The South Africa of today is one of the most sophisticated and promising emerging markets globally. The unique combination of a highly developed first-world economic infrastructure and a huge emergent market economy has given rise to a strong entrepreneurial and dynamic investment environment.

South Africa is the economic powerhouse of the African continent, with a Gross Domestic Product (GDP) of R1,9 trillion (US$283bn) - four times that of its Southern African neighbours, and comprising 30% of the entire GDP of Africa.

The World Economic Forum's Global Competitiveness Report 2008/09 of the World Economic Forum, ranked South Africa 45th out of 134 global nations. South Africa's GDP grew at a healthy 5,2 % in 2007 and a lower 3,1% in 2008, due to the impact of the global economic crisis. South Africa is one of the most sophisticated and promising emerging markets, offering a unique combination of highly-developed first world economic infrastructure, with a vibrant emerging market economy. South Africa is also one of the highest ranking developing economies and surpasses countries such as Hungary, Italy, Brazil and Thailand. The country leads the continent in industrial output (40% of Africa's total output) and mineral production (45% of total mineral production) and generates most of Africa's electricity (over 50%).

Macro Economic Stability

South Africa has achieved a level of macro-economic stability not seen in the country for many years. Such advances create opportunities for real increases in expenditure on social services, and reduce the costs and risks for all investors, laying the foundation for increased investment and growth. By 2007, the economy was stronger than at any time over the past 20 years.

The South African government has achieved significant successes in ensuring macro-economic stability, via the implementation of macro-economic policies directed at promoting domestic competitiveness, growth and employment. The South African economy, prior the global economic meltdown, has been growing substantially; additional jobs have been created, and the pace of the economic expansion has been strengthened by robust investment and domestic expenditure. South Africa's macro-economic performance over the past 15 years has been characterised by a remarkable improvement in stability, resulting in a considerably improved economic growth rate. The national government deficit decreased from -4.8% of GDP in 1994, to -0.6% in 2008, meaning that over time, the South African government is moving away from spending more than its revenue. The national government debt decreased from 50.4% of GDP in 1995, to 23.8% in 2008, resulting in a reduction in government's liability over the years.

Global economic activity deteriorated sharply in 2008 and 2009, as the international credit crisis intensified. According to the latest IMF World Economic Outlook Update (January 2009), global output growth is expected to slow further, from 3,4% in 2008 to 0,5% in 2009, before rebounding to 3,0% in 2010. In several advanced economies, real output is projected to contract in 2009, while economic growth is expected to moderate significantly in emerging-market and developing countries.

Against this backdrop, South Africa has not escaped the effects of the global economic downturn due to its open economy. Despite declining GDP, South Africa is still posting positive growth results but could slide into a recession during 2009.

Market Opportunity

One of the chief reasons for South Africa becoming one of the most popular trade and investment destinations in the world is due to the country ensuring that it can meet specific trade and investment requirements of prospective investors and businesspeople. Many lucrative possibilities, arising from South Africa's wealth of natural resources, and almost unlimited export and import opportunities, exist in the country.

Costs of doing Business

The cost of doing business in South Africa compares favourably to other emerging world markets. According to an annual World Bank study, titled the Ease of Doing Business, South Africa ranks 32nd out of 181 of the economies surveyed in 2009 for ease of doing business. The country boasts the lowest electricity prices in the world and despite looming challenges in this sector, doubling its electricity price will still place the country as the cheapest provider. South Africa's labour costs are significantly lower than those of other key emerging markets. It also has a favourable corporate tax rate compared to other emerging markets. The costs for labour, land, rental, human resources, transportation and general living expenses do, however, vary from province to province.

Cost of doing Business in South Africa Guide

This Guide is for investors who wish to have ready-made information, which can be used in investment-making decisions. It should be borne in mind that the cost figures contained in this publication are indicators and could vary within a relatively short space of time. It is therefore advisable that researchers and analysts obtain current figures from the sources quoted in this document. Although every effort has been made to verify the accuracy of the information, the dti Trade and Investment South Africa (TISA) division will not be held responsible for any damage or loss suffered by any person or entity arising from the use of information contained therein.

Skills

South Africa possesses a large resource base of skilled, semi-skilled and unskilled labour. The South African government has introduced wide-ranging legislation to promote training and skills development and fast-track the building of world-class skills and competences.

A strong network of universities and other tertiary education institutions is home to a host of leading international academics and researchers, with the majority of research and development in South Africa, undertaken at the country's universities.

Financial Infrastructure

South Africa is one of the world's favourite emerging markets, offering investors sophisticated financial infrastructures and exceptional investment opportunities. The South African Reserve Bank (SARB) oversees the banking services industry in South Africa. The non-banking financial services industry is governed by the Financial Service Board (FSB). South Africa has the following principle financial service markets:

• JSE Securities Exchange South Africa (JSE);
• South African Futures Exchange (Safex);
• Bond Exchange of South Africa (BESA); and
• Alternative Exchange (Altx)

The JSE is governed and licensed externally by the Stock Exchange Control Act of 1985. The Safex and BESA markets are governed by the Financial Marketers Control Act of 1989. The markets are self-regulated internally.

Transport and Logistics Infrastructure

South Africa boasts one of the most modern and extensive transport infrastructures in Africa. This infrastructure plays a crucial role in the country's economy and is depended on by many neighbouring states. The government recently announced large-scale upgrading of the country's infrastructure, as well as investment in new infrastructure. Transnet, a state-owned enterprise, is South Africa's main transport operator and the holding company for Spoornet (rail transport), Autonet (road transport), Petronet (liquid petroleum), Portnet (port authority) and Fast Forwards (container shipments). The national airline carrier, South African Airways (SAA), is an incorporated public company owned by the South African government. The airline serves more than 700 destinations globally and carries more than 7 million passengers a year.

Natural Resources

South Africa produces 14% of the world's gold, and has 41% of the world's known reserves. It is estimated that 21 000 tonnes of undeveloped resources - about one fifth of the world's unmined gold - still remains. These ores are increasingly difficult to exploit due to the great depths at which they are situated and their fairly low-grade quality produce. Over the past few years, South African mining houses have transformed into large, focused mining companies that include Anglo Platinum, Anglogold, De Beers, Implats and Iscor. South Africa is the world's largest producer of gold (after China) and platinum. The country is one of the leading producers of base metals and coal, accounting for a significant proportion of both world production and reserves. The country's diamond industry is the third largest by value, and the sixth largest by volume in the world, with Russia and Botswana leading in both categories.

The agricultural sector is well developed, and secondary manufacturing in the agro-processing industries is pervasive, evidenced by many locally-produced food items found in food retail outlets.

Today, South Africa is not only self-sufficient in virtually all major agricultural products, but in a normal year, it is also a net food exporter. Major import products include wheat, rice and vegetable oils. Despite the farming industry's declining share of GDP, it remains vital to the economy, and development and stability of the Southern African region. Over the past five years, agricultural exports have contributed on average about 8% of total South African exports.