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
Period	Long term	Short term	Long term	Short term	Total capital movements (net inflow)	SDR allocations and valuation adjustments	Total change in gross gold and other foreign reserves
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
Period	Goods produced in South Africa	Imported goods	All goods	Food	All goods	Services	All items
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.

During the four-day meeting, 18 partnership agreements were finalized between the UNCTAD Secretariat and private and public organizations.

The partnerships covered the fields of international transport; investment promotion; electronic commerce; the promotion of SMEs and entrepreneurship; the conservation of biodiversity and sustainable development, and agricultural commodities.

World Trade Organization

Cairns Group

South Africa was formally accepted into the Cairns Group in February 1998. This group is an association of agricultural exporting countries whose objective is to strive for fair and free trade in global agricultural markets.

The group was established in 1986 and consists of Argentina, Australia, Brazil, Canada, Chile, Colombia, Fiji, Indonesia, Malaysia, New Zealand, Paraguay, the Philippines, South Africa, Thailand and Uruguay.

A meeting was held in April 1998 in Sydney, Australia to prepare for the mandated WTO negotiations on agriculture which will commence late in 1999.

World Economic Forum

The World Economic Forum (WEF) is an annual meeting of world economic leaders, held in Davos, Switzerland, that has become the world’s global business summit. At the meeting, 1 000 top business leaders, 250 political leaders, 250 of the foremost experts in every domain, and some 250 media leaders come together to shape the global agenda. The 1999 annual meeting held from 28 January to 2 February was attended by the then South African President, Mr Mandela, who addressed the gathering.

One of the most important issues on the 1998 and 1999 agenda was the economic crisis in Asia. High-ranking government officials from across the region, leading economists, bankers and investors debated what kind of regulations and safeguards should be put into place to avoid a repeat of such a financial meltdown. The rapid advance of economic globalization and international efforts to calm the financial markets, strengthened a certain need for future global institutions.

Export promotion

Several organizations promote exports and external trade relations in general. The major government agency involved in export promotion is the Chief Directorate: Export and Investment Promotion of the Department of Trade and Industry.

The main functions of the chief directorate are to develop exports and provide assistance and services to South African enterprises wishing to enter the global market-place. Through its network of 41 foreign economic offices in 36 countries around the world, the Department assists existing and prospective exporters to obtain valuable market information, as well as business contacts in all major foreign markets.

The Department also coordinates a number of focused sector-specific export development projects in partnership with certain employers’ associations and other stakeholders.

The Directorate: Financial Assistance Schemes is responsible for managing the Export Marketing and Investment Assistance Scheme (EMIA) and the Export Credit and Foreign Investment Reinsurance Scheme. The EMIA and Export Credit schemes are aimed at providing prospective exporters with financial assistance.

South Africa’s main exports
Description	1996	1997	1998*
	(R million)	(R million)	(R million)
Precious and semi-precious stones, gold and other precious metals and products thereof	37 387	41 731	35 135
Base metals and articles thereof (steel, aluminum, copper, nickel etc.)	18 547	21 357	22 684
Mineral products (iron ore, coal, salt and others)	15 303	18 392	19 024
Special classification provisions: Original Equipment Components	9 281	9 640	24
Products from chemicals and allied industries	8 164	9 162	9 281
Machinery and mechanical appliances, electrical equipment and parts thereof	6 551	8 530	10 271
Vehicles, trains, aircraft, ships and associated equipment	4 430	6 560	8 024
Edible vegetables, fruits and nuts, cereals, plant oil and products thereof	5 107	5 563	5 592
Prepared foodstuffs, beverages, spirits, vinegar and tobacco products	4 664	5 068	5 930
Pulp of wood and other fibrous cellulosic material, paper and paperboard and articles thereof	3 793	3 633	4 148
Textiles and textile articles	2 579	3 213	3 221

* Not yet audited
Source: Customs and Excise

The EMIA consists of export marketing research, foreign direct investment research, outward-selling missions, inward-buying missions, inward-investment missions, outward investment recruitment missions, and foreign exhibitions. The EMIA also offers assistance to industry-specific sectors. The EMIA includes a special dispensation for SME exporters.

An Export Credit Finance Guarantee Scheme for SMEs has been introduced. The scheme facilitates finance for SMEs that lack working capital to procure materials and services for the execution of an export order and/or financing export trade debtors for a period of up to 180 days. Pre- and postshipment finance can be obtained for export orders. Finance is provided by banks and can constitute up to 90 per cent of export orders. Guarantees are issued by the Credit Guarantee Insurance Corporation (CGIC) and are reinsured by the Department of Trade and Industry.

The exporter has to be an independently owned business whose total assets do not exceed R5 million or whose labor force does not exceed 200. The loan application should not exceed R1 million and not be less than R50 000.

The Export Finance Scheme for Capital Projects is becoming more popular among financial institutions and contractors. Through this scheme, exporters of capital projects are able to compete internationally by offering prospective overseas buyers competitive repayment rates denominated in US dollar. Such credit facilities are available over a maximum repayment period of ten years. Africa, and southern Africa in particular, have proved to be popular markets for South African exporters of capital projects.

