tax deduction from all income earned in the first five years after a building has been refurbished.

Companies that develop new buildings will get a 20% tax deduction in the first year the building earns an income, plus an annual depreciation of 5% for the next 16 years.

Urban renewal tax incentive: guide for investors

This incentive supports other initiatives, such as policies to write off existing bad debt from inner city buildings in order to allow for these buildings to be sold, restored and refurbished.

The incentive will also encourage investment in affordable inner city rental housing, as well as provides a catalyst for public-private partnerships in mixed-used developments that provide social facilities integrated into new commercial and residential developments.

The incentive scheme will eventually apply to developments undertaken in 16 identified municipalities:

Buffalo City (East London), Eastern Cape Cape Town, Western Cape Ekurhuleni (East Rand), Gauteng Emalahleni (Witbank), Mpumalanga Emfuleni (Vaal Triangle), Free State eThekwini (Durban), KwaZulu-Natal Johannesburg, Gauteng Mafikeng, North West Mangaung (Bloemfontein), Free State Matjhabeng (Welkom), Free State Mbombela (Nelspruit), Mpumalanga Msunduzi (Pietermaritzburg), KwaZulu-Natal Nelson Mandela (Port Elizabeth), East London Polokwane (Pietersburg), Limpopo Sol Plaatje (Kimberley), Northern Cape Tshwane (Pretoria), Gauteng

The Johannesburg and Cape Town incentive scheme took effect from 14 October, with the Durban scheme expected to be gazetted by the end of 2004.

The Treasury has also already received applications for the scheme from the Tshwane, Emfuleni, and Sol Plaatje municipalities.

Johannesburg's approved urban development zones include the central business district, Newtown and Braamfontein, as well as the high-density high-rise residential areas of Hillbrow and Berea.

Other lower-density residential areas surrounding Johannesburg's Ellis Park area, such as Bertrams, Judith's Paarl, Doornfontein and Troyeville, as well as Bellevue, Bellevue East and Yeoville, are also included. The manufacturing and industrial strip to the north of the M2 East/West, from Benrose in the east to City West in the west, also fall under the city's approved urban development zones.

Johannesburg UDZ map

Cape Town has two urban development zones. Most of the historic Cape Town central business district is included, as are properties adjacent to the Main Road and Klipfontein Road Corridors. This includes portions of the suburbs of Salt River, Woodstock, Observatoy, Maitland, Mowbray, Athlone and Gatesville.

Cape Town UDZ map

Cape Town's second urban development zone includes the older part of the Bellville central business district, focusing on land adjacent to the Voortrekker Road Corridor and around Bellville Station. Some properties along Modderdam Road and Kasselsvlei Road are also included.

Belville UDZ map

The proposed urban development zone for eThekwini/Durban includes parts of Walter Gilbert Road, Bell Road, Shepstone Road, Bay Terrace, Victoria Embankment, Alexandra, Brook Streets, West Street, Berea Road, Carters Ave, Canongate Road, Warwick Ave, Centenary Road, Carlisle Road, First Ave, Stamford Hill Road, Croydon Road. Walter Gilbert Road, Cobham Road, Old Fort Road, NMR Ave, Somtseu Ave, Stanger Str, Argyle Road, and NMR Ave until Walter Gilbert Rd.

Proposed Durban UDZ map

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 Automotive Banking and financial services Chemicals Fishing Food and beverages General ICT and electronics Mining and minerals Property Tourism Telecoms Textiles

AgriprocessingSouth 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.

More on South Africa's agriprocessing industry More on agriculture in South Africa Department of Agriculture Agricultural Research Council

AutomotiveSouth 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).

More on South Africa's automotive industry National Association of Automobile Manufacturers of South Africa Automotive Industry Development Centre

Banking and financial servicesSouth 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.

More on South Africa's financial services industry Banking Council of South Africa

ChemicalsSouth 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.

More on South Africa's chemicals industry Chemical and Allied Industries' Association

FishingThe 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.

Department of Environmental Affairs and Tourism

Food and beveragesSouth 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.

SA Association for Food Science and Technology SA Meat Industry

ICT and electronicsThe 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.

More on South Africa's ICT and electronics industries Electronics Industries Federation

Mining and mineralsSouth 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.

More on South Africa's mining industry Department of Minerals and Energy

PropertyInvestors 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.

Department of Land Affairs Department of Housing SA Property Owners Association

TelecommunicationsSouth 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.

More on South Africa's telecommunications industry Department of Communications Independent Communications Authority of SA

TextilesThe 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.

