South Africa

Originally published: Aug-19-2011

View More Country Risk Reports

Official Name: Republic of South Africa

Internet Domain: .za
International Dialing Code: +27

Table of Contents

Location and Size

South Africa is located at the southern tip of the African continent. Its total land area is 1.2 million sq. km, making it slightly less than twice the size of Texas. Countries that border South Africa include Namibia, Botswana, Zimbabwe, Mozambique and Lesotho, a tiny country bordered on all sides by South Africa.

Government

South Africa is a Parliamentary democracy with 9 provinces.

Executive branch:

• chief of state and head of government President Jacob ZUMA; Deputy President Kgalema MOTLANTHE
• Cabinet (appointed by the president)

Legislative branch: bicameral Parliament consisting of

• National Council of Provinces (90 seats elected for 5-year terms) with special powers to protect regional interests
• National Assembly (400 members elected for 5-year terms)

Judicial branch: Constitutional Court, Supreme Court of Appeals, High Courts, Magistrate Courts

[back to Table of Contents]

Legal System

South Africa has a mixed legal system of Roman-Dutch civil law, English common law (four former British colonies were united to form South Africa) and customary law.

South Africa has not submitted an International Court of Justice (ICJ) jurisdiction declaration. It does accept ICCt jurisdiction. Read about the ICCt on Wikipedia.

[back to Table of Contents]

Nine Interesting Facts About South Africa

• Table Mountain in Cape Town is believed to be one of the oldest mountains in the world.
• The world is divided into six floral kingdoms. All these kingdoms encompass several countries, and in some cases, several continents. South Africa, which has a floral kingdom wholly contained within the country, is the one exception. The Cape Floral Kingdom has 9,600 plant species, 70% of which are not found anywhere else in the world.
• South Africa is the second largest exporter of fruit in the world.
• South Africa is rated 3rd in the world in supplying safe, drinkable tap water.
• The Palace of the Lost City resort hotel is the largest theme resort hotel in the world as well as the largest building project undertaken in the southern hemisphere.
• South Africa has the cheapest electricity in the world; the country generates two-thirds of Africa’s electricity.
• The deepest mine in the world is a gold mine in South Africa. The Western Deep Levels Mine reaches a depth of 11,749 feet. Most mines descend to about 3,300 feet.
• South Africa is the only country in the world to voluntarily abandon its nuclear weapons program.
• South Africa is the top ranked gold producing country and has 80% of the world's platinum reserves.

More Interesting Facts: Africa Beckons, Lark Tours

[back to Table of Contents]

Economy

South Africa has the largest economy on the African continent, contributing close to 40% of total African GDP. Seventy-five percent of the largest African companies are South African.

Daunting economic problems remain from the apartheid era - especially poverty, lack of economic empowerment among the disadvantaged groups, and a shortage of public transportation.

South Africa's former economic policy was fiscally conservative, focusing on controlling inflation and attaining a budget surplus. The current government largely follows the same prudent policies, but must contend with the impact of the global crisis and is facing growing pressure from special interest groups to use state-owned enterprises to deliver basic services to low-income areas and to increase job growth. More than a quarter of South Africa's population currently receives social grants. Unemployment remains high and outdated infrastructure has constrained growth.

Leading Markets (2009): China 10.3%, US 9.2%, Japan 7.6%, Germany 7%, UK 5.5%, Switzerland 4.7%

Leading Exports-commodities: gold, diamonds, platinum, other metals and minerals, machinery and equipment

Leading Suppliers (2009): China 17.2%, Germany 11.2%, US 7.4%, Saudi Arabia 4.9%, Japan 4.7%

Leading Imports-commodities: machinery and equipment, chemicals, petroleum products, scientific instruments, foodstuffs

Top Industries: mining (world's largest producer of platinum, gold, chromium), automobile assembly, metalworking, machinery, textiles, iron and steel, chemicals, fertilizer, foodstuffs, commercial ship repair

Top Agricultural Products: corn, wheat, sugarcane, fruits, vegetables; beef, poultry, mutton, wool, dairy products

[back to Table of Contents]

Comparative Economic Indicators – 2010

* July, 2011 estimates
** PPP – Purchasing Power Parity
*** 2010 Corruption Index: 10=Very Clean; 0=Highly Corrupt
**** 2011 Index of Economic Freedom: 100-80=Free; 49.9-0-Repressed
Economic Data from CIA World Factbook
2010 Corruption Perceptions Index, Tranparency International
2011 Index of Economic Freedom, Heritage Foundation

[back to Table of Contents]

Credit and Collections

Dispute Resolution

Dispute settlement and enforcement of commercial contracts is relatively easy and not as costly as in other countries in the region. This reflects the confidence of companies operating in South Africa in the integrity of the judicial system

South Africa is a member of the New York Convention of 1958 on the recognition and enforcement of foreign arbitration awards, but is not a member of the World Bank's International Center for the Settlement of Investment Disputes. South Africa recognizes the International Chamber of Commerce, which supervises the resolution of transnational disputes. South Africa applies its commercial and bankruptcy laws with consistency and has an independent, objective court system for enforcing property and contractual rights.

[back to Table of Contents]

Risk Assessment

Coface Country Rating: A3 – Changes in general good but somewhat volatile political and economic environment can affect corporate payment behavior. A basically secure business environment can nonetheless give rise to occasional difficulties for companies. Corporate default probability is quite acceptable on average.