There has also been an increase in insurance cover extended to South African short-term exports. Export credit insurance provides an exporter with insurance protection against financial loss owing to non-receipt of payment of a legally enforceable debt due and payable by a non-South African importer to the exporter for goods and services delivered. Insurance is available through the CGIC with reinsurance provided by the Department of Trade and Industry.

Undertakings wishing to import or export goods that are subject to control, may obtain permits from the Director of Imports and Exports, Private Bag X192, Pretoria, 0001. Permits must be renewed annually.

Registration with the local Controller of Customs and Excise is required of all factories subject to excise duties, as well as all enterprises that import on a regular basis. Information regarding specifications for existing or new products, and guidance on quality control is available from the South African Bureau of Standards.

Excise duty is levied on certain locally produced goods, of which potable spirits, beer, cigarettes, tobacco, motor cars and certain petroleum products yield the highest revenue.

Industrial policy

South Africa’s trade and industrial policy is in a process of fundamental change, moving away from a highly protected, inward-looking economy towards an internationally competitive economy capitalizing on the country’s competitive and comparative advantages.

As an integral part of the Government’s Growth, Employment and Redistribution (GEAR) strategy, the new industrial policy strives to achieve a balance between greater openness and improvement in local competitiveness whilst pursuing a process of industrial restructuring aimed at expanding employment opportunities and productive capacity.

South Africa has made courageous strides in opening the domestic economy to international competition, which include

a market-related and competitive exchange rate
no restrictions on the type or extent of investments available to foreigners or government approval required
the strengthening of competition policy and the development of industrial cluster support programs
abolishing exchange control for non-residents and substantial reduction in those applicable to residents
a significant reduction in tariff barriers, ahead of the WTO timetable, resulting in the lowest (trade weighted) average rate of protection in the SADC region
a proactive strategy to attract foreign strategic equity partners into the process of restructuring state assets
the introduction of greater labor market flexibility
the availability of attractive investment incentives to enhance international competitiveness and technology transfer with the means to facilitate foreign direct investment.

One of South Africa’s key industrial policies remains its commitment to fostering sustainable industrial development in areas where poverty and unemployment are at their highest. This objective is operationalised through the SDIs, which focus high level support on areas where socio-economic conditions require concentrated government assistance and where inherent economic potential exists. The SDI programs focus government attention across the various national, provincial and local government spheres with the goal of ensuring that investments are fast-tracked and that synergies between various types of investments are maximized.

Increasingly, South Africa’s approach to SDIs is based on the objective of operationalising South Africa’s commitment to the ‘African Renaissance’. As a result, SDIs are increasingly focused on the southern African region with the Maputo Development Corridor leading to substantial investments in both South Africa and Mozambique.

With reference to the rationale for economic integration in southern Africa, it is based on the premise that economic integration can yield greater developmental benefits by the collective rather than the unilateral use of economic policies.

The following issues can also be attended to far more effectively through the adoption of a regional approach:

the SADC countries’ attempts to achieve self-sufficiency, industrialization and modernization of their economies
obtaining increased bargaining power for SADC countries in international markets
the facilitation and mobilization of investments, both from local and foreign sources will increase as a much broader and integrated market can attract the interest of foreign investors.

The SDI program provides the private sector with unique opportunities to exploit the potential of under-utilized areas by identifying public-private partnerships in bulk and municipal infrastructure and other projects. The SDI concept may have a variety of focuses, such as:

Industrial – KwaZulu-Natal SDI, Fish River SDI. By November 1998, the Fish River SDI had inspired nine new commercial operations which created 500 new jobs. New firms invested R156 million in the Eastern Cape.
Agro-tourism – Lubombo SDI, Wild Coast SDI.
Sectoral mix – Maputo Development Corridor.
Industrial development zones (IDZs) – Coega, Saldanha and East London.
Second Generation SDI: The Gauteng Special Economic Zone (SEZ) focuses on high technology manufacturing, information technology, telecommunications, food processing, cultural, etc.

The SDI program consists of 11 local SDIs and four IDZs at varying stages of delivery. They are:

SDIs: Maputo Development Corridor; Lubombo SDI; Richards Bay SDI, including Durban and Pietermaritzburg nodes; Wild Coast SDI; Fish River SDI; West Coast Investment Initiative (WCII); Platinum SDI; Phalaborwa SDI and Coast 2 Coast Corridor
SEZs: Gauteng SE
IDZs: Coega IDZ, East London IDZ, Saldanha IDZ and Richards Bay IDZ.

By November 1998, the existing portfolio of SDIs had identified 630 investment opportunities valued at R18,7 billion with the capacity to generate more than 54 000 jobs.

In May 1998, former President Mandela attended the official launch of the Lubombo SDI. At the launch, an economic development agreement was signed by Mr Mandela, his Mozambican counterpart, Joaquim Chissano, and Swaziland’s King Mswati III. The Lubombo SDI targets eastern Swaziland, southern Mozambique and the north-eastern areas of KwaZulu-Natal.

The Government’s IDZ policy is designed to boost exports and jobs. The Department of Trade and Industry has developed a draft concept model which was approved by Cabinet on 17 March 1999. A National Development Zone Authority (NDZA) will be responsible for the regulation, facilitation and administration of IDZs. It is also envisaged that each IDZ will have a local NDZA to carry out the regulatory and approval process. The development and the management of zones will be done by the private sector. The first IDZ to be earmarked, and one of the biggest initiatives ever undertaken in South Africa, will be established at Coega, 30 km north of Port Elizabeth in the Eastern Cape.

