|
The South African Economy
South Africa is a
middle-income developing country with an abundant supply of natural
resources; well-developed financial, legal, communications, energy
and transport sectors; a modern infrastructure, and a stock exchange
which ranks among the ten largest in the world. At the same time,
the challenges which the country faces are to create a strong and
balanced economy in order to eliminate poverty, develop a dynamic
human resource capacity, facilitate the creation of a prosperous
southern African region and engage the world economy in a
sustainable manner.
In the context of the internationalization
of production processes and the integration of
commodity, financial and technological markets into a single market,
South Africa, like other developing countries, is highly susceptible
to trends in the economies of its major trading partners.
The defining feature of 1998
was the havoc wreaked in the global economy by the onset and
subsequent spreading of the East Asian financial crisis. South
Africa was partially protected from the worst of the crisis. This
was primarily due to a stable macroeconomic environment and the
soundness of the domestic financial system. However, there were some
negative consequences from the Asian crisis – the most important
being that the economy was diverted from its growth trajectory for
the year.
Foreign Trade and
Payments
Weak export growth in the
second half of 1998, coupled with a marked increase in import demand
for high-value capital equipment, resulted in the trade balance
moving from a surplus in the first half of the year to a deficit in
the second half. A decline in net service payments to the rest of
the world from the third quarter of 1998 to the fourth quarter
served as some cushioning for the negative balance on the current
account in the last quarter of 1998.
Overall, the deficit on the
current account increased from 1,5 per cent of GDP in 1997 to 2,1
per cent of GDP in 1998.
In 1998 there was a surplus of
R5,9 billion on the trade account, but this was relatively small
compared to the surplus of R9,1 billion recorded in 1997.
Export volumes were adversely
affected by the fall in demand from Asia. The volume of merchandise
exports declined by 3 per cent in the third quarter of 1998 and by
3,5 per cent in the fourth quarter. However, the physical quantity
of merchandise exports still increased by 2 per cent in 1998 as a
whole, after a growth of some 4,5 per cent in 1997.
The prices of merchandise
exports, many of which are determined in foreign currency, benefited
from the depreciation of the rand. However, a decline of almost 5
per cent was registered in rand export prices from the third to the
fourth quarter of 1998 owing to continually depressed international
commodity prices and the slight strengthening of the rand.
The combined effect of the
drop in export volumes and prices, was a lowering in the seasonally
adjusted and annualized value of merchandise exports from
R137,2 billion in the third quarter of 1998 to R25,7 billion in
the fourth quarter.
The value of net gold exports,
seasonally adjusted and annualized, rose from R26,9 billion in
the third quarter of 1998 to R28,2 billion in the fourth quarter.
Factors contributing to this growth in gold exports include an
increase
-
of about 4 per cent in the physical
volume of gold exports
-
in the averaging fixing price of gold
on the London market (from 288 US dollar per fine ounce in the
third quarter to 294 US dollar in the fourth quarter).
|
Capital account of the balance of payments
(R million), 1992 – 1998 |
|
Capital
movement* |
|
Period
|
Private
sector |
Public
authorities, public corporations and the banking sector
|
Total
capital movements (net inflow) |
SDR
allocations and valuation adjustments |
Total
change in gross gold and other foreign reserves
|
|
Long term
|
Short term
|
Long term
|
Short term
|
|
1992
|
-3 964
|
-6 167
|
2 453
|
3 267
|
-4 411
|
326
|
1 698
|
|
1993
|
2 675
|
-11 934
|
-2 947
|
-2 756
|
-14 962
|
1 609
|
123
|
|
1994
|
775
|
-4 714
|
2 728
|
5 305
|
4 094
|
344
|
2 818
|
|
1995
|
7 255
|
-6 686
|
10 975
|
6 968
|
18 512
|
315
|
3 596
|
|
1996
|
1 330
|
-13 527
|
5 409
|
8 977
|
2 189
|
3 245
|
-1 864
|
|
1997
|
11 171
|
-11 152
|
18 865
|
791
|
19 675
|
257
|
19 208
|
|
1998**
|
20 072
|
-22 685
|
5 137
|
6 553
|
9 077
|
6 165
|
6 305
|
* A minus sign
indicates an outflow
** Provisional figures
Source: South African Reserve Bank
|
Production and consumer price indices, 1992
– 1998 |
|
Production
prices of goods for domestic use
(June 1995 = 100)
|
Consumer
prices (1995 = 100) |
|
Period
|
Goods
produced in South Africa |
Imported
goods |
All goods
|
Goods
|
Services
|
All items
|
|
Food
|
All goods
|
|
1992
|
78,0
|
83,3
|
78,8
|
75,7
|
77,1
|
76,3
|
77,0
|
|
1993
|
83,4
|
87,4
|
84,1
|
80,9
|
85,1
|
82,9
|
84,5
|
|
1994
|
90,8
|
92,2
|
91,0
|
92,0
|
93,1
|
90,3
|
92,1
|
|
1995
|
99,8
|
99,2
|
99,7
|
100,0
|
100,0
|
100,0
|
100,0
|
|
1996
|
107,3
|
104,5
|
106,6
|
106,1
|
106,2
|
109,5
|
107,4
|
|
1997
|
115,5
|
109,7
|
114,2
|
116,4
|
114,8
|
119,5
|
116,6
|
|
1998
|
119,6
|
113,1
|
118,2
|
123,7
|
121,7
|
128,9
|
124,6
|
Source: South African Reserve Bank
Large increases in the volume
of imports were registered in the manufactured goods category for
1998. Increases in this category stemmed primarily from the
persistent high level of real aggregate final demand in the economy,
including aircraft purchases, a commitment to the expansion of the
telecommunications network and the export contracts of automobile
manufacturers requiring imported intermediate goods and equipment to
avoid paying higher prices later. The result was that the volume of
imported goods in the first three quarters of 1998 was 1,8 per cent
up from the corresponding period in 1997. Excluding South African
Airways (SAA) aircraft purchases, import volumes would have declined
by 2,5 per cent in the fourth quarter. For 1998 as a whole, the
volume of total merchandise imports increased by 2 per cent, after a
growth rate of 5 per cent in 1997.
