Below is the table of contents of the South African Country Commercial Guide. Please read Chapter 1: Doing Business in South Africa to get a better impression of its contents. If you are a U.S. company and you would like to receive a free copy of this guide, please complete the CCG request form.

Table of Contents

Chapter 1: Doing Business in South Africa
Chapter 2: Political and Economic Environment
Chapter 3: Selling U.S. Products and Services
Chapter 4: Leading Sectors for U.S. Export and Investment
Chapter 5: Trade Regulations and Standards
Chapter 6: Investment Climate
Chapter 7: Trade and Project Financing
Chapter 8: Business Travel
Chapter 9: Contacts, Market Research and Trade Events
Chapter 10: Guide to Our Services

Note: The Country Commercial Guide is updated every year.

Market Overview

Welcome to the South Africa Country Commercial Guide (CCG)! This guide presents a comprehensive look at South Africa's commercial environment, using economic, political and market analysis.

• South Africa is by far the largest economy on the African continent with an estimated 2004 GDP of $171 billion. It has a well-developed physical and financial infrastructure that is comparable to OECD standards. Its service sector is well established and growing and 45 million in an area almost twice the size of Texas.
• South African imports in 2003 came primarily from Germany 16.6%, United Kingdom (UK) 8.5%, United States (U.S.) 8.2%, Japan 5.9%, China 5.9%, Saudi Arabia 5.2%, and France 5%.
• The biggest foreign investor on a dollar basis is the UK; however, since 1994, the United States has made the largest number of investments.
• The economic sectors consist of agriculture: 3.8%, industry: 31%, services: 65.2%
• The national retail consumption patterns reflect the bipolar nature of the economic status of its citizens, ranging from basic needs (e.g., condensed milk) to high-end capital goods (e.g., SUV’s).

With the passage of the African Growth and Opportunity Act (AGOA), and the current negotiations for a United States-South African Customs Union Free Trade Agreement, there will be increased opportunities for American business looking to enter or expand their presence. Additionally, over the past four years, South Africa has further integrated into the global trading system by concluding free trade agreements (FTA) with:

• the European Union, by far the largest trading partner of South Africa, and
• its neighbors in the Southern Africa Development Community (SADC),

The Southern African Customs Union (SACU) agreement with Botswana, Namibia, Lesotho, and Swaziland, first entered in 1910, has also been recently renegotiated and agreed to by all members.

The continued growth in GDP for over ten years has increased the attraction of South Africa as an investment and marketing platform. Extensive structural reforms have spurred a boom in the services industry as well as in merchandise exports. Structural reforms in general have also increased the economy’s diversification and openness, bolstering its resilience to external shocks.

Twelve years after the watershed 1994 democratic elections, South Africa continues to maintain a stable political environment. This underpins:

• the government’s market-oriented economic policies, and
• steady progress towards restructuring state assets.
• At the same time, the strengthening nature of the bilateral U.S.-South Africa relationship is based upon a business-like approach to practical issues.

Market Challenges

South Africa’s business environment includes several socio-economic challenges.
Issues facing both government and business are:

• The specter of HIV/AIDS is affecting all facets of business.
• Unemployment remains high, and the lack of job creation is a key structural problem.
• Strong protection of employee rights is playing a role in the slow rate of foreign direct investment.
• The Black Economic Empowerment (BEE) policies on redressing historically disadvantaged communities continue to evolve.
• U.S. firms entering this market must contend with a typically mature market with well-established, mainly European competition.

Market Opportunities

Opportunities for U.S. exporters and investors in South Africa reflect the growth of its consumer base and its efforts to upgrade and develop its infrastructure to match and further fuel its economic growth.

Factors benefiting U.S. exporters include:

• a very strong retail environment expected to last for at least two years, and
• a currency that has increased in value to the trade weighted basket by 17 percent since December 2003 and now again favors many manufactured imports.
• U.S. branded goods are gaining market share.
• South African Government-owned corporatized parastatal utilities such as ESKOM (energy) and TRANSNET (transportation) are set to increase new capital expenditure to $20 billion over the next five years.
• The awarding to South Africa of the 2010 FIFA World Cup Soccer championship is expected to result in $350 million in improvements and investment projects.

In general, the best prospects for exports are in capital goods, though opportunity exists in a wide range of consumer products and services as well. Of particular note are:

• Airport/Ground Support Equipment
• Telecommunications Equipment
• Electric Power Systems
• Medical Equipment
• Automotive Parts/Service Equipment
• Pollution Control Equipment, and
• Healthcare Services

Market Entry Strategy

Because the South African market is sophisticated, entry should be well planned and factor in:

• a very skewed demographic income distribution pattern, where ten percent of the population earns 45 percent of national income.
• The majority of consumer demand is very price sensitive.
• Distribution issues where the large retail centers are spread over only five metropolitan regions.
• A judicious selection of one of three low-risk entry strategies: representation, agency or distributorship. (Note: any local partner should be BEE compliant).
• The entrenched bias of a conservative market that sticks to known suppliers requires sustained market development.
• South Africa is the pre-eminent stepping-stone for developing most sectors in sub-Saharan Africa. The marketing mix should anticipate this medium-term option.

In addition to this Country Commercial Guide, the Commercial Service office in Johannesburg offers many services to assist you in developing your market entry strategy and throughout your export experience in South Africa. Fore more information on entering the South African market click here.