The WCII, covering the west coast region of the Western Cape, was launched in Saldanha Bay on 25 February 1998. The WCII has about R12 million worth of projects under construction, with an estimated further R10 billion worth of projects under consideration.

The program of investment conferences and launches of major investment initiatives, linked to the SDI process, will continue in 1999, after which private-sector developers will take responsibility for implementation.

By using the instrument of government procurement, the Government will leverage foreign investment, export and technology development through the National Industrial Participation Program (NIPP)

The IDC announced in July 1998 that it would invest at least R1,5 billion to create more than 7 000 jobs in the 1998/99 financial year. The IDC is a statutory body which makes finance available for the establishment of new manufacturing industries and the expansion, modernization or relocation of existing industries. Between 1991 and 1997, it had approved loans totaling R1,2 billion.

At the end of October 1998, the IDC announced that its new entrepreneurial finance division would launch five empowerment finance schemes, namely a low-interest rate empowerment scheme; wholesale finance; takeovers and acquisitions; consortium finance, and a fish-harvesting scheme. Some R500 million was budgeted for the schemes. Finance is available in the form of loans, equity and quasi-equity loans.

National Industrial Participation Program (NIPP)

Owing to the probability that a number of large government contracts may be awarded to foreign suppliers on the basis of competitiveness and appropriate technology, certain economic consequences could result. The more critical consequences are job losses, a drain on foreign reserves, a reduction in industrial and commercial activities, a reluctance to invest in technology and training by local manufacturers and the curtailing of research and development activities. The NIPP of the Department of Trade and Industry was designed to address these issues.

The principle of Industrial Participation (IP) became obligatory as from 1 September 1996 on approval by the Cabinet. On 30 April 1997, the Cabinet fully endorsed the IP Policy and Guidelines. In essence, this means that all State and parastatal purchase and lease contracts (goods and services) signed after this date, exceeding a certain level of imported content, are subject to an IP obligation. No contract can be awarded to a tenderer if the latter has not satisfied the IP requirements.

The IP obligation is benchmarked on the imported content of the contract. Any contract having an imported content equal to or exceeding 10 million US dollar has an IP obligation. The obligation amounts to 30 per cent of the imported content.

IP arrangements to satisfy the obligation include investments, subcontracting, export promotion, licensor production, supply arrangements and research and development collaboration. A period of seven years has been identified as the time-frame in which these economic activities have to be generate

Investment marketing and facilitation

The national Government, working in partnership with its provincial and local counterparts, has developed an investment promotion and facilitation strategy which is focused on the needs of internationally competitive companies and their search for new and profitable markets.

This strategy was built on the foundation of exhaustive and scientific research into international best practice in the field of investment promotion and extracted the best examples from world-class agencies in the design of a coordinated national and regional approach.

The national investment promotion agency, Investment South Africa, and its partners in all nine provinces, is the official source of information pertaining to the regulatory and operating environment affecting the foreign investor.

The network provides investors with access to

a sector and project-specific marketing strategy linked to any field of operation
an on-line database focusing on the regulatory, commercial and operating environment affecting foreign companies
links to pre-qualified local joint-venture partners
assistance with tailor-made itineraries for inward investment missions.

Manufacturing

The Chief Directorate: Manufacturing Development of the Department of Trade and Industry is responsible for

supporting increased investment in the manufacturing sector
supporting and enhancing the establishment of new manufacturing entities
supporting new sustainable and profitable manufacturing entities

The chief directorate administers two incentive programs, namely the Tax Holiday Scheme (THS) and the Small Medium Manufacturing Development Program (SMMDP). The THS caters for qualifying investment in excess of R3 million per new project which came into operation after 1 October 1996. Between March 1998 and January 1999, 80 projects, totaling 4 201 investments, were approved.

The SMMDP caters for qualifying investment up to R3 million per new project. Between March 1998 and January 1999, 896 projects, totaling 1 858 investments, were approved.

Restructuring of State assets

Government initiatives for the restructuring of State assets are coordinated by the Office for Public Enterprises and are undertaken within the context of the National Framework Agreement (NFA) between the Government and organized labor as adopted in January 1996. The NFA and government policy allows for a high priority to be afforded to the redemption of State debt, the recapitalization of public enterprises and the broadening of economic participation.

The main objectives of restructuring as defined in the Departmental Guidelines, which were compiled in 1995, are as follows:

facilitating economic growth
creating wider ownership in the South African economy
mobilizing private-sector capital
reducing State debt
enhancing competitiveness
promoting fair competition
financing growth and requirements for competitiveness.

The Ministry for Public Enterprises has enhanced the capacity of the directorate dealing with restructuring by seconding three officials from parastatals whose sole mandate is privatization. Officials from other directorates are also helping with the process.

Entities which have been and still are in the process of restructuring include: Telkom, Sun Air, the Airports Company of South Africa, Safcol, Alexkor, the South African Post Office, Abakor, Aventura, SAA, Autonet, Viamax, Connex, Apron Services, Airchefs and Denel Aerospace.