As import volumes dwindled, so
did the import prices. Factors contributing to this scenario were
declining output prices in South Africa’s main trading-partner
countries and a mild appreciation in the average effective value of
the rand from the third to the fourth quarter. The value of
merchandise imports (seasonally adjusted and annualized) declined
from R164,2 billion in the third quarter of 1998 to R156,4 billion
in the fourth quarter. However, there was still a rise of about 14
per cent in the value of merchandising imports from 1997 to 1998.
Net service payments and
transfer payments to non-residents, which had increased from a
seasonally adjusted and annualized value of R16,7 billion in the
first quarter of 1998 to R21,4 billion in the third quarter,
declined to R17,4 billion in the fourth quarter. The drop was
attributable to lower interest payments to non-residents following
their large-scale selling of domestically registered bonds and a
decline in payments for freight and insurance. Owing to the decline
in net service payments to non-residents, the deficit on the current
account narrowed to R19,9 billion in the fourth quarter of
1998, after having widened from R3,3 billion in the first quarter to
R21,5 billion in the third quarter. As a percentage of GDP, the
deficit on the current account increased from 1,5 per cent in 1997
to 2,1 per cent in 1998.
As the intensity of the Asian
contagion subsided towards the end of 1998, the net flow of
international capital (not reserves) was reversed from a net outflow
of R3,6 billion in the third quarter of 1998 to a net inflow of R3,6
billion in the fourth quarter. This change in direction of capital
flow was confirmation of improved investor sentiment towards South
Africa.
There was a net inflow of
long-term capital in the first three quarters of 1998,
notwithstanding a net outflow in the third quarter, during which
non-resident investors reduced their South African bond holdings on
a large scale and locally registered banking institutions increased
their offshore direct investments. Net inflow of long-term capital
subsequently returned in the fourth quarter of 1998, taking the net
inflow of long-term capital to R25,2 billion for the year as a
whole. In 1997, the inflow of long-term capital amounted to R30
billion.
The persistent outflow of
short-term capital during the first three quarters of 1998 turned
into a net inflow of R2,8 billion in the fourth quarter of 1998.
Much of this reversal represented the delayed repatriation of export
earnings after the repatriation period had been extended by exchange
control authorities from 30 days to 180 days.
The gross gold and other
foreign reserves of the country, including the borrowed reserves of
the South African Reserve Bank, declined from R44 billion at the end
of the third quarter of 1998 to R41,8 billion at the end of the
fourth quarter. Overall, the country’s gross gold and foreign
reserves declined from 7,3 billion US dollar at the end of December
1997 to 7,1 billion US dollar at the end of December 1998.
Aggregate import cover, i.e.
the value of gross international reserves expressed as a ratio of
the value of imports of goods and services, was estimated at about
10,5 weeks at the end of 1998 – broadly unchanged from the end of
1997.
The average exchange value of
the rand against a basket of four currencies depreciated by 3,2 per
cent from December 1997 to April 1998. The decline was larger than
the inflation differential between South Africa and its main trading
partners, implying that the competitive standing of domestic
producers in export markets was heightened somewhat by the currency
depreciation. From the middle of April 1998, non-resident investors
began to reduce their holdings of South African bonds. This led to
an excess supply of rands on the foreign exchange market, a scenario
which was exploited by highly leveraged international investors and
other currency speculators who sold rands to establish short
positions which would allow them to profit from a fall in the
foreign exchange value of the rand. The selling of rands was so
severe that the average nominal effective exchange rate of the rand
declined by 21,6 per cent from the end of April to the end of August
1998. The rand weathered the effects of the Russian moratorium on
government debt repayments in August 1998 and began to strengthen at
the beginning of September. The appreciation was to some extent
assisted by the closing of positions by some currency speculators
who were left with short positions at a less profitable exchange
rate than they had expected. In general, the rand strengthened by
6,7 per cent against the four-currency basket from the end of August
to the end of December 1998.
Foreign trade
The importance of foreign
trade to the economy is evident both from the ratio of its exports
(goods and non-factor services) to GDP, and from the ratio of
imports (goods and non-factor services) to gross domestic
expenditure. Despite attempts to diversify its export base, South
Africa is still largely reliant on the export of primary and
intermediate commodities to industrialized countries. However,
manufactured goods account for about 70 per cent of exports to
Africa.
