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The Warsaw Voice » Other » April 19, 2006
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A Closer Look at South Africa
April 19, 2006   
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Economic Overview
South Africa has experienced strong economic growth since the end of apartheid in the 1990s. A profound restructuring of the economy and global integration have borne fruit in the form of macroeconomic stability, booming exports and improved productivity in capital and labor.

South Africa is the economic powerhouse of Africa, with a gross domestic product (GDP) four times that of its southern African neighbors and comprising around 25 percent of the continent's GDP.

The country leads the continent in industrial output (40 percent of total output) and mineral production and generates most of Africa's electricity (over 50 percent).

Its major strengths include physical and economic infrastructure, natural mineral and metal resources, a growing manufacturing sector, and strong growth potential in the tourism, and higher value-added manufacturing and service industries.

South Africa is the world's largest producer and exporter of gold and platinum and also exports a significant amount of coal. In 2000, platinum overtook gold as South Africa's largest foreign exchange earner. The value-added processing of minerals to produce ferroalloys, stainless steels, and similar products is a major industry and an important growth area. The country's diverse manufacturing industry is a world leader in several specialized sectors, including railway rolling stock, synthetic fuels, and mining equipment and machinery.

Agriculture accounts for just over 3 percent of the GDP. Major crops include citrus and fruits, corn, wheat, dairy products, cane sugar, tobacco, wine and wool. South Africa has many developed irrigation schemes and is a net exporter of food.

South African banking regulations rank with the best in the world. The sector has long been rated among the top 10 globally. There are 55 locally controlled banks, 12 foreign-controlled banks and five mutual banks. The Johannesburg Stock Exchange (JSE) Limited is the 18th largest exchange in the world by market capitalization (some R3.3-trillion as of September 2005).

Four main metropolitan areas dominate economic activity within the country: Johannesburg and its suburbs (Gauteng province), the coastal Durban/Pinetown areas (KwaZulu-Natal), the Cape Peninsula (which includes Cape Town), and the Eastern Cape's Port Elizabeth/Uitenhage area.

Economic growth
South Africa's economy has been in an upward phase of the business cycle since September 1999-the longest period of economic expansion in the country's recorded history. During this upswing-from September 1999 through to June 2005-the annual economic growth rate averaged 3.5 percent. In the decade prior to 1994, economic growth averaged less than 1 percent a year.

According to the South African Reserve Bank, there is no sign of this period of expansion coming to an end. GDP growth was running at an annualized 4.8 percent in the second quarter of 2005 (compared to 3.7 percent in 2004 and 2.8 percent in 2003).

Consumer inflation has been on a downward trend, averaging at 6.8 percent in 2003 and 4.3 percent in 2004-compared to 9.8 percent in 1994.

At the same time, prudent fiscal management has seen South Africa's budget deficit come down from 5.1 percent of GDP in 1994 to 2.3 percent of GDP in 2004. In the first quarter of 2005, this figure fell to 1.6 percent, with the SA Revenue Service collecting nearly $3.5 billion more than expected.

The source of the revenue windfall was not higher individual or corporate taxes-both have fallen since 1994-but the performance of the economy, consumer confidence, and a dramatic increase in the number of registered taxpayers, from 2 million in 1994 to more than 5 million in 2004.

Challenges
The International Monetary Fund (IMF), in its 2005 annual country assessment, commends South Africa's authorities for the remarkable economic progress achieved since democracy in 1994.

The economy is now growing strongly, inflation has been lowered and has become more predictable, public finances have been strengthened, and the external position has improved markedly, says the IMF. The expansion in economic activity has created additional jobs and the country's strong economic performance has benefited the rest of Africa.

At the same time, the IMF's directors note that serious economic challenges remain: persistent high unemployment, poverty, large wealth disparities and a high incidence of HIV/AIDS. But they came out in support of the SA authorities' approach to these problems, with policies aimed at raising economic growth in a stable economic environment and initiatives to reduce unemployment and improve social conditions.


South African International Corporations
Five South African firms were included in the UN list of the top 50 developing country multi-nationals. They are: Sappi Ltd (paper), SABMiller plc (food, beverages), Barloworld Ltd (diverse), Naspers Ltd (media) and Johnnic Holdings Ltd (telecommunications).

SABMiller is the world's second largest brewery, with a presence in 40 countries over four continents, producing 50 percent of China's beer.

SASOL operates the world's first and largest oil-from-coal refinery, providing 40 percent of South Africa's gasoline and diesel, as well as a huge range of chemicals which are exported to more than 100 countries.

Telkom, the national telecommunications operator, is helping to build a $630-million undersea fiber optic cable that will give Africa access to the world for the next 25 years.

AngloGold is the world's largest gold producer after acquiring Ghana's Ashanti mining company in 2003.

Eskom, the electricity utility is among the lowest cost power suppliers in the world. It satisfies 98 percent of domestic South African demand and two-thirds of Africa's.

Sources: The South Africa Story. Chapter 2, www.southafrica.info,
GCIS (2005) Pocket Guide to South Africa


Science, Technology, Research and Development
South Africa has 21 universities and other institutions of higher education, with a student population of close to a million.

South African science and research are world class. To expand this further, government budget for these areas has increased by 27.6 percent over the past five years. There are also a large range of international collaboration research projects.
These include the South African Astronomical Observatory (SAAO) and the South African Large Telescope Project (SALT), which form the basis of a Scientific and Cooperation agreement between Poland and South Africa.

The country has national research facilities for basic and applied research in such diverse areas as aquatic biodiversity, accelerator-based sciences and councils to promote research in such areas agriculture, cancer, geo-science, mining technology and medical research.

Due to the legacy of apartheid, South Africa has a skills shortage in a number of areas. It is addressing this through expanding educational opportunities, as well as a targeted program of recruiting skilled overseas personnel.

Source: GCIS (2005) Pocket Guide to South Africa. Pretoria


Poland-South Africa Trade Relations
Trade relations between South Africa and Poland have grown steadily, especially since 1997. Over the last few years, South Africa has become Poland's biggest trade partner on the African continent. The last 10 years have also seen South African foreign direct investment in Poland -through companies such as SABMiller (beverages), the JD Group (retail furniture) and Mondi (paper and packaging).


MAIN IMPORTS/EXPORTS 2005 (10 months)
Main imports from Poland to South Africa:

1. Vehicles; aircraft; ships and cooperating transport units
2. Machinery and mechanical appliances; electrical equipment and parts
3. Products of the chemical sector and related industries
4. Stone, articles of stone
5. Plastic and plastic products; natural rubber and byproducts
6. Base metal, metal articles
7. Processed food, alcohol and non-alcoholic beverages, tobacco

Main exports from South Africa to Poland by commodities:
1. Machines and mechanical appliances; electrical equipment and parts thereof
2. Mineral products
3. Products of vegetal origin
4. Base metal, metal articles
5. Products of the chemical sector and related industries
6. Vehicles; aircraft; ships and cooperating transport units
7. Plastic and plastic products; natural rubber and byproducts
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