Competition policy

The Competition Act, 1998 (Act 89 of 1998), is aimed at anti-competition practices, abuse of dominant positions and the strengthening of merger control. It replaced the Maintenance and Promotion of Competition Act of 1979. The Act provides for the establishment of a commission consisting of an Inspectorate and an Adjudicating Body.

The Act aims to outlaw the following main areas of business practice:

Restrictive practices between businesses, or between businesses, their supplier(s) and customers, which hinder competition. These include price-fixing, collusive tendering, restricting output and investment and market sharing.
The abuse of a dominant position which, according to the Act, is defined as a market share of 35 per cent or more

Small enterprise

Small businesses in South Africa absorb almost half the people formally employed in the private sector and contribute about 37 per cent to the country’s GDP. There are an estimated 3 million micro-enterprises in the country.

The White Paper on the National Strategy for the Development and Promotion of Small Business in South Africa was published in March 1995. The key objectives of the Government’s National Strategy for Small Business are to

create an enabling environment for small enterprises
level the playing-fields between bigger and small businesses, as well as between rural and urban businesses
facilitate greater equalization of income, wealth and earning opportunities and address the legacy of apartheid-based disempowerment of black business
support the advancement of women in all business sectors
create long-term jobs
stimulate sector-focused economic growth
strengthen cohesion between small enterprises
prepare small business to meet the challenges of an internationally competitive economy.

At the end of September 1997, the Department of Trade and Industry announced that an advisory board and eight task teams had been appointed to review constraints and legislation affecting small business in South Africa. The National Small Business Regulatory Review process started in March 1998 and the board and task teams were expected to report their findings to the Government in 1999. The review will specifically address the constraints identified in the White Paper.

Institutional support framework

The National Small Business Act, 1996 (Act 102 of 1996), aims at establishing a supportive environment for small business development. The main pillars of support are the Center for Small Business Promotion (CSBP), the State-owned Ntsika Enterprise Promotion Agency (Ntsika) and Khula Enterprise Finance (Khula Ltd.)

Center for Small Business Promotion

The mission of the CSBP is to implement, monitor and evaluate the effectiveness of the National Small Business Strategy. The aim of the Strategy is to contribute to job creation, income generation, the redistribution of wealth and overall economic growth.

The CSBP funds and coordinates a number of small business support programs through the following wholesale agencies

Ntsika Enterprise Promotion Agency

Ntsika’s mission is to render non-financial support services to the SMME sector through a broad range of intermediaries. This is achieved through initiatives in the areas of management and entrepreneurship development, marketing and business linkages, policy, research and business development services and targeted assistance by Ntsika.

The achievements of Ntsika can be categorized into capacity-building of the retail distribution network and direct services to SMMEs through these retailers.

It was announced in January 1998 that Ntsika and the Local Business Service Center Association of South Africa had embarked on an aggressive strategy to spread its service network.

From 1 April 1998 to 30 January 1999, Ntsika accredited a further 12 Local Business Service Centers (LBSCs) and supported 40 other potential organizations. Ntsika now supports a total of 42 LBSCs. In addition, 118 entrepreneurs have been supported by Manufacturing Assistance Centers, ten Tender Advice Centers have been established and 413 technical college students were trained in business skills.

In June 1998, a delegation of 20 South African business people from SMEs took part in the European Commission’s prestigious Europartenariat business partnership program in the Netherlands. The partnership was aimed at bringing together 7 000 small and medium-sized firms from over 60 countries. The trip was arranged by the EU and Ntsika.

Khula Enterprise Finance

Khula is a wholesale agency which provides financial support to small businesses through intermediaries. Its financial products include loans, a national credit guarantee scheme, grants and institutional capacity building.

The achievements of Khula can be categorized into support to financial intermediaries as retail distribution networks and direct services to SMMEs. Under the first category, some 2 800 bank branches have access to the Standard and Emerging Credit Guarantee schemes. From 1 April 1998 to 30 January 1999, 800 credit guarantees were issued to entrepreneurs.

By March 1999, 24 retail financial intermediaries had been assisted under the capacity-building scheme. The scheme provided seed loans to finance portfolios and operating expenses funds worth R20 million, and business loans for lending to SMMEs worth R83 million. Khula also participates in the provincial equity funds and has spent R5 million to partly fund joint ventures, expansion and recapitalization.

In September 1998, a micro-lending scheme, Khula Start, was launched to meet the needs of small and micro-enterprises, mainly in the rural areas of the country. Eight groups were identified as micro-lenders in the Eastern Cape, Northern Province, Northern Cape, Mpumalanga and KwaZulu-Natal. The scheme caters for groupings of three to ten people who require an average loan of R4 000 for business-related projects.

National Empowerment Fund

The National Empowerment Fund (NEF), formally launched in May 1998, aims to raise more than R4 billion over the next few years for the promotion and growth of small and medium-sized businesses, with the first R1 billion becoming available in 1998. The capital will be raised predominantly via trusts set up from the proceeds of privatization sales.

The fund will buy shares in privatization utilities from the Government at a discount of up to 20 per cent to resell to previously disadvantaged people.

One of the NEF’s functions is investor education to ensure awareness of the economic environment and basic economic literacy. The fund operates on three levels, initially targeting low-income individual earners and progressing towards savings clubs and equity finance agreements for SMEs.