Merchandise exports, based on
preliminary figures, represented 83 per cent (R129,1 billion)
of South Africa’s total exports (merchandise plus net gold exports
and excluding receipts for services) in 1998.
Net gold exports are
responsible for a large part of foreign exchange earnings. Earnings
from this source are, however, directly linked to the international
gold price. In 1998, net gold exports amounted to 17 per cent of
merchandise exports.
Imports mainly comprise
capital goods, raw materials, semi-manufactured goods (approximately
76 per cent of total trade imports) and consumer commodities.
In November 1998, the National
Export Week was held in Midrand, Gauteng. The week was attended by
representatives of the International Trade Center and aimed to raise
the awareness of exporters about the services and service providers
available.
The week culminated in the
presentation of the prestigious President’s Award for Export
Achievement. The company Continental Tyre SA (Pty) Ltd took top honors
overall as well as in the Plastics and Chemicals category.
The other winners were KWV, Durban Clothing Manufacturers, Energy
Measurements, Macadams Bakery Manufacturing, Consani Engineering,
Rand York Minerals, Swasap, Intertrading, Tradewinds Parasol and
Burger International.
At the end of the export week,
the Government and the business sector announced details of a joint
exporting strategy. A key part of the strategy is the establishment
of a National Export Advisory Council, several working groups and
sectoral export targets. The council consists of senior government
officials, parastatals and business associations and advises the
Minister of Trade and Industry and the Government on export related matters. The working groups will investigate the development of
sectoral export strategies; improvements in export finance;
transport and logistics, and further development of an institutional
capacity within the business sector.
Another key element of the
strategy is a small exporters’ program aimed at identifying and
nurturing the development of 100 small exporters every year.
Overall export targets include
increasing the contribution of finished manufactured exports
to total South African exports over the next three years from 20 per
cent to 30 per cent. The targets also include raising manufactured
exports by 14 per cent a year in real terms and increasing the
penetration of South Africa’s exports in non-traditional markets.
Trade relations
South Africa maintains formal
trade relations with various countries by means of treaties, trade
agreements and membership of international institutions concerned
with trade.
The country’s trade is likely
to be increasingly driven by its foreign policy. Evidence of this is
the growing number of official missions undertaken at the highest
level by the President and Deputy President and other ministerial
delegations to countries which, during the sanction years, had not
officially traded with South Africa. Countries in the Far East, the
Middle East and Africa are becoming important focus areas. (See also
Chapter 9: Foreign relations.)
Trade relations with Africa
and the Middle East
The conditions regarding a
South African value-added export strategy in the Southern African
Development Community (SADC), Africa (excluding the SADC) and the
Middle East are guided by the country’s capacities in the domestic
economy, the related targeting policies for increasing manufactured
employment, and the capacities of the receiving market to absorb
South African exports. While the Department of Trade and Industry’s
efforts in SADC markets have tended to follow a path of trade and
investment integration, efforts in the rest of Africa and the Middle
East have tended to focus on export marketing, outward investment
projects and the resultant export demand created by such investment
projects.
The US Agency for
International Development (USAid) has become involved in a project
called Retail Loan Program aimed at increasing micro-enterprises’
access to finance.
Short and
medium-term working capital loans of between R5 000 and R50 000
are made available to established micro-enterprises in all sectors
that are deemed ‘unbankable.’ By May 1998, 130 loans worth about
R2,4 million had been disbursed since the project’s launch in 1997.
The Department has
restructured a number of services to achieve greater value-added exports to these regions. This is done by means of the following
strategies:
-
Analysis of the market
opportunities, barriers and business climate in these regions, as
well as defining and shaping the nature of the
government-to-government relationship as it affects the economic
relationship for South African operators. These are available to
South African companies in the form of country-strategy
publications by the Department. The following country analyses are
available: Uganda, Kenya, Mauritius, Tanzania, Egypt, Israel,
Saudi Arabia, the United Arab Emirates (UAE), Ghana, Côte
d’Ivoire, Senegal, Nigeria, Madagascar, Morocco, Tunisia and
Algeria.
-
The export strategies of individual
South African firms are supported in the form of non-financial
services such as the Export Help Desk at the Department’s
headquarters which serves as a port of first call for exporters
trying to access the Department’s export services. Sector export
promotion specialists at the Department’s headquarters provide the
next tier of service available to prospective exporters. A further
initiative has been the facilitation of export action groups by
sector specialists to help sectoral groupings to formulate
export strategies for these regions.
-
Work done by the Department’s
trade promoters in these regions. These offices are located in
Egypt, Côte d’Ivoire, Kenya, Ethiopia, Tanzania, Zimbabwe,
Mauritius, Angola, the UAE, Saudi Arabia, Israel and Iran. The
offices have been instrumental in providing South African
exporters and service providers with the necessary support in
achieving success.
-
Provision of marketing-related
financial assistance for exporters. This entails support for
primary research, selling trips, exhibitions, export-action group
formation, export finance for capital goods or projects, insurance
for exports and export finance for small businesses.
