ContentsCountry profile

South African Economy

South African Trade

Economic growth and need for energy

Investment environment

Energy sector status

Need for clean technology

Potential for international cooperation

South African Economy

• South Africa positioned as a manufacturing centre of excellence

• Diversified Industrial sectors

• Open economy

• Sound business case for investment and profit

• Gateway to Africa and markets of more than 200 Million consumers

• Africa is the next big story after China and India

Source: SARB

YEAR 1994 THEN 2004 IN 2015

GDP (billions) R 482

US$ 60

R 1 374

US$ 171

R 3 990

US$ 312.94

Merchandise exports

(billions)

R 69, 8

US$ 8.7

R 281,8

US$ 35.2

R1 041

US$ 81.65

GDP Growth 3,2% 4,6% 1,3 %

South African Trade 2015

Source: Quantec

SONA 2015

Resolving the Energy challenge

Revitalizing Agriculture & the

Agro-processing value chain

Advancing Beneficiation/adding value to our mineral wealth

More effective implementation of a higher impact Industrial Policy Action Plan

Encouraging private sector Investment

Moderating Workplace conflict

Unlocking the potential of SMME’s, Cooperatives and Township & Rural

enterprises

State reform and boosting the role of state-owned companies, ICT

infrastructure/broadband roll out, water, sanitation and transport infrastructure

Operation Phakisa aimed at growing the ocean economy & other sectors

Government Priorities

Government Priorities to stimulate growth

Priority Sectors For FDI

6

• Advanced Manufacturing

• Nanotechnology

• Metals

• Mining & Beneficiation

• Biofuels

• Agribusiness

• Automotives & Components

• Capital Equipment

• Precision engineering

• Aerospace

• Film production

• Tourism

• Oil & Gas

• Boat Building

• ICT and electronics

• BPO (Business Processing &

Outsourcing) and Call Centres

• Chemicals & Biochemicals

• Plastics & Composites

• (Bio) Pharmaceuticals & Medical

Devices

• Leather and footwear

• Forestry products & Furniture

• Energy and Renewables

• Infrastructure Development

• Waste Management

• Energy Efficiency & Cleaner

Technology

The South African Green Economy

Investing In The Green Economy

• The Green Economy is a key focus area for the SA Government

• The New Growth Path sets a goal of creating 5 million jobs by 2020

• The Green Economy is identified as an area of growth that could

contribute significantly to job creation

• The Green Economy Accord – signed in 2011 and identifying specific

opportunities for the Green Economy

The Green Economy Accord

• Identifies various priority areas including:

➢ Rollout of 1 million solar-water heating systems

➢ Increasing investment in the green economy through public and

private investors (including the Industrial Development Corporation)

➢ Procurement of renewable energy as part of energy generation plan

➢ Promotion of biofuels for vehicles

➢ Promoting energy efficiency across the economy

➢ Waste management and recycling

➢ Reducing carbon-emissions on the road – a shift to rail for freight-transport

➢ Economic development in the green economy – promote localisation,

youth employment, cooperatives and skills development

The Policy Environment

• Department of Trade & Industry adapted the Industrial Policy Action Plan to

include the Green Economy as a key priority

• Study by the Industrial Development Corporation identified that most green jobs

would be created through manufacturing of key components and equipment for

the renewable energy industry

• Various measures to create an enabling environment – developing technical and

physical infrastructure; developing standards for wind and solar power industries;

designate certain components

• Local content requirement is a policy measure implemented and monitored by the

dti – certain percentage of local content for each bidding round

• This has contributed directly to investment in manufacturing capacity in the

renewable energy sector

Green Economy Subsectors

• Renewable energy: wind, solar, biogas, biomass - focus on manufacturing of components

• Waste Management and Waste to Energy

• Energy efficiency and demand management initiatives

• Biofuels

11

REIPPP Investment And Local Content

Round 1 Round 2 Round 3 Round 4 MW

remaining

capacity

Approved bids 28 19 17 13

Value of

approved

projects

US$3.2bn US$2bn US$2.4bn US$1,6bn

Local content

valueUS$0.8 US$0.8bn US$1.1bn US$0.7bn

Local content %

(average for all

technologies)