Business Partners

Early in October 1998, the Small Business Development Corporation changed its name to Business Partners Limited as part of a restructuring process which started more than two years ago. The restructuring saw the Government reduce its shareholding from 50 to 20 per cent.

Business Partners also increased its focus on formal SMEs by introducing new financing and investment packages to these businesses through equity and related funding. The base and ceiling on its exposure to any single project have been increased to R150 000 and R15 million respectively, reflecting the shift in focus to larger SMEs. The 735 000 m³ property portfolio has also been restructured to ensure that business premises are made available to SMEs at market-related rentals. More than 75 per cent of the lettable space is for industrial use, while the remaining 25 per cent is for commercial use (mainly retail, but with some office space).

Business Partners has R1,3 billion in shareholders’ equity and operates from a network of 28 offices located in the major cities and towns across South Africa. It has invested in excess of R3 billion in more than 60 000 businesses over its 18-year participation in the sector. The portfolio classification by economic activity has 34 per cent invested in manufacturing, 29 per cent in commercial, and 37 per cent in service-related businesses.

Business Partners intends investing R460 million in SMEs in 2000. It estimates that future growth sectors will be tourism and export-related manufacturing.

Public Works programs

The Department of Public Works’ Community Based Public Works Program (CBPWP) has created more than 1 110 projects, mostly situated in and providing employment opportunities to communities in the most impoverished areas. The program is now changing its focus towards creating assets that will lead to more sustainable job creation and alleviation of poverty. A comprehensive planning process is in motion to ensure a realignment of the program in accordance with increasing challenges and responsibilities.

In October 1998, a rural anti-poverty project for which R85 million was allocated, was launched in KwaZulu-Natal. The project is expected to create some 14 000 jobs. It will focus on the three poorest provinces, namely Northern Province, KwaZulu-Natal and Eastern Cape.

Special attention is given to violence-torn areas.

The R274 million allocated towards the end of 1998 has enabled an expansion of the new approach. Building on the experience gained in the first phase, plans are well advanced to deliver 35 cluster developments which will create 19 000 projected jobs over a period of six months.

The CBPWP has also extended its relations beyond South Africa’s borders. A partnership with the International Fund for Education and Self Help has resulted in schools being built in KwaZulu-Natal and the Eastern Cape.

The Construction Industry Development Program (CIDP)

Mandated by the Cabinet, the Department has successfully coordinated an intergovernmental policy initiative aimed at enhancing the role and impact of the construction industry in South Africa’s physical and economic development.

Key objectives already realized include the launch of a Green Paper and the establishment of interim institutional arrangements which will enable the effective coordination of a construction industry development program.

The White Paper on Creating an Enabling Environment for Reconstruction, Growth and Development in the Construction Industry was released in May 1999.

The White Paper is aimed at enhanced delivery, greater stability, improved industry performance, value for money and growth in the emerging construction sector.

Emanating from the White Paper, a range of policy proposals are being developed to address industry relations. A policy framework is also being developed on the establishment of a national register of contractors and for the constituting of a construction industry development board to drive the strategy for industry growth and development.

Emerging Contractor Development Program (ECDP)

The Department has embarked on the implementation of the 10-Point Plan and the Affirmative Procurement Program. Whilst these initiatives have helped to create the necessary environment for emerging contractors, there is a need to provide coordinated support to emerging contractors.

At the end of August 1998, the Minister of Public Works announced that the Government would spent R283,4 million to transform black contractors into prime players to enable them to take advantage of the contracts available in the construction industry. The ECDP focuses on developing and reinforcing the sustainable growth of emerging construction entities. To achieve this objective, the ECDP has developed an array of initiatives and enabling support strategies. Key support strategies already realized, include

creation of help desks in six of the Department of Public Works’ regional offices to provide information on contract opportunities, training, finance and credit providers, tendering and quoting procedures
development of a database of emerging contractors to assist, among other things, in the screening and categorization of contractors, keeping records of work opportunities awarded to contractors and performance monitoring
development, in collaboration with Ntsika, of the Black Construction Council and the International Labor Organization (ILO) of the Contracting Entrepreneurial Training Program.

The ECDP is also developing a mentorship program to provide support to contractors participating in the Strategic Project Initiative which was launched by the Minister of Public Works at the end of August 1998. Projects to the value of R284,4 million were identified. The main objective of the initiative is to develop emerging contractors into prime contractors.

Disposal of strategic State-owned properties

One of the Department’s alternative approaches, representing a shift in emphasis from simply disposing of fixed properties to the highest bidder in an open tender process, entails the disposal of property assets through the invitation of development proposals known as the ‘proposal call’ model.

The main objective of the process is to take advantage of the knowledge of market forces and creative input of a variety of developers in developing public land. Other objectives are to ensure that new developments on State-owned land provide public facilities and amenities, as well as being a sound investment opportunity for the prospective developer. It was envisaged that tenders for the development and disposal of these properties would be invited by mid-1999.

Human resources and employment

According to the Bill of Rights, which is contained in the Constitution of South Africa, 1996 (Act 108 0f 1996), everyone has the right to, among other things, freedom of association, fair labor practices, the right to negotiate collectively, the right to withhold labor, the right to protection and the right to education.

