The Republic Of South Africa Economics Essay

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The Republic of South Africa held its 1st universal suffrage elections in April 1994. The African National Congress, fight against white minority rule and the apartheid system of state-forced tribal separation and won control of the National Assembly.

Nelson Mandela was elected as President of the Assembly and became ANC leader. He released from Prison in 1900 after serving 27 years.

South Africa's second universal suffrage elections were held in June 1999, and again the ANC retained control of the National Assembly. Deputy President Thabo Mbeki, was chosen by the Assembly to succeed Mandela.

South Africa's politics persist to be dominated by the ANC, which has enjoyed support among many black South Africans because of its role was to fight against white minority rule.

And support apartheid system.

Further parties represented in parliament include:

The New National Party (NNP)

The Independent Democrats (ID)

The United Democratic Movement (UDM)

The African Christian Democratic Party (ACDP).

The National Council of Provinces (NCOP) is also a legislative body in SA with small amount of prwer. Its members are chosen by the governments of the nine provinces.

Democratic Alliances:

Democratic Alliances is the 2nd largest party in the National Assembly of South Africa.

DA was created in 2000 by a merger of the Democratic Party (DP) and the New National Party (NNP) to remove the dominant power of ANC in the political system.

The DP has largely white in its membership but it advocated a classical liberal stage and became beneficiary to the Progressive Party. They strongly opposed apartheid and campaigned on human rights issues.

African National Congress:

The ANC has long worked in an closely connecting tripartite alliance to the Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP). Leaders of COSATU and the SACP assemble on the National Executive Committee (NEC) of the ANC, and plays important role as the party's principal decision-making body.

Zuma Administration:

Zuma was elected as South Africa's newest President on May 9, 2009. Long-serving Finance Minister Trevor Manuel was replaced by the well respected former head of South Africa's Revenue Service, Pravin Gordhan. Manuel was heading a new national planning commission to formulate government strategy.

Parliament is concern that Zuma would modify the country's economic policy to different positive level. Hillary Rodham Clinton Secretary of State welcomed the Zuma government's swearword to continue "a strong economic program."

Congress of People:

Numerous prestigious ANC members united to previous Defense Minister Mosiuoa Lekota to begin a new, moderate political party, the Congress of the People (COPE) in December 2008.

The new party did well in its first electoral contest and won one-third of the 27 seats in Western Cape municipal by-elections in December 2008. COPE selected preacher Mvume Dandala as its presidential member.

nd has pledged to reduce serious and violent crimes by 7% to 10% annually.


The South African government places a strong emphasis on budget transparency which is ranking second after the United Kingdom in public spending transparency in the Open Budget Index.

The United States provides considerable support to South Africa's fight against HIV/AIDS through the President's Emergency Plan for AIDS Relief (PEPFAR) which having contributed more than $2 billion since the program's inception in FY2004. In FY2010, the PEPFAR program provided Anti-Ritro Viral therapy to an estimated 917,700 patient's and transmission prevention treatment to over 682,400 pregnant HIV-infected women. Also counseling and testing for over 5 million, and palliative and tuberculosis care for 2,160,300 South Africans. PEPFAR's South Africa program also funds public education efforts to promote self-discipline, faithfulness, and healthy behavior to reduce the risk of transmission among high-risk groups.

In December 2010, the United States and South Africa signed a five-year Partnership Framework to improve synchronization on PEPFAR.

The Obama management has emphasized South Africa's important leadership role, both regionally and globally. The United States supports South Africa's efforts to deliver foreign assistance to other African countries through a $1.3 million Trilateral Assistance Program.


South Africa is among one of the few countries which has largely experienced a relatively smooth transition to democracy. The apartheid government which was dominated by the National Party had voluntarily agreed to democratic elections in which party had little possibility of success.

