Foreign Direct Investment Into South Africa example essay topic

POLITICAL SYSTEM a) Political structure. Government type - Republic. Head of state / government - President Thabo Mbeki b) Political parties. Since the transition to democracy in 1994, South Africa has been ruled by the left-leaning African National Congress (ANC). The ANC was the major source of opposition to the minority white governments of the Apartheid era, and has reaped the rewards in terms of solid electoral mandates in both the general elections held since the transition to democracy in the early 1990's... The Democratic Party has become the most vocal source of liberal opposition to the ANC, under the leadership of Tony Leon.

However, the party remains a predominantly white organization, and is unlikely to gain in influence unless it is able to broaden its appeal. The other significant player in South African politics is the Zulu nationalist Inkatha Freedom Party (IFP), which won 34 seats in the 1999 election... The ANC was led to victory in 1999 by Thabo Mbeki, the former president Nelson Mandela having fulfilled his vow to hold power for only one term. Mbeki had been effectively running the country for two years prior to the poll, so the end of the Mandela era has had few effects on the direction of policy. d) Stability of government.

Politics in South Africa has struggled to shake off the divisive language of race and ethnic grievance. The ruling African National Congress (ANC) continues to scare off white support, and even within the black communities divisions between Xhosa and Zulu groupings are reflected in the animosity between the ANC and the Zulu nationalist Inkatha Freedom Party (IFP)... Nevertheless, the political situation has proven remarkably stable, and there was a marked decrease in political violence during the 1999 election, in comparison to the political assassinations and violence during the country's first proper democratic contest in 1994. e) Special taxes. The macro-economic policy adopted by the South African Government in 1996 demonstrated its commitment to open markets, privatisation and a favourable investment climate, moving away from the former government's strategy of import substitution and industrial development that protected local industries with high tariff barriers...

Since 1995/96, South Africa has reformed and simplified a complex tariff structure, reduced its average tariff rate considerably and terminated most import controls and trade restrictive practices. ECONOMIC STATISTICS AND ACTIVITY a) Gross Domestic Product (GDP). Following two years of sluggish growth in 1998 and 1999, brought on by the emerging markets crisis, the South African economic outlook improved considerably as from 2000. In the year 2000 Real GDP was 113.9 and Real GDP growth improved to 3.4% from 2.1% the previous year. e) Principal industries.

Mining, automobile assembly, metalworking, machinery, textile, iron and steel, chemicals, fertilizer, foodstuffs. Tourism - Within five years, tourism's contribution to the economy will outstrip that of mining. The government, which sees the sector as a great way to create jobs and woo foreign currency, has launched an intensive marketing campaign and tourism skills development project... Mining - Mining accounts for only 6% of GDP, but gold exports provide one-fifth of South Africa's foreign exchange reserves. The country also produces 75% of the world's platinum, an important component in cars' catalytic converters. South Africa's global role in mining also continues to grow...

Manufacturing and cars - Manufacturing is the largest contributor to GDP, at 18%. It is dominated by engineering and metal products but food and tobacco processing remain important. Manufacturing output has revived in the last six months, helped by stronger exports to Europe and Asia, as well as a modest upturn in domestic demand. f) Percent foreign investment / industry. South Africa's reputation as an emerging market suffers from its proximity to the instability and conflicts that have appeared in neighbouring countries. The 2000-2002 land invasions in Zimbabwe and the controversial Zimbabwean election in March 2002 had a negative impact on the value of the Rand and on South Africa's ability to attract foreign investment. g) Principal exports, imports (lb value). In 2002 the world total export market was 6.2 billion US dollars, South Africa had an export value of 29.7 million US dollars, and was ranked 38 in the world in terms on this share.

Export performance has been relatively good, and South Africa could reap considerable benefits from recent efforts to liberalize trade both with the EU and with its African neighbours... Principal export commodities included: gold, diamonds, platinum, other metals and minerals, machinery and equipment (1998 est. ). In 2002 the world total import market was 6.5 billion US dollars, South Africa had an import value of 29.3 million wand was ranked 40 in the world based on this share...

Principal import commodities included: machinery and equipment, chemicals, petroleum products, scientific instruments, foodstuffs (2000 est.) h) Balance of payments. In 2001 the current account deficit totalled R 1.7 billion, or 0.2 percent of GDP, compared to a deficit of R 3.1 billion in 2000. The marked improvement in the current account balance resulted from a substantial increase in merchandise export earnings, which rose by R 41 billion or 20 percent in 2001... The financial account balance, which covers transactions in financial assets and liabilities with non-residents, changed to a deficit of R 1.5 billion in the fourth quarter of 2001 after surpluses were recorded during the second and third quarter of 2001. In 2001 as a whole, the financial account registered a surplus of R 7.2 billion, compared with R 9.1 billion in 2000 and a R 29.5 billion surplus in 1999. Both the absolute level and composition of these flows are generally regarded as inadequate in view of the country's long-term growth and development needs.

