South Africa at a Glance:

Population: 45 Million
Form of Statehood: Republic, since 1961
Government: Democracy, since 1994
Literacy: 86%
Total Area: 1.22 million km sq. (slightly less than twice the size of Texas)
Nominal GDP: US$ 135 billion (approx same as S. Carolina)

Natural Resources: Platinum group metals (PGMs), gold, base metals, chromium, manganese, titanium, uranium, diamonds and coal.

Primary Industries: Ore and mineral extraction, agricultural produce, including fishing.

Secondary Industries: Food and beverages, ore and mineral benefication, hydro-carbon into petroleum and plastics conversion, iron and steel, machinery and automotive.

Main Export Partners: US 27%, UK 12%, Germany 10%, Japan 10%, Italy 6% and others 25%

South Africa’s Regional Importance
South Africa is the economic, financial and technology hub in southern Africa. South Africa’s economic position is reflected in its role in Africa. In relation to Africa, it accounts for:

6% of the population
50% of purchasing power
18% of continent-wide GDP
50+% of electricity generated
45% of mineral production

South Africa has the largest and most diversified economy in the region and on the African continent. South Africa’s geographic position offers access to markets, not only in Africa, but also throughout the Southern Hemisphere. Strong linkages between the domestic and regional economy determine South Africa’s commercial interests and organizational objectives in the Southern African region.

As a member state of the Southern African Development Community (SADC), South Africa plays an important role in developing regional trade and cooperation. It also benefits from the SADC Free Trade Agreement that came into operation in September 2000. SADC consists of 14 countries with a total population of approximately 180 million.

South Africa is also playing a leading role in the Southern African Customs Union (SACU) negotiations on a Free Trade Agreement (FTA) with the United States. South Africa and its SACU partners (Botswana, Swaziland, Lesotho and Namibia) regard the proposed agreement as a significant step towards integrating SACU economies into the global economic system and promoting development in the region.

Marketing Strategies to Gain Access to South Africa
Even though the US lost market share in certain sectors during the sanctions years, the stronger Rand does make certain imports from the US again more lucrative. Furthermore, there are opportunities for creative export marketing strategies, such as:

Piggy-back exporting, where a new market entrant makes use of an existing market player with cross-cutting service and product delivery. Piggy-back exporting into South Africa also ensures that the often mandatory regulatory requirements of Black Economic Empowerment (BEE) are met; a minimum requirement to access large contracts and SA Government tenders.

Certain industrial participation off-set requirements in large SA Government contracts may present opportunities to increase US export advantages in other sectors.

Challenges & Opportunities
Foreign businesspeople are often surprised by the already tight South African market conditions, and the level of sophistication and commitment required to enter the market. For practically all market segments in SA, access is almost as difficult as in most mature foreign markets.

South African society reflects a very skewed income distribution, where 50% of the population earn only 11% of total domestic income. Therefore South Africa has a dualist economy with high consumption patterns, OECD-quality financial institutions and communications but also a large and unskilled labor pool.

Many US exporters and investors require a return on investment in the short term that conflicts with the imperative but costly market development phase (marketing, distribution, goodwill, etc).

Not only are more and more new suppliers coming to this market, but those already on the market (especially the Europeans and Japanese) are being forced to reduce their margins to fend off new competition. This is leading to radical corporate re-engineering across South African industries. New entrants sometimes resort to introducing loss leaders to the market in order to ensure critical mass within a short period.

Those with established production facilities in SA are making use of the South African Government’s (SAG) industry incentives to off-set import duties against export earnings. This is making access to the market for new entrants without joint-venturing, etc. more difficult.