23.7% 46.85% 47,2% 49,2%

MW Approved 1 415.6 1 044 1 456 1121 1488

Department of Energy

REIPPP Investment And Local Content

Department of Energy

Spain FDI into South AfricaYear Projects Capex Avg CapexJobs CreatedAvg Jobs Companies

2015 3 2 673.8 891.7 61 20 3

2014 5 1 900.5 379.6 604 120 5

2013 4 2 774.6 693.6 220 55 4

2012 2 106.6 52.7 25 12 2

2011 4 4 808.7 1202.2 76 19 3

2009 1 92.6 92.6 4 4 1

2008 1 187.5 187.5 61 61 1

2006 2 1 467.0 733.5 252 126 2

Total 22 14 011.3 637.4 1 303 59 18

4) Jobs data includes estimated values

Notes:

1) © fDi Intelligence, from the Financial Times Ltd 2016.

2) All Capex figures shown in the table are in ZAR - South Africa Rand millions

3) Capex data includes estimated values

Spain FDI into South Africa…

Industry Sector Projects Capex Avg Capex Jobs Created Avg Jobs Companies

Alternative/Renewable energy 5 9 736.9 1947.4 153 30 3

Electronic Components 4 240.2 59.8 190 47 4

Industrial Machinery,

Equipment & Tools3 219.1 72.6 25 8 2

Metals 3 3 147.2 1048.7 684 228 3

Software & IT services 2 255.4 127.7 71 35 1

Chemicals 1 72.6 72.6 14 14 1

Communications 1 87.9 87.9 16 16 1

Financial Services 1 128.9 128.9 17 17 1

Leisure & Entertainment 1 92.6 92.6 4 4 1

Minerals 1 30.5 30.5 129 129 1

Total 22 14 011.3 637.4 1 303 59 18

Notes:

1) © fDi Intelligence, from the Financial Times Ltd 2016. Data subject to terms and conditions of use

2) All Capex figures shown in the table are in ZAR - South Africa Rand millions

Local Content RequirementsTECHNOLOGY FIRST BID SECOND BID THIRD AND FOURTH BID

Current

threshold

Current target Threshold Target Threshold Target

ONSHORE WIND 25% 45% 25% 60% 40% 65%

SOLAR (PV) 35% 50% 35% 60% 45% 65%

SOLAR CSP

(without storage)

35% 50% 35% 60% 45% 65%

CSP (with

storage)

25% 45% 25% 60% 40% 65%

BIOMASS 25% 45% 25% 60% 40% 65%

BIOGAS 25% 45% 25% 60% 40% 65%

LANDFILL GAS 25% 45% 25% 60% 40% 65%

SMALLL SCALE

HYDRO

25% 45% 25% 60% 40% 65%

Investment Opportunities

• The investment requirement associated the IRP2010-2030 for solar and wind energy capacity amounts to R180bn by 2020 and over R400bn by 2030.

WIND SOLAR

Wind tower manufacturing

Wind turbine blade manufacturing

Gearboxes

Electronic controls

Pitch and yaw systems

Nacelle housing and cooling

PV cells and modules

PV inverters

Controllers

Batteries

Transformers

• Manufacturing opportunities

Special Economic Zones (SEZS)

• Government has identified Special Economic Zones as a mechanism

that will contribute towards the realisation of its economic growth and

development goals;

• And is committed to support and facilitate the designation, regulation

and development of Special Economic Zones in South Africa;

• Special Economic Zones will be designated in areas to promote

targeted economic activities, supported through special arrangements;

• and support systems including incentives, business support services,

streamlined approval processes and infrastructure.

