transport investors conference 2011 investing into south africa

TRANSPORT INVESTORS CONFERENCE 2011

Investing into South AfricaInvesting into South Africa

South Africa at a glanceSouth Africa at a glance

Indicator 1994 2009

Total Population 38,283,223 49,320,150% of Total Population under 15 years 37% 31%Adult Literacy Rate (1990) 76.2 % 88.8%Internet Users 100,000 4,420,300Mobile Telephone Subscriptions 340,000 46,436,000GDP per capita (constant 2005 prices) R 27,400.12 R 37,261.16FDI (net inflows % of GDP) 0% 2%Gross Fixed Capital Formation (% of GDP) 15% 23%

Source: World Bank Development Indicators 2010

South African EconomySouth African Economy

• South Africa positioned as a manufacturing centre of excellence• Diversified Industrial sectors• Open economy• Sound business case for investment and profit• Gateway to Africa and markets of more than 200 Million consumers • Africa is the next big story after China and India

Subject Descriptor 2005 2010 2015

GDP (constant prices) 5.277 2.784 4.5

GDP per capita (constant prices) 33,506.98 36,730.29 42,280.50

Investment (%GDP) 17.958 21.698 20.855

Import volume of goods and services growth (%) 10.879 4.584 6.3

Export volume of goods and services growth (%) 8.568 5.036 6.452

Population (million people) 46.888 49.912 52.979

Source: IMF: World Economic Outlook, April 2011

Achieving sustained and balanced growthAchieving sustained and balanced growth

Further, ‘consistently prudent macroeconomic policies have succeeded in reducing the fiscal deficit, stabilising debt levels, and lowering inflation and interest rates’ and the country ‘stands out among its peers due to its democratic and transparent institutions and entrenched political stability…’

Economic advantages which create a positive environment Increased

investment in infrastructure

Abundant mineral & natural resources

A tested and reliable legal

system

A relatively large labour force

Established industrial &

financial infrastructure

Standard and Poor’s, August 2010

Rapid recovery from recession: • 4.8% growth in Q1• 14% growth in manufacturing • improving fiscal position • Improved growth prospects in Africa and Asia • low interest rates

Platform on which improved economic performance can be

built

South African Economy…

Complemented by investment in social, municipal and economic infrastructure

Economic growth

2005-2007 2011-2014

5% 4-5%= Employment growth of 140 000 in

past 6 months

Employment elasticity

Increase to 0.8% relative to GDP growth

=Proviso: Gross fixed capital formation growth of 10% p.a. - investment would

thus rise to 25% by 2014.

Reachable economic goalsReachable economic goals

Macroeconomic interventions to accelerate growth and ensure social inclusion

Higher public sector investment Reduce the cost of doing business Expand public works & micro-credit programmes Improve state capacity to provide economic services Strengthen social and municipal infrastructure

Growth in 2011 expected 3,8%

Broad framework of further steps needed to raise the rate of investment, employment and economic growth

Proceeds from premise that positive developments in Africa and BRICS will lead to economic development.

Macro-Economic PolicyMacro-Economic Policy

• Cape Town was named the top tourist destination in the world in the 2011 Traveler’s Choice Destinations awards.

• South Africa is the only African country that is a member of the G20

• South Africa is also a member on the UN Security Council

• OR Tambo airport is the best airport in Africa, according to the World Airport Awards 2010/11. It was also in the top 3 most improved airports in the world for the same period

• South Africa’s Real GDP growth will accelerate from 2.8% in 2010 to 3.7% in 2011 and 4.8% in 2012, helped by stronger external demand and looser fiscal policy.

South Africa- global perspectiveSouth Africa- global perspective

Source: SouthAfrica.info; Economist Intelligence Unit

• Stellenbosch University was the first African university in the world to design and launch a microsatellite

• The Western Deep Level mines are the world’s deepest mines at approaching 4km.