Southern African Development
Community
The centerpiece of South
Africa’s foreign economic policy is the SADC, comprising Angola,
Botswana, Democratic Republic of Congo (DRC), Lesotho, Malawi,
Mauritius, Mozambique, Namibia, Seychelles, South Africa, Tanzania,
Zambia and Zimbabwe. The key policy objective is to strengthen trade
and investment linkages between South Africa and the other SADC
countries.
Trade with SADC countries
increased dramatically during the period 1988 to 1997. Imports from
the SADC increased from R531 million (less than 1 per cent of
total imports) to R2,5 billion (in excess of 2 per cent of total
imports) during that period. The increase in South Africa’s exports
to the region was even more dramatic – from R2 billion in 1988 (4
per cent of total exports) to R15,2 billion in 1997 (11 per cent of
total exports).
At present, the ratio of South
Africa’s exports to imports stands at 6:1. Exports to the region are
concentrated in high value-added sectors such as minerals and base
metals, chemicals, machinery, transport equipment and food and
beverages. These sectors generate overall growth and high wage formal
employment in the domestic economy – and have grown dramatically –
almost tripling between 1992 and 1997.
A disaggregation of South
Africa’s exports to the SADC country by country reveals that
Zimbabwe is the most important market, followed by Mozambique,
Zambia, Mauritius, Malawi, Angola and Tanzania. On the import
side, Zimbabwe features as the most important source of imports,
followed by Malawi, Angola, Zambia and Mozambique.
South Africa’s interests and
objectives in the southern African region are guided by the
existence of strong linkages between the domestic and regional
economy. As the market for a large proportion of South Africa’s high
value-added exports, the growth of the SADC economies is
inextricably linked to the growth of the region’s economies.
In order to strengthen trade,
investment and industrial linkages within the SADC region, the
member states are engaged in negotiations to conclude a Free Trade
Agreement (FTA). The Department has been active in promoting trade
and investment through business missions to SADC countries. Once the
FTA is implemented, the trade integration which it will foster will
provide a range of opportunities for industrial development within
the SADC region in the form of regional specialization and
processing.
South Africa has been decisive
in propelling negotiations to achieve a free trade area towards
conclusion. After extensive consultations with other government
departments, the Parliamentary Portfolio Committee on Trade and
Industry, Southern African Customs Union (Sacu) member states
(Botswana, Lesotho, Namibia and Swaziland), as well as with
stakeholders at the National Economic Development and Labor Council
(Nedlac), South Africa has structured a tariff order which should
set the process of implementing an FTA in motion.
The trade offer was notified
in the Government Gazette of 11 September 1998, and all
stakeholders have been invited to comment. Once the latter have been
incorporated into the trade offer, an intensive period of
negotiations with the SADC member states – addressing both tariff
and non-tariff issues – is envisaged. This should ensure the rapid
conclusion and implementation of a free trade area in the near
future.
During 1998, the Department
led business missions to Angola, Mauritius and Tanzania. The
missions provided a number of trade and investment opportunities
which offer high returns, but which also contribute to investment,
technology transfer, employment and input for local production in
these countries.
On the investment side, the
implementation of Spatial Development Initiatives (SDIs) throughout
the SADC region, coupled with trade and investment missions led by
the Department of Trade and Industry from South Africa to SADC
member states, has resulted in substantial investments in the region
that are mutually beneficial to South Africa and the recipient
countries. The following progress has been made:
- The Maputo Development Corridor
is expected to attract 7,6 billion US dollar in investment in
terms of the projects identified by March 1999. Successful
implementation of the project is ongoing.
- The Walvis Bay SDI has been
approved by the Namibian Cabinet and the process of implementation
has been set in motion.
- The Nacala, Beira and Lobito corridors
were the focus of the Department of Trade and Industry
during 1998. Discussions with Angola, Mozambique, Malawi, Zimbabwe
and the DRC are at a very advanced stage and the prospects for
implementation in the near future appear to be positive.
Coupled with the extension of
the mandates of the Development Bank of Southern Africa and the
Industrial Development Corporation (IDC) to provide finance to the
entire SADC region for the development of infrastructure and
industry, these initiatives have played, and will continue to play,
an important role in stimulating investments to SADC member states,
leading to higher growth, employment and industrial development in
the recipient countries.
Trade with
Europe
Europe is the biggest source
of investment for South Africa, and accounts for almost half of
South Africa’s total foreign trade. Seven out of ten of South
Africa’s top trading partners are European countries.
Since the end of South
Africa’s isolation and the gradual easing of exchange control
announced in July 1997, Europe has become an important destination
for South African investment and a vehicle for effective integration
into the global economy. At the same time, European investment in
South Africa has assumed a larger and more important dimension. Both
bilateral development co-operation and multilateral development programs
through the European Union (EU) form a substantial
element of South Africa’s reconstruction and development. Relations
with Europe, with the EU as the pivot, are economically crucial.
Britain is South
Africa’s largest single trading partner and its biggest export
market. British exports to South Africa were worth R14 billion in
1998 while South African exports to Britain totaled R11 billion.