Incentives Strategy

i) 15% Corporate Tax

ii) Building Allowance

iii) Employment Incentive

iv) CCA

v) 12i Tax Allowance

SEZ Value Proposition

SEZ Support Measures

Funding Strategy

i) SEZ Fund

ii) Mix of funding instruments

iii) PPPs

Infrastructure Strategy

i) Bulk infrastructure by government through SEZ Fund

ii) SEZ Locations

iii)Various stakeholders roles in providing infrastructure in and out of zone

Skills & Supplier Development

i) Skills dev. Strategies for SEZs

ii) Supplier development programmes to develop our local businesses

iii) Continuous training of civil servants

OSS Strategy

i) To reduce info search & transaction cost

ii) Facilitate permits & licences for investors

iii) Eliminate steps in approvals

iv) After care

Proposed SEZS In South Africa

Case specific lower corporate tax rate (15 %)

Employment incentive for

low salary workers

Accelerated depreciation for 11 years

Customs controlled area

– VAT exemptions and

duties

12 I tax allowance -

100 % to 75%

All other dtifinancial support

incentives

Dti Funding for all bulk and connecting

infrastructure

Physical links to strategic initiatives

One stop support

services portal (OSS)

Value Proposition

Holistic

industrial

investor

incentives and

support

measures

Support across the supply chain for i.e. tooling engineering supplier development etc.

11 years @ 20 % in first year and 8 % thereafter

Green and brownfield investments of between 100 % and 75 % tax allowance

Incentive Licensee Operator Investor

1. Customs Duties & VAT (in CCA) √ √ √

2. Employment Incentive √ √ √

3. Building Allowance* √ √

4. 15% Corporate Tax* √

5. 12(i) Additional Benefits (points & %) √

6. SEZ Fund for CAPEX (Infrastructure) √ √

* Provided that the Minister of Finance has agreed to allow this benefit to the

SEZ, and that the company is involved in activities that have not been

excluded.

7. SEZ Management support, infrastructure, security, OSS

Summary: Incentives

INCENTIVE SCHEMES

CLUSTER INCENTIVE SCHEME

MANUFACTURING

INVESTMENT

•12i Tax Incentive

• Automotive Incentive Scheme (AIS)

• People-carrier Automotive Investment Scheme (P-AIS)

COMPETITIVENESS

INVESTMENT

•Manufacturing Competitiveness Enhancement Programme

(MCEP)

• Export Marketing & Investment Assistance (EMIA)

•Capital Projects Feasibility Programme (CPFP)

SERVICES

INVESTMENT

•Film & Television Production

• Business Process Services (BPS)

BROADENING

PARTICIPATION

•Black Business Supplier Development

Programme (BBSDP)

• Co-operative Incentive Scheme (CIS)

• Incubator Support Programme (ISP)

INFRASTRUCTURE

INVESTMENT• Critical Infrastructure Programme (CIP)

INVESTING IN SOUTH AFRICA

Coega IDZ

East London IDZ

Richards Bay IDZ

OR Tambo International Airport (licensed)

Dube trade Port IDZ

Saldanha Bay IDZ

Contact:

Letta Kaseke

Assistant Director: Investment

Information

Tel: +27 12 394 5935

Email: Lkaseke@thedti.gov.za

REASONS TO INVEST IN SOUTH AFRICA – WORLD COMPETITIVENESS RANKINGS 2016

# 1 - Strength of auditing and reporting standards

#2 – Regulation of securities exchange

#3 – Protection of minority shareholders’ interests

#3 – Efficacy of corporate boards

#1 – Financing through local equity market

#6 – Availability of financial services

#8 – Soundness of Banks

#14 - Strength of investor protection

#14 – Quality of air transport infrastructure

#73 Overall ranking out of 189 countries and

#2 in Ease of doing business among BRICS countries in 2016

Top Investors

Invest South Africa (ISA) is the National investment promotion agency of South Africa offering a one-stop-shop approach to investing in South Africa

2014 UNCTAD winner for excellence in promoting Foreign Direct investment (FDI) projects to advance sustainable development

South Africa was ranked third in the world for investment in clean energy, according to Climatscope 2014 report released by Bloomberg New Energy finance

SA was voted overall winner for Africa by the Financial Times for the best destination for 2013 and 2014

In May 2013, AIM award for facilitating the second-best investment project (pharmaceutical sector)

2014 – Winner at AIM for sustainable development