More on South Africa's textiles industry Textile Federation of SA Clothing Federation of SA

TourismThe 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.

Department of Environmental Affairs and Tourism South African Tourism

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.

Public-Private sector partnerships

A strong emerging investment opportunity is through public-private sector partnerships. These initiatives require the contribution of private companies because the government cannot finance them alone. Projects are underway at the national, regional and local levels.

There is also a great need for skills development and transfer. The government is delivering houses, electricity, water, land, free health care, education and training, protection of civil and workers' rights and has improved transport and communication to millions of South Africans.

But the war on poverty is not over. Several of these programmes have shifted in direction or gathered new impetus following a period of policy review and consolidation. And in other areas, there are new challenges to address.

Alongside South Africa's own social and development policy commitments, the country is playing a leading role in the New Partnership for Africa's Development.

New Partnership for Africa's Development

From eco-tourism to the information superhighway, from regional trade promotion to participation in United Nations peacekeeping operations - new engagements on the continent and in partnership with other developing nations have brought new opportunities and demands on resources.

Social investment opportunitiesProject spend amounted to over US$5,8bn for the period 1994 to 2000, according to the fifth edition of Doing Business in South Africa published by Kogan-Page in the United Kingdom and sponsored by Absa Corporate Bank. The demand for building materials and companies involved in construction, electrification, water reticulation, sewerage and telephone installation will receive a strong stimulus from various infrastructural programmes.

The construction of 200 000 to 300 000 houses per year and the improvement of the situation whereby only one in three people have access to electricity will provide substantial opportunities for investment.

Already the electrification programme undertaken by the parastatal Eskom, the electricity supplier, is exceeding set targets, as has the rollout of telephone facilities in previously disadvantaged areas by fixed line operator Telkom. The government is currently in the process of offering the licence for a second fixed-line operator.

Eskom Telkom

The Department of Transport has embarked on more than 20 major road projects, (including toll roads) worth more than R5 billion over two years – many of which have brought substantial benefits to local communities.

The creation of Spatial Development Initiatives (SDI) in over 10 regions in the Southern African Development Community (SADC) is also leading to major infrastructural developments.

Department of Transport Spatial Development Initiative

Other related opportunities will arise from human resource development. Education and training implies a need for stationery, school furniture and related materials. Industries involved in supplying this sector could blossom in a country in which the need for education is of vital importance if sustainable economic growth is to be achieved.

Government spendingIf public infrastructure spending on construction goods and services is examined in more detail, it is clear that construction works made up the vast bulk of the investment of both public authorities and public corporations.

In the case of public authorities, these construction works would largely comprise the roads, water and sanitation reticulation needed for the development of communities. They would also include the national highway system and bulk water and sanitation infrastructure (dams and treatment plants).

The peak investment was in the early 1970s and such infrastructure investment has been declining ever since. However, the election of a democratic government in 1994 turned the trend and the past three years have brought an increase in such infrastructure investment.

Public-sector economic infrastructure investment has consistently predominated over investment in social infrastructure. Economic infrastructure is defined by the South African Reserve Bank as "roads, bridges, dams, electricity and water supply" while social infrastructure is defined as "schools, hospitals, etc. and administrative services".

Development Bank of South AfricaThe Private Sector Investments Unit of the Development Bank of Southern Africa (DBSA) plays a unique role in facilitating private sector provision of infrastructure in support of sustainable economic development in the SADC region.

The unit was established in 1996 in response to a worldwide trend towards increased private sector involvement in infrastructure, and in recognition of the need for an appropriate source of financial support for Public Private Partnerships (PPPs) in Southern Africa.

The DBSA aims to promote economic development by fostering the growth of productive enterprise and efficient capital markets within the regional and sectoral requirements of DBSA's mandate. Its focus is on four broad infrastructural groups: basic infrastructure services to the community (eg water and sanitation), economic infrastructure (eg telecommunications, toll roads, rail, power), industrial/agribusiness projects with infrastructure components, and capital market development.

SA online retail up 20% in 2005

11 January 2006

South Africans spent R514-million shopping online in 2005, 20% more than in 2004, according to a new report by technology researchers World Wide Worx.

The report, released in Johannesburg on Tuesday, predicts a further 20% increase in 2006.

These figures exclude the sale of air tickets online, which dwarf the numbers for online retail.

According to World Wide Worx, the four South African airlines selling tickets online - kulula.com, FlySAA.com, 1Time and Nationwide - together accounted for R1.8-billion in e-commerce in 2005, more than doubling the 2004 figure of R850-million, and more than three times the size of conventional online retail.