Legislation

The Basic Conditions of Employment Act, 1997 (Act 75 of 1997), came into effect on 1 December 1998 and applies to all workers except for the South African National Defence Force (SANDF), the South African Secret Service (SASS) and the National Intelligence Agency (NIA).

There is a transitional period of 18 months for the Public Service , which means that the implementation date for the Public Service is May 2000.

The new provisions include the following:

A reduction in the maximum hours of work from 46 to 45 hours per week.
An increase in the rate of overtime from 133 per cent to 150 per cent.
Payment for working Sundays is now 200 per cent if Sunday is not a normal working day; if Sunday is a normal workday, payment is at 150 per cent.

Night work – a premium in pay or additional time off is prescribed.
Maternity leave increases to four months (but payment is not prescribed).
Annual leave increases from two weeks to three weeks (21 consecutive days).
Family responsibility leave: 3 days paid family responsibility leave to attend to the birth or illness of children, or death of an immediate family member.
Employers have to provide workers with written Particulars of Employment.
The Act includes provisions for establishing minimum wages and conditions for groups of workers in vulnerable sectors e.g. domestic, farms, security, clothing, etc. The Employment Conditions Commission advises the Minister in setting these.
The Act prohibits children under 15 years of age from working. Children between 15 and 18 will be better protected, and also prohibited from working in certain jobs, especially in the mining and manufacturing sectors.

Compensation for Occupational Injuries and Diseases Amendment Act, 1993

The Compensation for Occupational Injuries and Diseases Act, 1993 (Act 130 of 1993), came into force in March 1996. In terms of the Act, a Compensation Board was established which advises the Minister on problems that arise from the application of the Act, and the nature and extent of benefits.

The Compensation Fund provides for financial compensation for workers who, in the course of their employment, sustain injuries or contract industrial diseases that result in medical expenses and/or temporary or permanent disablement. In cases of fatal accidents or death caused by an occupational disease, compensation is paid to the worker’s dependants. Compensation and medical expenses are covered by the Accident Fund.

In terms of the Compensation for Occupational Injuries and Diseases Amendment Act, 1997 (Act 61 of 1997), decision-making and the 595-strong staff of the Compensation Fund were placed under the Director-General of the Department of Labor.

The Amendment Act is intended to make old legislation compatible with the provisions of the Unemployment Insurance Act, 1966 (Act 30 of 1966). The Act protects contributors against the risk of loss of earnings through unemployment, illness and, in the case of women contributing to the fund, maternity or the adoption of children under the age of two years. The Act provides for lump-sum payments to dependants of deceased contributors. The State, employers and workers contribute to the fund, which earns interest on investments.

Labor Relations Act, 1995

The Labor Relations Act (LRA), 1995 (Act 66 of 1995), came into effect on 11 November 1996. It enables bargaining councils to be established and registered, and stipulates that the councils should include small and medium-sized businesses. New rules are provided to extend bargaining council agreements to non-parties and give councils the power to determine the issues to be bargained in the various sectors and workplaces.

The LRA facilitates worker participation and decision-making in the workplace. The LRA entrenches the right to strike, encourages sectoral and enterprise bargaining and clarifies the law on unfair dismissals and information disclosure, and also introduces workplace forums and new mechanisms for dispute resolution.

The LRA does not apply to members of the SANDF, the NIA or the SASS. Employees in essential services have limits placed on their rights to strike.

The Labor Relations Amendment Act, 1998 (Act 127 of 1998), came into operation on 1 February 1999. The Act improves the institutional functioning of the Commission for Conciliation, Mediation and Arbitration (CCMA) and bargaining councils as well as the closure of the Industrial Court.

The Employment Equity Act, 1998

The Employment Equity Act, 1998 (Act 55 of 1998), was assented to by the President on 16 October 1998. The Act signaled the beginning of the final phase of transformation in the job market, which began with the implementation of the LRA. It aims to achieve representivity in employment and correct past discriminatory employment practices.

The Act compels employers to adopt employment policies and practices which do not unfairly discriminate on the basis of race, sex, disability, pregnancy, marital status, ethnic or social origin, sexual orientation, opinion, culture, language, religion or belief. Firms with 50 or more employees, or whose annual turnover is more than that set for a small business in terms of the National Small Business Act, 1996, will have to prepare and execute an employment equity plan. Employers who comply with the provisions will be able to tender for government contracts. Those guilty of contraventions will face heavy fines.

Specific requirements of the Act are that companies prepare a profile of their workforce and a statement on the categories of their workers and review current employment practices and policies. The Act will subject employers to penalties for non-compliance. Large companies will have to report annually on the progress of their programs to the Department of Labor, and small companies once in two years.

In terms of the Act, the Government will be required to establish a Commission for Employment Equity which will be an advisory body to the Minister of Labor.

Skills Development Act, 1998

The Skills Development Act, 1998 (Act 97 of 1998), was gazetted on 2 November 1998. The purpose of the Act is to

develop the skills of the South African workforce to
improve the quality of life of workers, their prospects of work and labor mobility
improve productivity in the workplace and the competitiveness of employers
promote self-employment
improve the delivery of social services
increase the levels of investment in education and training in the labor market and improve the return on that investment

encourage employers to

provide opportunities for new entrants into the labor market to gain work experience
employ persons who find it difficult to get employment and use the workplace as a learning environment
provide workers with the opportunities to acquire new skills
encourage workers to participate in learner ship and other training programs
improve the employment prospects of persons previously disadvantaged by unfair discrimination to enter the labor market and to redress those disadvantages through training and education
ensure the quality of education and training in and for the workplace

assist

work seekers to find work
retrenched workers to re-enter the labor market
employers to find qualified workers
provide and regulate employment services.