In May 1998, a trade promotion campaign called Britain and
South Africa: Partners in Opportunity, was launched. The
campaign will be funded by the British Government to the tune of R17
million over three years to encourage trade relations between
British and South African companies.
Also in May 1999, South Africa
and the United Kingdom (UK) signed an investment promotion
and protection agreement.
In July 1998, the British
Minister for Small Firms, Trade and Industry led a delegation on a
visit to South Africa to investigate investment opportunities. In
September 1998, the British Trade and Industry Minister paid a visit
to South Africa to open the UK-South Africa Partnership Week in
Johannesburg.
Trade between Germany and
Africa rose in 1997, with South Africa remaining the single most
important African partner for both imports and exports. German
exports to South Africa were valued at DM5,9 billion in 1997, a rise
of 7 per cent over previous years. German imports from South Africa
were up almost 16 per cent to R9 billion in 1998. The German-South
Africa Binational Commission (BNC) was inaugurated in 1997. The
Commission with its five committees is intended to build further on
the strong commercial links that already exist between the two
countries.
In March 1998, Germany’s
former Federal President, Dr Roman Herzog, visited South Africa –
the first visit to the country by a German Head of State.
In February 1998, relations
between South Africa and Norway were strengthened when King Harald V
and his wife, Queen Sonja, arrived in the country on a State visit.
In April 1998, a trade and
investment mission led by the Minister of Trade and Industry visited
the Netherlands. The Minister hosted an investment conference in The
Hague. The Deputy Minister of Trade and Industry led another
delegation to the Nordic countries in May.
Trade between South Africa and
Denmark has increased significantly since the first democratic
election in 1994. Denmark has also been giving substantial aid to
South Africa since that time.
There has been a steady
increase in bilateral trade between France and South Africa and, at
the end of 1998, France was the fifth largest supplier of goods to
South Africa. South African exports to France totaled more than R2
billion. The Joint Economic Commission between South Africa and
France, established by an intergovernmental protocol in March 1995,
held its second meeting in Paris in November 1998. The growing
number and diversity of events over the months following the last
meeting of the Commission were welcomed as evidence of an
intensification of relations between the two countries. Specific
actions undertaken by both sides during this period, including the
France Technologies exhibition, held in July 1997 and the
French-South African Forum, held during President Jacques Chirac’s
visit to South Africa in June 1998, were seen as important for
consolidating and promoting co-operation between South African and
French firms. Various seminars, visits, exhibitions, bilateral
agreements and financing concessional agreements, among other
things, also contributed to the strengthening of bilateral
relations.
In August 1998, South Africa
and the Belgo-Luxembourg Economic Union (BLEU) signed an agreement
on the promotion and protection of mutual investments. The treaty is
aimed at stimulating direct investment in South Africa and giving
the country access to Belgium and Luxembourg markets. The BLEU is
among South Africa’s 15 largest foreign trade partners and mutual
investment is growing.
Bilateral trade between South
Africa and Switzerland is worth R6,384 billion a year. Almost 400
Swiss companies are represented in South Africa. In August 1998,
Swiss President Flavio Cotti arrived in South Africa on a State
visit.
In June 1998, the then
President Nelson Mandela departed on a State visit to Italy at the
invitation of President Oscar Luigi Scalsaro. Italy is one of the
top five major trading partners of South Africa, with the
two-way trading relations amounting to R8 billion in 1997.
At the end of September 1998,
South Africa signed an investment agreement with Spain. The treaty,
together with a double taxation agreement which is being negotiated,
will boost trade relations between the two countries.
In October 1998, South
Africa’s Minister of Foreign Affairs visited Portugal to
strengthen trade ties. Two-way trade between the two countries totaled
R861 million in 1998.
In November, the Greek Foreign
Minister visited South Africa to further the work of the South
African Hellenic Chamber of Commerce. Greek investment in South
Africa totals R36 billion. Two-way trade totaled R861 million in
1998. Five agreements were signed, among them the avoidance of
double taxation and the promotion and protection of investments.
Equally important for both
economic development to underpin internal progress, and
international integration, are South Africa’s relations with Central
and Eastern Europe, with their emerging and realigning economies.
Trade and investment
ties between South Africa and the Ukraine have increased
substantially in recent years. In April 1998, a high-level
delegation from the Union of Industrialists and Entrepreneurs
visited South Africa to expand economic and trade cooperation
between the two countries. South Africa mainly exports base metals,
electrical equipment, chemical products, fruit, wine, vegetables and
leather goods to the Ukraine. In November, Foreign Minister Borys
Tarasyuk arrived in South Africa for an official visit.
Late in November 1998, former
Deputy President Thabo Mbeki led a high-powered trade delegation to
Russia to boost economic and investment ties between the two
countries. In April 1999, Mr Mandela was on a State visit to
Russia,. He was accompanied by the Minister of Trade and Industry
and a high-powered business, scientific and technical delegation.
Two-way trade between the two countries totals some R600 million per
year.
European Union
The negotiations for a Trade,
Co-operation and Development Agreement with the EU entered its
fourth consecutive year in 1999 as one of South Africa’s priority
foreign trade projects. It was organized around six parallel
negotiating groups: trade-related and non-trade aspects, industrial
tariffs, agricultural tariffs, rules of origin, wines and spirits
and fisheries.