The election outcome allowed the ANC (African National Congress) majority to form the GNU (Government of National Unity) in cooperation with the National Party and Inkatha. The GNU will rule the country for next five years until new constitutional provision for South Africa are finalized for the nation. Scholars and policymakers distinguish South Africa as a model for democratic transition in ethnically divided societies.


The Union Buildings in Pretoria, The Houses of Parliament in Cape Town

seat of the executive seat of the legislature

C:\Users\FRENY CHRISTIAN\Desktop\FMCGr\South Africa - Wikipedia, the free encyclopedia_files\220px-Houses_of_Parliament_(Cape_Town).jpgPhoto of the Union Buildings

South Africa is a parliamentary republic, although not like most such republics the President is both head of state and head of government, and depends for his tenancy on the confidence of Parliament.

The executive, legislature and judiciary are all subject to the power of the constitution and the superior courts have the power to beat down executive actions and acts of Parliament if they are unauthorized

South Africa has three capital cities: 

Cape Town: The seat of Parliament which is the legislative capital; 

Pretoria: The seat of the President and Cabinet which is the administrative capital;

Bloemfontein: The seat of the Supreme Court of Appeal which is the judicial capital of South Africa.

Since the end of apartheid in 1994, South African politics have been dominated by the ANC, which continuously winning with almost 60-70 per cent of the vote of total. The Democratic Alliance is main challenger to the rule of ANC as opposition party.

The National Party ruled from 1948 to 1994 then renamed party in 1997 to the New National Party and then finally amalgamated with the ANC in 2005.

Other political parties who represented in Parliament are the Congress of the People, which split from the ANC and won 7.4 % of the vote in 2009, and the Inkatha Freedom Party which mainly represents Zulu voters and won 4.6 % of the vote in the 2009 election. These both parties are also major parties in SA.

Since 2004, the country had many thousands of popular opposites some were aggressive. It was also known as the "most protest-rich country in the world" at that time. Many of these protests have been organized from the growing shanty towns that surround South African cities.

In 2008, South Africa placed 5th out of 48 sub-Saharan African countries on the Ibrahim Index of African Governance. South Africa also scored well in the categories of various Rule of Law, Corruption, Transparency and Participation and Human Rights, but was disappointment by its relatively poor performance in Safety & Security of nation. The Ibrahim Index is a complete measure of African governance based on a number of different variables which reflect the success with which governments bring necessary political supplies to citizens of country. In November 2006, South Africa became the first African country to legalize gay marriage.

Foreign Relations:

As the Union of South Africa SA was a founding member of the United Nations. The country is one of the founding members of the African Union (AU) and has the largest economy of all the members.

It is also a founding member of the AU's New Partnership for Africa's Development (NEPAD).

South Africa has played a key role as a intermediary in African conflicts over the last decade, such as in Burundi, the Comoros, the Democratic Republic of Congo and Zimbabwe.

After apartheid ended South Africa focused to the Commonwealth of Nations. The country is a member of the Group of 77 and leads the organization in 2006.

South Africa is also a member of the Southern African Development Community, South Atlantic Peace and Cooperation Zone, Antarctic Treaty System, International Monetary Fund (IMF), Southern African Customs Union, World Trade Organization, G20 and G8+5.

Jacob Zuma, South African President and Chinese President HuJintao build bilateral ties between the two countries on 24 August 2010, when they signed the Beijing Agreement, which announced South Africa's earlier "strategic partnership" with China to the higher level of "comprehensive strategic partnership" in both economic and political affairs and including the strengthening of interactions between their respective ruling parties and legislatures.

 In April 2011, South Africa officially joined the Brazil-Russia-India-China (BRICS) grouping of countries which was identified by President Zuma as the country's largest trading partners, and also the largest trading partners with Africa as a whole. Zuma asserted that BRICS member countries would also work with each other through the UN and the Group of Twenty (G20) and the IBSA forum (India, Brazil South Africa).

Political Structure:

The Republic of SA is a unitary parliamentary republic.

