An economic analysis of South Africa

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South Africa has three capital cities: Cape Town, Pretoria and Bloemfontein. It has a bicameral parliament: the National Council of Provinces and the National Assembly. The primary sources of South Africa law are Roman-Dutch mercantile law and personal law with English Common law. Since the end of apartheid in 1994, South African politics have been dominated by the African National Congress, the main opposition party is the Democratic Alliance party.

According to the Ibrahim Index of African Governance, South Africa scored high in the categories of Rule of Law, Transparency & Corruption and Participation & Human Rights, but relatively low in Safety & Security. Since 2004, the country underwent thousands of popular protests, some are violent.

In terms of the foreign trade policy, the foreign trade policy of South Africa is based on "International Trade Administration Act"(2002) and other related laws include the "Customs and Revenue Act"(1964), "Consumer Affairs Act" and "Sales and Service Transactions Law." On October 21, 2002, South Africa, Botswana, Lesotho, Namibia and Swaziland signed the "2002 Southern African Customs Union Agreement" (SACU). Under the SACU, the flows of goods among member states are duty-free, while to the non-member countries, a common external tariff is implemented. In addition, South Africa, Malawi, Zimbabwe, Hungary, Mozambique, Poland and Turkey have signed bilateral trade agreements to provide reciprocal trade arrangements.

In terms of foreign investment policy, South Africa does not separate investment law. The investment affairs are legislated by the various departments. And investment related laws include "Company Law"(2008), "Tax Code" (2009), "Labour Relations Act" (2002), "competition Law"(1998). The Ministry of Trade and Industry of South Africa is the major department for investment regulations. The other relevant government agencies are South Africa Inland Revenue Service Department, National Economic Development and Labor Commission, Regional Industrial Development Committee. A large number of investment plans in South Africa ("Manufacturing investment plan", "the cooperative incentive scheme", "preferential tax return") encourages investors to invest in South Africa. South Africa has been committed to encourage foreign investment in South Africa, national treatment applies to all foreign investors in South Africa and foreigners is allowed to freely repatriate their after-tax profits directly.

Except financial institutions, any foreign company can set up branches in South Africa. In the process of the establishment of the branch, the South Africa requires foreign companies registered as "foreign company" (external company), and set up within 21 days after registration. If the branch involved in import and export trade, it will need to obtain additional approval.

ECONOMIC

GDP

South Africa has a mixed economy with high rate of poverty and low GDP per capita. According to the government website of the South Africa, the growth in real GDP slowed to 3.1% in 2008, compared with GDP between 2004 and 2007 (4.9%-5.3). In 2009, due to a contraction in real final consumption expenditure by household and general government, a decrease of the domestic expenditure is witnessed. The growth, as expected by the South Africa Reserve Bank, will be average 3,4% in 2011 and 3.6% in 2012.

Inflation

According to the Trading Economics, the inflation rate in South Africa was last reported at 3.70% in January of 2011. From 1981 until 2010, the average inflation rate in South Africa was 10% with an historical high of 20.80 percent in January of 1986 and a record low of 0.10 percent in January of 2004. According to the South Africa Reserve Bank the mean forecast of CPI inflation is to be 4,5% for 2011, and 5,4 per cent and 5,6 per cent for 2012 and 2013 respectively.

Exchange rates

South Africa currently adopts a free-floating exchange rate system. The South African Reserve Bank, when necessary, may make appropriate interventions, but only in the case of the short-term, abnormal, excessive exchange rate volatility. As we can see from the below graph, the exchange rate of the Rand against RMB fluctuates within the range of 1:1 to 1.12:1 for the last 120 days; Generally speaking, one Rand for on RMB. As claimed by the South African Reserve Bank, the rand exchange rate is expected to remain relatively strong.

Balance of Trade

As below, South Africa turnaround the trade deficit in the middle of 2009, and reported a trade deficit equivalent to 4.93 Billion ZAR in January of 2011. Being a country rich in minerals resources, South Africa is the world's major exporter of gold, platinum, coal and diamonds. In terms of imports, South Africa mainly imports machinery, foodstuffs, equipment, chemicals, petroleum products and scientific instruments. Its major trading partners are: European Union (U.K. Germany, Italy, Belgium), The United States, China, and Japan.

Unemployment

As below, the unemployment rate of South Africa is relatively higher than many countries, about a quarter of the people in South Africa cannot find job in the market..

However, the unemployment rate seems to improve recently. According to the Timeslive, in Q4 2010, of 32.193 million people aged between 15 and 64 years in South Africa, 17.269 million were economically active (down 102 000 relative to Q3 2010), 13.132 million were employed (up 157 000 relative to Q3 2010), 4.137 million were unemployed (down 259 000 relative to Q3 2010. However, the number of discouraged workers increased by a further 117 000 in the quarter).

CULTURAL

South Africa has a population of approximate 50 million, mainly composed by the black, white, colored and Asian ethnic. The blacks are mainly use Bantu. The white are mainly use Afrikaner language and English. The colored mainly use Afrikaner language. Asians, are mainly Indians and Chinese. Residents are predominantly Protestant, Catholic, Islam, and the original religion. However, the population suffered a slight decrease the 2010 with the rate of -0.051%.

Dating back from the pre- colony period, labor between the sexes and the generations was divided, and in rural areas, it is still the case at present. Besides, like China, people in the rural areas are moving into the cities, resulting in insufficient labors in the farmland.

South Africa's social etiquette can be summed up as "black and white", "British-oriented". The so-called "black and white" means: by race, religion, customs constraints, the blacks and whites in South Africa has to comply with the different social etiquette; British-oriented means: in a long historical period, the white controlled the country. The White social etiquette, especially the British one, prevails in South African.

REGIONAL ENVIRONMENT

South Africa is China’s largest trading partner in Africa. According to statistics published by the Chinese Customs, bilateral trade between China and South Africa in 2009 amounted to USD16.06 billion, down 10% from last year. Among them, China exported amount to USD7.37 billion, down 14.5% from last year; imported USD8.69 billion, down 5.9%, which result in a USD1.32 billion trade deficit of China. China mainly exported to South Africa for the electrical equipment, machinery and equipment, apparel and clothing accessories, knitted or crocheted, not knitted or crocheted garments and clothing accessories, footwear, furniture, bedding, iron and steel products, organic chemicals, vehicles, plastics and plastic products. According to MOFCOM, in 2009, Chinese companies in South Africa completed engineering contracts amounting to USD120,000,000; completed labor service cooperation contracts amounting to USD 2,750,000. Besides, in 2009, the MOFCOM approved, the Chinese in South Africa's non-financial direct investment amounted to USD48,200,000. In 2009, South Africa invested 24 projects in China, the actual use of foreign investment of USD41,200,000.

In terms of textile, clothing and footwear, South Africa maintains a stringent labeling requirement. Textiles, clothing and footwear must be marked with the detailed contents [1] before they are allowed for import and sale in South Africa. China believes that the labeling requirements of South Africa is too complicated, and does not meet the existing relevant international standards. China hopes that South Africa can effectively perform its obligations under the WTO "Agreement on Technical Barriers to Trade" and not to imposed too many restrictions to the importation.

According to MOFCOM, South Africa initiated 2 anti-dumping investigations against China in 2009. The concerned products mainly included including synthetic fibers, staple, detonating cord and detonators. As of the end of 2009, South Africa initiated a total of 44 trade remedy cases’ investigations against China, of which 43 are anti-dumping investigations, 1 case is involved with a mixed anti-dumping and subsidy investigations. Textiles, metal products and chemical products are the main product concerned by anti-dumping against China.

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