The Skills Development Levies Act, 1999 (Act 9 of 1999) the financing counterpart to the Skills Development Act, had to be separately drafted and tabled to comply with the Constitution which requires that all money Bills must be tabled by the Minister of Finance. Once fully implemented, these two pieces of legislation will fully replace the Manpower Training Act, 1981 (Act 56 of 1981), and the Guidance and Placement Act, 1981 (Act 62 of 1981).

Parallel to the Skills Development Act, 1998, the Minister of Education’s Further Education and Training Act, 1998 (Act 98 of 1998), was also passed. This legislation seeks to address issues of relevance and quality of learning in technical colleges and to lay the basis for the long-term transformation of the senior secondary school system.

The complementarity between the two pieces of legislation was designed in joint sessions between the two responsible departments. In essence, the Skills Development Act, 1998, is seen to stimulate the demand for skills development in the labor market from public and private sector employers. The Further Education and Training Act, 1998, on the other hand, is seen to improve the ability of learning institutions to respond to the increased demand in creative ways. The new legislation establishes the vehicles by means of which these objectives are to be achieved.

These purposes are to be achieved by:

establishing an institutional and financial framework comprising
the National Skills Authority (NSA)
the National Skills Fund (NSF)
a skills development levy-grant scheme as contemplated in the Skills Development Levies Bill
Sector Education and Training Authorities (Setas)
labor centers
the Skills Development Planning Unit
encouraging partnerships between the public and private sectors of the economy to provide education and training in and for the workplace
co-operating with the South African Qualifications Authority (SAQA).

In the 1997 Annual Report, detail was provided about the Labor Market Skills Development Program, a program designed to implement the Skills Development Act, 1998. The year 1998 saw the signing of the official Financing Agreement, securing ECU 46 million for this program. Detailed work plans were completed and it was hoped to commence implementation in the middle of 1999.

National Skills Authority

The NSA was launched on 12 April 1999 to implement the Skills Development Act, 1998. Schedule 2 of the Act states that the National Training Board (NTB) will perform the functions of the NSA until the authority is formally established.

The NTB has already initiated a number of projects, the most significant of which is a project funded by the German Government through the German Technical Co-operation (GTZ).

The project is exploring the sectoral demarcation for the establishment of Setas. It is also looking at the organizational implications of the functions outlined in the legislation. The outcome of this project will contribute towards the finalization of the regulations for the establishment of Setas.

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Funds that were allocated to the NSF in the 1998/99 financial year have been assigned to a number of pilot projects, that aim to give effect to the Skills Development Act, 1998. However, donor assistance has again supported the work of the Department. Danida, the Danish Aid Agency, has supported a major pilot project on learnerships in KwaZulu-Natal. The focus of the project has been on the delivery of 250 learnerships in the tourism and building industries.

Sector Education and Training Authorities

Steps have been taken to finalize formal Seta establishment guidelines. However, these steps have been complemented by a great deal of spontaneous activity in the private and public sectors. For example, major initiatives have been taken by the Department of Public Service and Administration to lay the basis for a Public Service Education and Training Authority, and actors in local government have initiated a process intended to create a Local Government Education and Training Authority. Major progress has also been made in the tourism, hospitality, mining sectors and others. Key functions to be performed by Setas are the design and management of learnerships. The Directorate of the Central Organization of Trade Testing (COTT) has taken up the challenge of initiating a process of discussion and development work aimed at preparing guidelines on learnerships.

In addition to the work done in the KwaZuluNatal pilot project, a number of other projects linked to the learner ship idea have begun in the plastics, printing and electrical contracting industry.

Labor centers

Labor centers are Department of Labor offices at local level. Traditionally they have principally made pay-outs to Unemployment Insurance Fund applicants. However, major strides were made in 1998 to boost the functions associated with the Directorate: Employment Services, and these functions were further strengthened in 1999.

Staff capacity-building

Assistance from Australian Aid for Development (AusAid) was provided to support capacity-building initiatives for employment services practitioners at labor centers and provincial offices. These included the direct training of staff, as well as training provincial-level staff to train others. This initiative will be incorporated into a larger wide-wide initiative to build staff capacity to implement the new functions of the Skills Development Act, 1998.

Current skills profiles and training plans for everyone will be developed once actual learning programs have been designed to assist staff to achieve competence. Partnerships with external training providers are being established to ensure learning programs are available wherever and whenever required.

If the capacity-building program is successful, it could be extended to external social partners on Seta boards, Seta staff, and even staff within providers or in other government or private sector institutions.

The Skills Development Planning Unit

The unit will be established within the Department of Labor to guide the development of training needs analyses at both sectoral and provincial level and then use this information to

recommend priorities (or criteria) to the NSA and the Minister for the disbursement of funds from the NSF and set guidelines to be used for the disbursement of grants
propose a National Skills Development Strategy to the NSA for consideration; the NSA will make recommendations in this regard to the Minister of Labor
ensure that all priorities and strategies take due account of groups previously excluded from participation in the labor market
ensure that training needs analyses embrace the needs of small and microenterprises.