Stability of Government:

As an emerging nation, SA has not remained completely unaltered by the turmoil in other emerging economies worldwide, especially in Asia, and lately also in Russia. Which may negatively affected investor confidence in these countries.

Role of Government:

SA economists in the 1980's decided the national nation as a free enterprise system in which the market, not the government, set most earnings and prices.

Special Taxes

SA has a residence based system which basically means residents are subject to certain exclusions taxed on their worldwide income irrespective of where their income was earned. Non residents are also taxed on their income from South African source.


Political Environment refers political and Government Environment. It has close relationship with the economic system, economic policy and legal environments of country.

The Democratic government countries laws / acts are passed in the parliaments and then they are regulating rules and regulation of business according to the act.

Political stability, political responsibility and political ideology and level of political morality, the law and order situation and practice of the ruling party and major determination and efficiency of the government agencies

Political agencies' nature is mainly influence to economic and industrial act which is present in the country.

Government's various policies like fiscal, monetary, industrial, labor and export import policies \ influences to specific legal acts and structure towards the business organization Political function and degree of the effectiveness mainly influenced to generate and implement policy in the legislature.

The political environment is also based on the uncertainty that's why demographic countries consist of number of political parties.

Political parties are not got clear majority to form government. In this situation, industry and commerce collapsed their business activities due to unstable government of the country. The political parties are unable to formulate stable government if affect and vary the government policies. So business organization and public needed to the stable government.

Elements of Political environment:


Government policies


In spite of having eye-catching the economic, geographical, social prospects of a particular country or region, doing business there might prove to be financially disastrous if the host government inflict heavy financial penalties on a company or if unexpected events in the political arena lead to the loss of income-generating assets.

The political environment in which the firm operates or plan to operate will have a significant impact on a company's international marketing activities. The greater the level of involvement in a foreign markets the greater the need to monitor the political climate of the countries business is generated.

Changes in government usually result in changes in policy and attitudes towards foreign business.

When country came to know that foreign company operates in Host Company then government will become more conscious. In this case the government can either encourage foreign activities by offering attractive opportunities for investment and trade or discourage its activities by imposing restrictions such as import quotas, tariffs etc. An exporter that is continuously attentive of shifts in government approach will be able to adapt export marketing strategies accordingly.

Nearly all governments today play active roles in their countries' economies. In most of the countries government ownership of economic activities is widespread in the earlier centrally planned economies, as well as in certain developing countries which lack a sufficiently well developed private sector to support a free market system.

One of the surest measurement value of political instability is a frequent change in government. Although a change in government need not be run by violence but usually appear a change in policy towards business and particularly global business. This kind of growth might impact negatively on a firm's long-term global marketing programme with foreign countries.

A government's attitudes and policies towards foreign business gives idea about how best to endorse national interest in the field of the country's economic and political resources as well as objectives. Foreign products and investments become important part in the growth and development of countries economic condition by receiving taxes, quotas etc.

South Africa's global relations have become normal and today other countries all over the world see South Africa as well established political power and stability.

The political environment is connected to the international business environment through the concept of political risk.


Political risk defined as the effect of political change and differences on the export firm's operations and decision making process.

Political risk is measured in a different way for different companies they might or might not been affected by political change in respected country.

Political risk is major when politically motivated environmental changes affect all foreign investment. It is minor when the environmental changes are proposed to affect only selected fields of business activity or foreign firms with specific characteristics.

When any business is conducted in developing countries major risk to the business are civil turmoil, war and take away rules from public and when business is conducted in industrialized countries labor disruptions and price controls are generally become greatest threats to a company's profitability and existence in the country and also affect market shares.


Government Stability:

South Africa has suffered political instability during the past 25 - 10 years but it is now stable. As an emerging economy, South Africa has not remained completely unaffected by the confusion in other emerging economies international especially in Asia and then also in Russia. This negatively affected investor confidence in these countries.

