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South Africa International Finance Country Report Leann Bustamante Miriam McDonough Lindsay Surig Brief Description of South Africa Republic of South Africa Size: Less than 2x Texas Capital: Cape Town Population: 43, 647, 658: Growth rate.02% Ethnic Groups: black (75,2%), white (13.6%), colored (8.6%), Indian (2.6%). Brief Description of South Africa The Boers: Dutch Settlers The Boer War: (1899- 1902) 1990s- End of Apartheid General Economic Importance Middle income, developing country Well-diversified economy Natural Resources Financial, Legal, Communication, Energy and Transport, Mining sectors Stock Exchange: ranked among 10 largest in the world General Economic Importance Economic Problems Unemployment rate Problems with respect to Apartheid Era Crime and Corruption HIV/AIDS General Economic Importance Imports/Exports Recent Economic History External Accounts • • • • • 1998- 1.6% 1999- virtual balance 1998- Measures to reduce unemployment 2000- Free Trade Agreement with EU 2001- South African Development Community (SADC) trade protocol 2000- President MBEKI vow to promote economic growth and foreign investment 2001- Government slow down (result of international economy) 2001 GDP Figures GDP - $412 billion GDP growth rate – 2.6% GDP composition by sector agriculture –3% industry- 31% services-66% Inflation Rate- 5.8% Political Stability and Structure Apartheid Democracy Reformed structure 2002 Organization for African Unity African Union AU focus Changed from fight against poverty and human rights To promote democracy, good governance, and economic growth Assistance AU and President Thabo Mbeki continue to seek assistance to implement their ideas “Future assistance will be focused on countries that demonstrate a political and financial commitment to good governance and the rule of law, investing in their people, and pursuing policies that spur economic growth and alleviate poverty implementation. We will not work with governments which disregard the dignity and interests of their people.” Stability Increasing levels of stability The political structure seems strong enough to hold the diverse region together. There are huge expectations for the new South Africa. Major Exports 32.3 billion dollars in exports Export commodities: gold, diamonds, platinum, metals, minerals, machinery, and equiptment Export partners: EU with 33%, United States with 20%, Japan with 6%, and Mozambique with 2.5% Major Imports 28.1 billion dollars in imports Larger exporters than importers Expected of a growth country Imports include machinery, rice, equipment, chemicals, petroleum products, and scientific instruments Major importing partners:EU with 41%, United States with 11.4%, Saudi Arabia with 7.3%, and Japan with 7% Currency Rand Over 10 years had devalued by 2/3 2001 fell 25% against the dollar, yen, and the pound Favorite object for speculators Underrated by 15% - 20% Exchange rates Rand per US dollar from 1997-Jan2002 11.58786 (January 2002), 8.60918 (2001), 6.93983 (2000), 6.10948, (1999), 5.52828 (1998), 4.60796 (1997). Trade Relationship with the United States South African shipments are entitled to specialized treatments under: Generalized System of Preferences African Growth and Opportunity Act United States shipment are entitled to Most Favored Nation Status Trade Relationship with the United States 1994: U.S.-South Africa Binational Commission 2002: U.S.-South African Cooperative Forum Between 1996 and 1999, foreign investment has increased significantly Other Major Trading Partners South African Customs Union Free Trade Agreement Botswana, Lesotho, Namibia, and Swaziland European Union South African Development Community Free Trade Agreement Fourteen countries in the region South African Trade by Country (Rand ‘000) Investment Potential Positives: Offers a market with a steadily growing economy Provides easy access to the other markets in Africa Labor costs that are low Well developed financial institutions and capital market Strong macroeconomic policies Investment Potential Negatives Unemployment and crime rates are high Education and health care systems are extremely poor Investment Potential South African Government has conducted a number of investment promotion efforts Attractive investment destination for capital goods, technology, foreign investment, and joint ventures South Africa Questions or Comments?