In March 1999, South Africa’s
historic agreement with the EU was concluded. The agreement will
result in the abolition of tariffs on more than 90 per cent of trade
– currently worth more than R10 billion a year – between the 15
EU countries and South Africa within 12 years. The trade
negotiations involved more than 10 000 products. Some, such as wine
and spirits, and fishing, will be dealt with in parallel agreements
which have yet to be finalized. A few other mainly technical changes
were made to a draft accord reached in Davos, Switzerland in January
1999.
South Africa and the EU signed
trade and development co-operation agreements worth R635 million in
April 1999, as part of the EU’s ongoing program in South Africa.
EU grants made between 1995 and 1998 exceeded R3 billion.
Lomé Convention
In April 1998, the member
states of the convention, which links 71 countries in Africa, as
well as the Pacific and Caribbean Oceans (ACP) countries with
the EU, completed their internal ratification procedures. This
allowed the revised edition of the fourth agreement, which included
South Africa’s protocol of accession, to enter into force. South
Africa’s membership is on a qualified basis, which means that it is
excluded from the trade and aid regimes of the convention.
European Development Fund tenders
From an economic point of
view, the most important element of South Africa’s membership is the
fact that, for the first time in history, South African contractors
are allowed to tender for European Development Fund contracts in ACP
countries. These contracts amount to about R70 billion over a
five-year period.
Post-Lomé negotiations
In September 1998, the
so-called post-Lomé negotiations were launched in Brussels,
Belgium. The multilateral process, scheduled for completion by
February 2000, will result in a new arrangement between the ACP and
the EU.
The Americas
North America
The United States of America
(US) is one of South Africa’s largest trading partners. South Africa
is a beneficiary of the US’s Generalized System of Preferences which
grants duty-free treatment for more than 4 650 products. South
Africa’s exports to the US increased from R5,2 billion in 1993 to
R14,8 billion in 1998. Total trade amounted to R34,5 billion in
1998, a 26 per cent increase over 1997. Total US foreign direct
investment in South Africa for the period 1994 to April 1998
amounted to R14,3 billion.
The two countries have
institutional structures to strengthen trade and investment. The
Business Development Committee (BDC), a subcommittee of the SA-US
Binational Commission, was established in 1994 by the two
governments to provide a forum for business people to develop links
and exchange views with each other and with senior government
leaders. The BDC is co-chaired by business people from the US and
South Africa and its programs are driven by the private sector.
The BDC also interacts with the Trade and Investment Committee, a
government-to-government committee of the BNC, which is co-chaired
by the Minister of Trade and Industry and the US Commerce Secretary.
This interaction provides the private sector with an opportunity to
raise and find solutions to the problems it may encounter when doing
business in the US.
South Africa is a beneficiary
of Canada’s General Preferential Tariff (GTP). The GTP rates range
from duty-free to reductions in the most favored nations rates.
South Africa has a memorandum of understanding with Canada relating
to the export from South Africa of certain textiles and textile
products for import into Canada – granting South Africa quotas for
these products.
Since the lifting of sanctions
in 1994, bilateral trade between the two countries has been on the
increase, from R756 million in 1993 to R2,8 billion in 1997. Whereas
in 1993 South Africa’s exports to Canada were worth R353 million, in
1998 they amounted to R1,3 billion.
In September 1998, there was a
Ministerial trade and investment mission to Canada. The mission
coincided with the President’s State visit to that country. During
the mission, a Trade and Investment Co-operation Arrangement was
signed.
|
South Africa’s main imports
|
|
Description |
1996 |
1997 |
1998* |
| |
(R
million) |
(R
million) |
(R
million) |
|
Machinery
and mechanical appliances, electrical equipment and
parts thereof |
39 454
|
43 824
|
51 888
|
|
Other
unclassified goods |
15 544
|
19 047
|
139 787
|
|
Mineral
fuels (mostly oil) |
11 646
|
16 958
|
12 929
|
|
Products
from chemicals and allied industries |
13 595
|
14 551
|
15 649
|
|
Vehicles,
trains, aircraft, ships and associated equipment
|
9 078
|
10 356
|
8 822
|
|
Base metals
and articles thereof |
5 881
|
6 021
|
6 582
|
|
Plastics,
rubber and articles thereof |
5 178
|
5 806
|
5 837
|
|
Textiles and
articles thereof |
5 012
|
5 772
|
5 213
|
|
Prepared
foodstuffs, beverages, spirits, vinegar and tobacco
products |
3 413
|
4 014
|
3 180
|
|
Edible
vegetables, fruit and nuts, cereals, plant oil and
products thereof |
2 978
|
2 942
|
2 882
|
* Not yet
audited
Source: Customs and Excise
Latin America
Argentina, Brazil, Paraguay
and Uruguay are members of the Southern Common Market (Mercosur)
free trade area. In July 1998, the then President Mandela addressed
the leaders of the Mercosur trade bloc, the first time that a
foreign head of State had been invited to address the summit.
Brazil is South Africa’s
biggest trading partner in Latin America, with bilateral trade
reaching R2,3 billion in 1998, a decrease of 19 per cent over 1997.