Coface Business Climate Rating: A3 – same as above

Coface: Strengths 

• Economic and political heavyweight on the continent
• Extensive natural resources (coal, platinum, diamonds, coal
• Diversified industry and effective financial services
• Public-sector finances and indebtedness under control
• Good foreign debt profile: essentially medium-long term and rand-denominated
• Satisfactory business environment

Coface: Weaknesses

• Outlying geographic location
• Sensitivity to raw material prices
• Sensitivity to economic conditions in Europe and United States and to Asian competition
• Deficient transport and energy infrastructure
• Dependence on foreign capital inflows which are volatile in nature
• Severe inequality, high unemployment and shortage of skilled manpower
• 11% AIDS prevalence rate

Ducroire Delcredere Political Risk: 3 fairly low
Ducroire Delcredere Commercial Risk: B moderate

More information on South Africa’s economy and commercial/country risk can be found in the July 2011 Atradius Country Report on South Africa.

[back to Table of Contents]

Business Climate

South Africa is the largest economy in the region, with a large private sector and a growing private tax base. The government has openly committed itself to a liberal economic course with a focus on macroeconomic stability, financial discipline, and an increase in foreign direct investments.

South Africa, a middle-income, emerging market, has an abundant supply of natural resources; well-developed financial, legal, communications, energy, and transport sectors; a stock exchange that is the 18th largest in the world; and modern infrastructure supporting a relatively efficient distribution of goods to major urban centers throughout the region. Unfortunately, the country has a shortage of skilled manpower and high unemployment as a result. There is severe inequality between the elite and the rest of the population.

Economic Freedom: The 2011 Index of Economic Freedom scored South Africa at 62.7, which makes its economy the 74th freest in the world (out of 179). It is ranked 5th out of 46 countries in Sub-Saharan Africa and its score is higher than the world average. The South African economy benefits from relatively good levels of trade freedom, business freedom, and financial freedom. The regulatory environment encourages competitiveness and flexibility. Continuing integration into global commerce has led to notable increases in productivity.

Official Company Register: http://www.cipro.gov.za/2/home/

Market Access: The government of South Africa is open to foreign investment as a means to drive economic growth, improve international competitiveness, and obtain access to foreign markets for its exports. Virtually all business sectors are open to foreign investors. No government approval is required to invest, and there are few restrictions on the form or extent of foreign investment.

Regulatory System: Although the regulatory environment in South Africa is continuously being improved, some public services are still characterized by high levels of red tape.

Intellectual Property Rights: South Africa is a member of the WIPO (World Intellectual Property Organization) and a signatory to the Paris Convention for the Protection of Intellectual Property.

Exchange Control: The South African Reserve Bank's (SARB) Exchange Control Department administers foreign exchange policy. An authorized foreign exchange dealer, normally one of the large commercial banks, must handle international commercial transactions and report every purchase of foreign exchange that is received by South African residents or companies. Generally, there are only limited delays in the conversion and transfer of funds.

While non-residents may freely transfer capital into and out of South Africa, transactions must be reported to authorities. Non-residents may purchase local securities without restriction. To facilitate repatriation of capital and profits, foreign investors should make sure that an authorized dealer endorses their share certificates as "non-resident." Foreign investors should also be sure to maintain an accurate record of investment.

Corruption: According to the Business Anti-Corruption Portal, the level of corruption in South Africa is not as pervasive as in other African countries, largely due to the country's relatively well-functioning government institutions. However, business surveys indicate that corruption still presents an obstacle to business operations. Transparency International’s Corruption Perceptions Index 2010 gives South Africa a score of 4.5, which is moderately corrupt. It’s score is 54th out of 178 countries.

Political Violence: Political violence is not currently an issue. However, criminal violence remains at a high level. National and provincial governments are pursuing programs to diminish the level of criminal violence. Some forms of crime, including murders, armored vehicle and mall robberies, have declined over the past five years, while others, including burglaries and small business robberies have increased.

For more detailed information on these topics, visit the 2011 Investment Climate Statement – South Africa, of the U.S. Department of State.

[back to Table of Contents]

Business Protocol in South Africa

South Africa is one of the most multicultural countries in the world. Many different ethnic groups make up the population in urban areas. In addition to the indigenous black peoples of South Africa, colonialism and immigration have brought in white Europeans, Indians, Indo-Malays, Chinese and many other peoples. As such, it is difficult to generalize South African etiquette and culture.

• South Africans do not need to establish long-standing personal relationships before conducting business.
• There are major differences in communication styles depending upon the individual's cultural heritage.
• For the most part, South Africans avoid confrontations.
• Most South Africans, regardless of ethnicity, prefer face-to-face meetings to more impersonal communication mediums such as email, letter, or telephone.

More information on Business Protocol:

• Kwintessential
• Executive Planet

[back to Table of Contents]

Sources for further information on doing business in South Africa

Doing Business in South Africa, UHY International

Embassy of the Republic of South Africa in Washington, DC

SouthAfrica.info

The American Chamber of Commerce in South Africa

U.S. Diplomatic Mission to South Africa

[back to Table of Contents]

*****

Subscribe to the Credit-to-Cash Advisor
Monthly e-Newsletter -- It's Free

This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including South Africa. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a wide variety of reputable sources.

Comparative Economic Indicators: CIA World Factbook

Risk Assessment information: Coface Country Rating and Ducroire/Delcredere.

Exchange Rates: OANDA.com The Currency Site.

Other information is provided by sites including FITA.