Stable politics may attract the business but in SA as we know Democratic Alliance is greater opposition to ANC which is continuously affecting the political growth of SA

Taxation Policy:

Taxation in South Africa mainly involves payments to a minimum of two different levels of government: Central government all the way through the South African Revenue Service (SARS) or to local government.

Revenue to Central government come primarily from income tax and value added tax (VAT), corporation tax and fuel duty by business and people.

Revenues to Local government come primarily from various grants from central government funds and municipal rates which are applicable locally.

South Africa has income tax system in which people should have to pay according to their wealth. Wealthy should give much more than the person which is poor. This basically means that the more a person earns the higher percentage tax they pay to nation.

Direct Taxation:

Normal tax

Secondary tax on companies:

It is a policy tax forced by government with the plan of encouraging companies to keep hold of profits instead of giving out dividends

Withholding tax

Donations tax

Indirect Taxation:

Value Added Tax

Fuel levy

Foreign Trade Dimensions:

Besides large-scale foreign investment in South Africa, foreign investors also seek other opportunities to stay in South Africa due to presence of natural resources availability.

Due to South Africa's strategic and geo-political importance in a regional and global context, a high quality is placed on its steadiness by the global community. In view of factors such as South Africa's leading and stabilizing role in a regional context and the positive global impact of South Africa's democratic miracle, the international community has more than a passive or passing interest in the future stability of South Africa. There is just too much at risk.

Africa has represented international investors with unprecedented opportunities for business with its relatively large and previously untapped markets.

Originally political transitions are almost inevitably volatile. It therefore comes as no surprise that the period since the April 1994 elections saw amid the overall sense of achievement and increasing goodwill moments of political uncertainty and pressure. In general, however, political stability increased as constitutional democracy became more entrenched.

Politics is not everything in country. In top-level appointments of talented politicians in the private sector highlighted that the career paths of capable leaders are not confined to politics, the bureaucracy or the military. This sets South Africa apart from many other developing countries, enhancing political stability in the sense that politics is not a zero-sum contest.

A strong spirit of reconciliation: President Mandela personifies the remarkable settlement and nation-building which has characterized South Africa's transformation. This spirit is, however, evident throughout political and everyday life. Examples include the normality of parliamentary politics and national and community processes of co-operation and the fascinating process of soul-searching and resolution through the Truth and Reconciliation Commission.

Social Welfare Policies:

The South African government seen that political and economic stability in South Africa is directly connected to political and economic stability in the country. No country can survive as an island of prosperity, in a sea of poverty.

There is greater progresss towards South Africa's political and economical integration into Southern African region within radius of Southern African Development Community (SADC). Economic policy changes the maximum political stability and joint participation in global trade and tourism are now common items on the development agenda of South Africa and its neighbors.

South Africa plays a leading role in SADC, which has become the key integrative mechanism in the region.


GROWTH, EMPLOYMENT AND REDISTRIBUTION STRATEGY (GEAR) is a total strategy aiming at a competitive, fast growing and job-creating economy and redistribution of resources and creating opportunities for the poor people with the provision of available health, education and housing facilities. The strategy consist budgetary reform and shortage reduction along with trade liberalization and tariff reformation and flexible labour market strategies and renewed infrastructure investment also tax incentives to attract investment and a commitment to co-ordinate policies.

The main players in the economic field have already shown that they have both the right attitude and the will to do so and these two factors are vital to the successful implementation of GEAR. Some examples of GEAR's applications:

- The private sector fully supports almost all the principles of GEAR for example the emphasis on budgetary change and fiscal shortage reduction and consistent monetary policy and trade liberalization and investment-friendly strategies of nation.

- Trade unions remained committed to a social compression between government, labor and employer organization and organization.

- New tax incentives were introduced to support fixed investment and restructuring in manufacturing in order to increase competitiveness among players, to facilitate higher labor incorporation and encourage small and medium-sized manufacturing companies of nation.