Bilateral trade between South Africa and Argentina was steady at
R1,7 billion in 1998. In 1998, a Reciprocal Promotion and Protection
of Investment Agreement was signed by the two countries during Mr
Mandela’s State visit to Argentina in July.
Trade relations between South
Africa and Uruguay were boosted in October 1998 when the Minister of
Foreign Affairs visited that country.
In November 1998, Chile’s
President Eduardo Frei Ruiz-Tagle paid South Africa a State
visit, accompanied by a business delegation. A Reciprocal Promotion
and Protection of Investments Agreement was signed.
Asia
South and South-East Asia and
Australasia
Economic relations with this
broad region were severely effected by the Asian economic crisis.
The crisis had its most severe impact in South-East Asia.
South Africa is a member of
the Indian Ocean Rim Association for Regional Co-operation
(IOR-ARC), a project-based regional economic grouping of 15
countries washed by the Indian Ocean. This group covers the eastern
coastal line of Africa, the Arabian peninsula, Southern Asia, and
Singapore, Indonesia and Australia. The IOR-ARC member countries
account for around 7 per cent of world trade. Currently, South
Africa is involved in two projects: a regional ports initiative and
a financial systems harmonization initiative.
In conjunction with the
Government of India South Africa has established an Indo-South
African Commercial Alliance together with a Joint Ministerial
Commission (JMC). Total trade with India has been increasing rapidly
since 1994, reaching R3,3 billion in 1998. Strategic relations with
Australia have also been cemented via the JMC. Total trade with
Australia amounted to R5,5 billion in 1998.
Bilateral trade with
South-East Asia increased rapidly, starting from a low base in 1990,
with an average growth rate before 1998 of approximately 25 per cent
per annum. This trade is more or less evenly spread between
Singapore, Malaysia, Indonesia and Thailand. Total trade with these
countries amounted to R8,3 billion in 1998, with the trade balance
being slightly in South Africa’s favor. This was mostly accounted
for by a large trade surplus with Indonesia, while Malaysia and
Singapore ran surpluses with South Africa. However, in 1998 the
economic crisis contributed to the emergence of a large trade
imbalance with the region, with the most notable impact being a
sharp decline in the value of South Africa’s exports mirrored by a
rise in the value of imports from the region. Total trade amounted
to R8,9 billion.
South Africa has built its
strongest ties in South-East Asia with Malaysia. Evidence of this is
Malaysia being the second largest investor on a cumulative basis in
South Africa as of April 1998. This investment totaled almost R6,67
billion, and was concentrated in telecommunications, energy and oil,
and property. These ties were cemented by two visits to South Africa
in 1998 from the Malaysian Prime Minister, Dr Mahathir Mohamed.
However, a source of concern for South Africa is the rapidly rising
trade deficit with Malaysia.
North-East Asia
Japan is South Africa’s
largest trading partner in Asia, and its fourth largest trading
partner overall. In 1998, total bilateral trade amounted to R21
billion, an increase of 9 per cent over 1997. This trade is
structured along north-south lines, with South Africa exporting
commodities, especially minerals, to Japan and in return importing
manufactured goods, notably automobiles and electronic goods. Japan
is the fifth largest investor in South Africa, with cumulative
investment between 1994 and April 1998 amounting to approximately R2
billion. These investments are concentrated in minerals processing
and the motor assembly and related sectors, especially tires. Japan
is also a substantial aid donor to South Africa.
The importance of Japan as a
bilateral partner for South Africa was demonstrated by former Deputy
President Mbeki’s two visits there in 1998. The first was part of a
visit to the region, including Japan, South Korea and China, in
April. During this visit, South Africa and Japan agreed to set up a
Partnership Forum designed to strengthen bilateral ties. During the
second visit in October, he attended the second Tokyo International
Conference on African Development. This conference, organized by the
Government of Japan in conjunction with the United Nations (UN), was
designed to mobilize support for African development.