"Kulula.com has in fact been the single biggest success story of e-commerce in South Africa, and is the first South African consumer website to reach R1-billion in online sales in a single year," said World Wide Worx MD Arthur Goldstuck.

"It is abundantly clear that online ticketing of air travel will continue to dominate consumer e-commerce in South Africa for at least the next five to 10 years, given present growth trends in conventional online retail."

'A year of positioning'Not counting the sale of air tickets online, the 20% growth in online retail in SA was down from the 25% growth rate of 2004 - a decrease attributed by World Wide Worx to the high cost of broadband internet access in the country.

"The biggest obstacle to growth identified by all the executives we interviewed continued to be speed of internet access, and more specifically lack of affordable access to broadband," Goldstuck said.

"But there is a growing realisation that the growing experience levels of users will also make a significant impact. We call it the experience curve, and we believe that is the key to online retail in South Africa."

Media consultant Stephen Whitford, who conducted executive interviews with leading online retailers for the survey, described 2005 as a year of positioning.

"For most of the main online retailers interviewed this year, 2005 has been about re-strategising, implementing new systems, improving business processes and expanding product ranges," Whitford said.

Auctions, gifts, apparelThe number of online retail sites in SA has grown substantially, from 719 at the end of 2003 to 826 at the end of 2005. This growth has come despite 210 sites - more than a quarter of those online at the end of 2004 - closing down during 2004 and 2005. No less than 311 new sites came online during this time.

World Wide Worx identified the fastest growing major categories, in terms of number of sites, as auctions (230% increase in sites), gifts (50%) and apparel (32%). Gifts were identified as representing "significant opportunity", but also as one of the areas of greatest competition in online retail.

"The market can expect to see fallout in this sector, as well as in auction sites, which seem to have been fired up by the huge success of eBay, without having the market and structural benefits enjoyed by eBay," Goldstuck said. "However, this sector is also dominated by a few large players, mainly Aucor and Bid-or-Buy, and many of the latecomers will disappear."

10 sites dominateThe South African market is dominated by 10 online retail sites, which between them account for most online retail sales in South Africa.

They are the two major malls, M-Web ShopZone and Digital Mall; the two largest online grocers, Pick 'n Pay Home Shopping and Woolworths; the two largest online book retailers, Kalahari.net and Exclusive Books; the largest online florist, NetFlorist; the largest online wine retailer, Cybercellar; the largest online electronics store, Digital Planet; and the largest online health and beauty store, Ascot Direct.

Kalahari.net also dominated several other categories, including music, where Look 'n Listen and Musica are expected to offer serious competition, and movies, where it has almost no competition.

Black middle class on the rise

9 November 2004

New research shows that there is a burgeoning black middle class in South Africa – with a significant boost to the number of black South Africans entering the middle-income brackets.

The research, commissioned by the Financial Mail, shows that almost 300 000 black South Africans have become middle-income earners over the last three years. It also says that 500 000 upped their class status to the lower middle-income group.

Black spending power on the up - A recent report says motor vehicles, furniture, clothing, media, property and cellphone retailers are all benefiting from SA's booming "buppie" class. While the numbers are small - especially compared to the 4-million unemployed in the country - they are considered the first hard evidence that the country's racially divided economy is moving towards equilibrium.

The study used the benchmark of an average household income of between R6 455 per month and R11 566 per month to indicate middle class status.

The research process was simple. The South African Advertising and Research Foundation (Saarf) was asked to run a historical comparison of racial breakdowns of the Living Standards Measure (LSM) categories.

LSM measures socio-economic status using a range of measurements, such as monthly income and access to running water, education and transport.

The LSM 8 category has an average household income of R8.471 per month, whereas those falling in LSM 6 have an average income of R4 075 per month. The benchmark for the study was the LSM 7-9 group, the Sunday Times reports.

Another recent study, this time conducted by Unisa's Bureau for Market Research (BMR), picked up similar trends.

The BMR's latest household expenditure survey found that the highest percentage increases in household expenditure by black consumers between 1993 and 2003 were on education (up 21.4% per year) and domestic workers (up 23.4% per year).

The main increases in expenditure were on holidays or weekends away (up 44% per year over the period); recreation (up 29%); cigarettes and tobacco (up 25%); housing and electricity (20%); and savings (up 18%).

According to the BRM, although 95% of the poorest 20% of all households in the country are black, 38% of the top-earning 20% of households are also black.

Data from Saarf also shows that the number of black people in the LSM 10 (R18 649 per month) bracket has more than doubled to 6.3%.