Foreign direct investment into South Africa, which had been positive in the first three quarters of 2001, turned negative to the value of R 1.9 billion in the fourth quarter. South African companies exported capital valued at R 5.4 billion during the fourth quarter of 2001. They did this by acquiring interests in the equity capital of foreign companies and also by extending trade credits to foreign subsidiaries or other associated companies. i) Exchange rate. The volatility experienced in the Rand exchange rate in recent years, not only continued, but increased during 2002. The weighted exchange rate of the Rand, which had declined by 13.5 percent from the end of June 2001 to the end of September, fell further by 24.0 percent from September to the end of December. On balance, the nominal effective exchange rate of the Rand declined by 34.4 percent from the end of 2000 to the end of 2001, following a decline of 12.4 percent in 2000...

Real wages and productivity have increased by over 20 per cent since 1994, bringing rising living standards to millions of people and strengthening the competitiveness of industry... However increasing substitution of capital for labor has created the specter of 'jobless growth', and unemployment remains stubbornly high, at around 40% by official figures. With low rates of labor market participation, the true level of unemployment is far higher. l) Inflation rates. As a result of the Rand's performance and also because of a rise in international oil prices, inflation began to accelerate in December 2001. South African inflation had declined considerably in recent years.

However, due to new inflationary pressures, the South African Reserve Bank was only just able to bring the rate within the target range for 2001 of between 3 and 6 percent. In the year 2000 the inflation rate was 5.3%. Infrastructure. Fiscal consolidation over the past five years has afforded government the opportunity to deepen its commitment to redistribution, allowing consumers significant tax relief, encouraging investment by the private sector and placing a renewed focus on physical infrastructure development... For the 2002/2003 Budget, capital spending is budgeted to grow by 18.1 percent a year over the next three years, including strong investment in both social infrastructure - such as schools, hospitals and housing - and provision for investment in roads, water services, rail infrastructure and other economic assets. SOCIAL ENVIRONMENT b) Education.

Literacy - definition: age 15 and over can read and write total population: 86.4% male: 87% female: 85.7% (2003 est. ). This is lower than in developed countries. The US, Japan and Germany all have a 100% literacy rate. c) Demographics.

The population grew by 1.49% in 2000 to reach 43.69 million... Birth rate = 18.87 births/1,000 population (2003 est. ). Gender - In 2001, females accounted for 51.50% of the population in South Africa, while the male population represented 48.50% of the population. South Africa has the same ratio as the UK, and it is close to most Western European countries. However, comparisons differ when the population aged over 60 is considered. e) Living standards and leisure.

Housing - House completed since 1994: 1.1 million. These houses have secured tenure, running water, sanitation and electricity. Number of people given shelter in the past 5 years: 5 million Number of rented council units transferred to full ownership: 370,000 Number of homes still needed: 2 to 3 million Number of people still in need of adequate housing: 7.5 million people. South Africa has made great strides in proving housing and basic services such as electricity and water to the people of South Africa. Despite not achieving its goal of 350,000 houses per year, the government says that its housing delivery surpasses such world leaders as Sweden, Cuba and Singapore. However, much remains to be done overcome the housing backlog and make water and electricity available and affordable...

Recreation -. South Africa's climate is ideal for outdoor sports and recreation all through the year. Soccer, rugby and cricket are the most popular sports in South Africa. South Africans also enjoy tennis, field hockey, squash, badminton, golf, surfing, sailing, running and cycling...

During the apartheid years many sectors of the South African population were forbidden to participate in certain sports. This changed after apartheid was repealed. Sport has brought the various ethnic groups of South Africa closer together. For example, in 1995 during the Rugby World Cup tournament, hosted for the first time in South Africa, the whole nation rallied around the South African Rugby Team.

The current government is working to upgrade facilities and make sport accessible to everyone... Cinema remains one of the most popular forms of entertainment in South Africa, with over 26 million people going to the movies every year. Other favourite recreational pastimes include music, dancing and socializing. South Africans have a strong musical tradition and dance is considered an important component of recreation and of communicating with others. TECHNOLOGY b) Information systems. Internet users: 3.068 million (2002) Growth of the lingerie sales on the Internet A survey on retail e-commerce in South Africa conducted by Arthur Gold stuck for technology research house World Wide Worx, found that the single fastest growing retail category by number of sites is Lingerie.

Mobile phones: 7.06 million (2001). Telephone system: the system is the best developed and most modern in Africa.