south africa international finance country report leann bustamante miriam mcdonough lindsay surig

South AfricaInternational FinanceCountry Report

Leann Bustamante

Miriam McDonough

Lindsay Surig

Brief Description of South Africa Republic of South Africa Size: Less than 2x Texas Capital: Cape Town Population: 43, 647, 658: Growth

rate- .02% Ethnic Groups: black (75,2%), white

(13.6%), colored (8.6%), Indian (2.6%).

Brief Description of South Africa The Boers: Dutch Settlers The Boer War: (1899- 1902) 1990s- End of Apartheid

General Economic Importance Middle income, developing country Well-diversified economy

Natural Resources Financial, Legal, Communication, Energy and

Transport, Mining sectors Stock Exchange: ranked among 10 largest in the

world

General Economic Importance Economic Problems

Unemployment rate Problems with respect to Apartheid Era Crime and Corruption HIV/AIDS

General Economic Importance Imports/Exports

Recent Economic History External Accounts

1998- 1.6% 1999- virtual balance

• 1998- Measures to reduce unemployment• 2000- Free Trade Agreement with EU• 2001- South African Development Community (SADC) trade

protocol• 2000- President MBEKI vow to promote economic growth

and foreign investment• 2001- Government slow down (result of international

economy)

2001 GDP Figures GDP - $412 billion GDP growth rate – 2.6% GDP composition by sector

agriculture –3% industry- 31% services-66%

Inflation Rate- 5.8%

Political Stability and Structure Apartheid Democracy Reformed structure 2002 Organization for African Unity African Union AU focus

Changed from fight against poverty and human rights To promote democracy, good governance, and economic

growth

Assistance AU and President Thabo Mbeki continue to

seek assistance to implement their ideas “Future assistance will be focused on countries

that demonstrate a political and financial commitment to good governance and the rule of law, investing in their people, and pursuing policies that spur economic growth and alleviate poverty implementation. We will not work with governments which disregard the dignity and interests of their people.”

Stability Increasing levels of stability The political structure seems strong enough

to hold the diverse region together. There are huge expectations for the new

South Africa.

Major Exports 32.3 billion dollars in exports Export commodities: gold, diamonds,

platinum, metals, minerals, machinery, and equiptment

Export partners: EU with 33%, United States with 20%, Japan with 6%, and Mozambique with 2.5%

Major Imports 28.1 billion dollars in imports Larger exporters than importers

Expected of a growth country

Imports include machinery, rice, equipment, chemicals, petroleum products, and scientific instruments

Major importing partners:EU with 41%, United States with 11.4%, Saudi Arabia with 7.3%, and Japan with 7%

Currency Rand Over 10 years had devalued by 2/3 2001 fell 25% against the dollar, yen, and

the pound Favorite object for speculators

Underrated by 15% - 20%

Exchange rates Rand per US dollar from 1997-Jan2002

11.58786 (January 2002), 8.60918 (2001), 6.93983 (2000), 6.10948, (1999), 5.52828 (1998), 4.60796 (1997).

Trade Relationship withthe United States

South African shipments are entitled to specialized treatments under: Generalized System of Preferences African Growth and Opportunity Act

United States shipment are entitled to Most Favored Nation Status

Trade Relationship withthe United States 1994: U.S.-South Africa Binational

Commission

2002: U.S.-South African Cooperative Forum

Between 1996 and 1999, foreign investment has increased significantly

Other Major Trading Partners South African Customs Union

Botswana, Lesotho, Namibia, and Swaziland

Free Trade Agreement European Union

South African Development Community Free Trade Agreement Fourteen countries in the region

South African Trade by Country(Rand ‘000)

Investment Potential Positives:

Offers a market with a steadily growing economy Provides easy access to the other markets in

Africa Labor costs that are low Well developed financial institutions and capital

market Strong macroeconomic policies

Investment Potential Negatives

Unemployment and crime rates are high

Education and health care systems are extremely poor

Investment Potential South African Government has conducted a

number of investment promotion efforts

Attractive investment destination for capital goods, technology, foreign investment, and joint ventures

South Africa

Questions or Comments?