- As far as trade liberalization is concerned, the average import in the manufacturing industry has been reduced from 19 percent in 1994 to 10 percent in 1996. The aim is towards 8 percent in the year 2000.


Fast Moving Consumer Goods (FMCG) - or Consumer Packaged Goods (CPG) - Are products that are sold quickly and at relatively low cost.

Examples of FMCG products include non-durable goods such as soft drinks, toiletries, and grocery items. Though the complete profit made on FMCG products is comparatively small organization usually sell in large quantities so that cumulative profit on such products can be substantial and increases. ITC Limited, Procter & Gamble and Unilever are the three biggest consumer goods companies that operate across the globe and having major market shares.

The term FMCGs refers to those retail goods that are generally replaced or fully used up over a short period of time like days, weeks, months and within one year of period. This contrasts with durable goods or major appliances such as kitchen appliances which are replaced over a period of several years.

FMCG products have a short shelf life which ultimately results in high consumer demand because the product deteriorates rapidly. Some FMCG products such as meat, fruits and vegetables and dairy products such as milk, cheese and baked goods are highly perishable and deteriorate in very short period of time.

Some FMCG goods such as alcohol, toiletry products, pre-packaged foods, soft drinks and cleaning products have high turnover rates.

The following are the main characteristics of FMCGs:

From perspective of consumer's:

Frequent purchase because of deteriorate very soon

Low involvement [involves little, less or no effort to choose the item or products with strong brand loyalty are exceptions to this rule]

Low price(Few products like alcohol, food packages are higher prices)

From the view of marketers :

High volumes

Low contribution margins

Extensive distribution networks

High stock turnover

The Fast Moving Consumer Goods (FMCG) industry in South Africa is one of the largest sectors in the country and over the years has been growing at steadily. The sector consists of consumer nondurable products which broadly consist of personal care products, household care and food products & beverages. The South African FMCG industry is largely classified as organized and unorganized. This sector is in major competition with other industries. Along with competition FMCG industry is also marked by a robust distribution network joined with introduction of MNCs across the entire value chain from other countries.

Industry Classification

The FMCG industry is driven by quantity along with low margin to company. The products are branded and majorly supported and forced by huge marketing, heavy advertising, polished packaging and strong distribution networks. The FMCG segment classified under two segments: the premium segment and popular segment. The premium segment serves generally to the higher/upper middle class which is not much price sensitive but rather they are more brand aware. The price sensitive popular or majority segment consists of consumers belonging largely to the semi-urban or rural areas who are not particularly brand conscious. Products sold in the popular segment have considerably lower prices than their premium ones.


The products which have a rapid turnover and relatively low cost are known as Fast Moving Consumer Goods.

FMCG products are those products that change within a year. FMCG generally include a wide range of products which are frequently purchased by consumer like toiletries, soap, cosmetics, shaving products and detergents, shaving products, tooth cleaning products as well as other nondurables such as bulbs, glassware, batteries, paper products, and plastic goods. FMCG may also include consumer electronics, packaged food products, pharmaceuticals, soft drinks, tissue paper, and chocolate bars.

A division of FMCGs is Fast Moving Consumer Electronics which include innovative electronic products such as mobile phones, digital cameras, MP3 players, GPS Systems and Laptops. These are replaced frequently than other electronic products.

White goods in FMCG are known as household electronic items such as Radio, Refrigerators, T.Vs, Music Systems etc.

The South African FMCG sector is the one of the major in the economy Well-established distribution networks, as well as major competition between the organized and unorganized segments are the characteristics of this sector. FMCG in South Africa has a strong and competitive MNC presence across the entire value chain.

The middle class and the rural segments of the South African population are the most potential market for FMCG and give brand generators an opportunity to convert them to branded products. Most of the product categories have potential for growth is huge.


Clove Industries Limited

Tiger Brands

Tongaat Hulett Group



Godrej Group