|
Status of bilateral agreements by March
1999 |
|
Country |
Signed |
Date effective
|
|
Cuba
|
8 December
1995 |
7 April 1997
|
|
Denmark
|
22 February
1996 |
23 April
1997 |
|
France
|
11 October
1995 |
13 June 1997
|
|
South Korea
|
7 July 1995
|
28 June 1997
|
|
Switzerland
|
27 June 1995
|
29 November
1997 |
|
Austria
|
28 November
1996 |
1 January
1998 |
|
People’s
Republic of China |
30 December
1997 |
1 April 1998
|
|
Germany
|
11 September
1995 |
10 April
1998 |
|
United
Kingdom |
20 September
1994 |
27 May 1998
|
|
Mozambique
|
6 May 1997
|
22 October
1998 |
|
Mauritius
|
17 February
1998 |
23 October
1998 |
|
Netherlands
|
9 May 1995
|
South
African constitutional procedures complete |
|
Canada
|
27 November
1995 |
South
African constitutional procedures complete |
|
Iran
|
9 June 1997
|
South
African constitutional procedures complete |
|
Italy
|
3 November
1997 |
South
African constitutional procedures complete |
|
Sweden
|
25 May 1998
|
South
African constitutional procedures complete |
|
Senegal
|
19 June 1998
|
South
African constitutional procedures complete |
|
Ghana
|
9 July 1998
|
South
African constitutional procedures complete |
|
Argentina
|
23 July 1998
|
South
African constitutional procedures complete |
|
Belgium and
Luxembourg |
14 August
1998 |
South
African constitutional procedures complete |
|
Finland
|
14 September
1998 |
South
African constitutional procedures complete |
|
Spain
|
30 September
1998 |
South
African constitutional procedures complete |
|
Egypt
|
28 October
1998 |
South
African constitutional procedures complete |
|
Chile
|
12 November
1998 |
South
African constitutional procedures complete |
|
Greece
|
19 November
1998 |
South
African constitutional procedures complete |
|
Russia
|
23 November
1998 |
South
African constitutional procedures complete |
|
Czech
Republic |
14 December
1998 |
South
African constitutional procedures complete |
|
Uganda
|
25 January
1999 |
South
African constitutional procedures complete
|
Bilateral trade with China
reached R5,3 billion – R8,8 billion if Hong Kong is included – as
against R4,2 billion and R8,2 billion in 1997. It is anticipated
that this economic activity will gather momentum as the two
countries move to sign a trade agreement and establish a joint
economic commission. Trade with Taiwan tumbled by 9,2 per cent in
1998, mostly owing to poor demand caused by the crisis in the
region.
South Korea is South Africa’s
fourth largest bilateral trading partner in Asia. Total bilateral
trade in 1998 amounted to R5,3 billion, a decrease of 16 per cent
from 1997. This trade is of a similar structure to that with Japan,
although South Africa supplies more intermediate goods to Korean
markets than is the case with Japan. Investments from South Korea
from 1994 until April 1998 totaled approximately R280 million. In
recognition of South Korea’s importance to South Africa, Mr Mbeki’s
visit there in April 1998 resulted in agreements to form several
bilateral committees focused on trade and investment.
Bilateral investment
treaties
The Government’s drive to
attract fixed direct investments (FDIs) has been gaining
momentum since 1994. Starting from R4,7 billion FDIs in 1994, the
1998 preliminary statistics put the figure at R7 246 billion.
By March 1999, 28 bilateral
investment treaties had been signed by South Africa. Since starting
on the program to conclude investment treaties, South Africa has
adopted a highly modern and advanced constitution which ensures an
open, transparent and market-driven investment environment, with
positive government encouragement of investment. This has largely
served to replace any particularly strong need to conclude treaties
to provide for inward investment. To some extent, the focus of
relatively limited resources has shifted towards concluding these
treaties where they can serve to support investment by South African
firms involved in investment and development outside of South
Africa, with a particular focus on current regional action.
Management of multilateral
trade relations
South Africa’s multilateral
trade relations are managed by the Chief Directorate: Foreign Trade
Relations of the Department of Trade and Industry, as are
participation in the activities of multilateral organizations such
as the World Trade Organization (WTO) and the administration of
international trade agreements.
The chief directorate also
deals with matters resulting from the activities of agencies of the
UN that affect South Africa, such as the United Nations Conference
on Trade and Development (UNCTAD). Other responsibilities of the
chief directorate include the maintenance and improvement of trade
relations with individual countries or groups of countries where
such relations are not governed by multilateral bodies.
Multilateral economic
relations
The WTO and UNCTAD, in
partnership with the Bretton Woods Organizations (the World Bank and
the International Monetary Fund) are increasingly setting the
parameters for and directing the economic policies of governments
around the world. This has serious implications for the content,
evolution and trajectory of economic development strategies being
pursued by the developing countries, including South Africa. In
order to influence and shape the configurations of the emerging
system of global governance, it is imperative for South Africa to be
geared to participate actively and effectively in all multilateral
forums to ensure that its particular economic interests and
development objectives are achieved.
|
1999 Provincial election results
|
|
Province
|
Ruling
party |
Seats
gained |
|
Eastern Cape
|
ANC
|
47
|
|
Free State
|
ANC
|
25
|
|
Gauteng
|
ANC
|
50
|
|
KwaZulu-Natal |
IFP and ANC
formed coalition |
IFP: 34;
ANC: 32 |
|
Mpumalanga
|
ANC
|
26
|
|
Northern
Cape |
ANC
|
20
|
|
Northern
Province |
ANC
|
44
|
|
North-West
|
ANC
|
27
|
|
Western Cape
|
NNP and DP
formed coalition |
NNP: 17;
DP: 5 |
United Nations Conference
on Trade and Development
As President of UNCTAD IX,
South Africa is playing an important part in the work of this organization. South Africa attended and fully participated in
important meetings dealing with, among other things, the
Multilateral Investment Agreement, government and private sector
roles and interactions in small and medium enterprise (SME)
development, telecommunications, trade facilitation, trade
efficiency, electronic commerce and the economic development of
least developed countries.
One of the highlights of the
work program of UNCTAD in 1998 was the Partners for Development
Summit in Lyon, France, in November 1998. Some 2 700 representatives
of the private sector, non-governmental organizations (NGOs),
academic institutions and governments, from 172 countries attended.
|