Co-operation with SAQA

The Minister of Labor is co-responsible with the Minister of Education for the success of SAQA.

In 1998, SAQA made major strides, both in respect of its own staffing and accommodation, and in the establishment of key institutions such as the 12 National Standards Bodies, which were duly appointed.

Over and above these roles relating to formal structures, the Director of the COTT has entered into a partnership with SAQA to jointly manage a project aimed to assist Setas to become registered as Education and Training Quality Assurers.

The outcome of this project will be the formal accreditation of Setas by SAQA and the successful delivery of these services by Setas to providers and companies associated with their sectors.

Trade unions

The right or freedom to associate manifests itself in, among other things, employer organizations and trade unions.

Voluntary registration of employer organizations and trade unions takes place with the Department of Labor after an applicant organization has applied in the prescribed manner.

Registration allows the organization to become party to a bargaining council, a forum in which formal negotiations are conducted between registered employer organizations and registered trade unions in a particular industry.

At the end of 1998, there were 474 registered trade unions and membership had increased to 3,8 million. Total membership of all trade unions represented over 37 per cent of those in employment in 1998.

Unregistered unions are legally obliged to furnish membership particulars to the Department of Labor.

Trade unions may join to form federations which must furnish the Department of Labor with their constitution, office-bearers and membership figures.

The most important trade union groups or federations are the Federation of Unions of South Africa (Fedusa), the National Council of Trade Unions (Nactu), and the Congress of South African Trade Unions (Cosatu) – the largest federation, with a membership of close to 1,8 million.

In March 1997, Fedsal and the Federation of Organizations Representing Civil Employees (Force) merged to form Fedusa, the second largest trade union federation in the country after Cosatu, and the largest independent federation.

The three largest trade unions are the National Union of Mineworkers (NUM), the National Union of Metalworkers of South Africa (Numsa) and the National Education Health and Allied Workers’ Union (Nehawu). All are Cosatu affiliates.

Employers also have the right to associate with employer organizations and register their organizations with the Department of Labor. At present, there are 242 registered employer organizations and ten federations of employer organizations.

Collective bargaining has dominated industrial negotiations during the past few years and appears to be on the increase. Unregistered trade unions cannot negotiate via the bargaining council system and are confined to enterprise collective bargaining. Many registered trade unions engage in informal collective bargaining because the proceedings are less rigid, rapid results may be obtained, there is a high degree of flexibility and a wider range of items may be negotiated. It is impossible to determine with any degree of accuracy how many plant level agreements are concluded every year, since most are private arrangements between management and a particular trade union.

Negotiation remains the most important method of preventing and resolving labor disputes.

The labor dispensation introduced in 1995 has, in fact, developed negotiation as the most important means of power-sharing between employers and trade unions. In those sectors of the economy where employers and employees are not organized or sufficiently organized to negotiate minimum wages and other conditions of service in terms of the LRA, such conditions are prescribed in wa

Commission for Conciliation, Mediation and Arbitration

The CCMA, established in November 1996, is an independent statutory organization, set up in terms of the LRA to resolve labor disputes.

The commission’s tasks are to promote sound worker-employer relations; prevent labor disputes from arising; settle disputes that do arise by conciliation and, if necessary, arbitration. Two years after its formation, some 144 000 cases have been referred to the commission, with an overall conciliation settlement rate of 70 per cent. More than 16 000 arbitrations were completed.

Labor Court

The Labor Court has been operating since November 1996. In 1998, there were 6 056 cases lodged with the Labor Court and 153 appeals with the Labor Appeal Court. One of the important functions of the court is to determine whether a strike or a lockout enjoys protection by the LRA. The court also adjudicates if the CCMA is unable to resolve disputes about picketing or when an employee claims to have been unfairly dismissed.

Strikes

More than 2,8 million work days were lost as a result of industrial action in the first ten months of 1998. This was the highest figure since the 1994 elections.

According to a report commissioned by the ILO/Swiss project, some violence occurred, with at least 11 people losing their lives and damage to property. The metal sector accounted for 32 per cent of the days lost with the retail and services sector at 31 per cent.

According to the report, strikes were generally caused by economic factors. The number was expected to rise to about three million days lost by the end of the year.

Major strike triggers in 1998 were wages at 96,8 per cent, followed by grievance (1,2 per cent), dismissal related to discipline (1,1 per cent), retrenchments (0,7 per cent) and union recognition (0,1 per cent). The majority of strikes took place at national level (90,9 per cent), followed by Gauteng (4,6 per cent), Western Cape (2,6 per cent), KwaZulu-Natal (1,1 per cent) and other (0,8 per cent).

South African Companies with Offices in the US

ABSA
780 Third Avenue, 42nd Floor
New York NY 10017
Tel: (212) 223-4400
Fax: (212) 223-5620

Nedcor Bank Ltd.
230 Park Avenue
Suite 1000
New York NY 10169
Tel: (212) 808-3011
Fax: (212) 808-4987

Standard New York Inc.
153 East 53rd Street, 38th Floor
New York, NY 100022
Tel: (212) 407-5015
Fax: (212) 407-5025