• South Africa houses one of the three largest telescopes in the world at Sutherland in the Karoo.

• SA has 45 million active cell phones (population 49 million) – ranking in the top 5 globally in terms of cell phone coverage.

• South Africa sold $1.8 billion worth of cars to the US in 2010, putting us ahead of Sweden and Italy as suppliers to the US market. Car sales are projected to grow 10% in 2011 to 460,000

South Africa - global perspectiveSouth Africa - global perspective

Source: SouthAfrica.info

• South Africa's total road network is about 754 000 kilometers, of which over 70 000km are paved or surfaced roads.

• South Africa has an extensive rail network – the 10th lengthiest in the world – connecting with networks in the sub-Saharan region.

• More than 50 airlines, making around 230 000 aircraft landing, and carrying about 33m passengers a year, move through South Africa’s 10 principal airports.

• The Port of Ngqura is being developed off the coast of Port Elizabeth in the Eastern Cape and is set to be the deepest container terminal in Africa.

South Africa - global perspectiveSouth Africa - global perspective

Source: South Africa Geared for Growth, 2010

Of 14 emerging markets; Australia, Canada, Russia, Mexico,China, Poland, Spain, India, Korea, Brazil, SA, Colombia

Chile &Argentina

South Africa is:• 2nd most sophisticated financial market• 2nd lowest effective business tax rate• 4th ranked for ease of accessing capital• 4th ranked i.t.o. the cost of capital• 6th ranked for infrastructure• 7th for FDI as a % of GDP (2008)• 8th ranked i.t.o labour productivity

Source: Brazil National Confederation of Industry. Competition Brazil 2010: A Comparison of selected countries

South Africa – emerging market South Africa – emerging market perspectiveperspective

• In 2011, at 5.5%, South African interest rates are at a 30-year low.

• The JSE Securities Exchange one of the world’s top 20 exchanges.

• 1st for the regulation of securities exchange, strength of auditing & reporting standards by Global Competitiveness Report 2010.

• 1st out of 60 countries in the Economist’s House Price index for the period 1997 – 2009.

• The South African Rand was the 2nd best performing currency against the US Dollar between 2007 and 2011, in Bloomberg’s Currency Scorecard.

Economic AchievementsEconomic Achievements

Source: SouthAfrica.info

• The South African stock market rose 16.09% in 2010, ranking 8th out of the G20 nations and ahead of all of the G7 countries

• 34th out of 183 countries in the World Bank Ease of Doing Business 2011

• 2nd in the ease of getting credit

• 2nd for good practice in protecting both borrowers and lenders

• 10th in investor protection

• 54th out of 139 countries in the World Economic Forum’s Global Competitiveness Index.

• 9th in financial market development

• 27th in the protection of intellectual property


• 54th out of 173 countries in the Transparency International Corruption Perception Index 2010

• South Africa is a world leader in coal-based synthesis and gas-to-liquid technologies.

• It is among the lowest-cost producers of ethylene and propylene in the world, thanks to abundant access to low-grade coal and leading-edge process technology.

• Sasol has flown the world’s first passenger aircraft using the company’s own-developed and internationally approved 100% synthetic jet fuel. Sasol took to the skies with the world’s first fully synthetic jet fuel flight on Tuesday, 21st of September 2010.


Africa is becoming more attractive...Africa is becoming more attractive...

Source: Ernst & Young’s 2011 Africa attractiveness survey

Investing in Africa: an improving Investing in Africa: an improving environmentenvironment

The operating environment is improving visibly and rapidly …

• 54 countries, 35 democracies (compared to only 8 in 1991)

• Many countries have improved their business environment:• restored macro-economic stability • greater predictability & increased reliability of policy &

regulatory framework• increased transparency and improved decision-making• privatisation initiatives• reduced corruption• investment protection & promotion• intra and inter-regional initiatives

• High returns on investment

TRIPARTITE FREE TRADE AREA (T-FTA)TRIPARTITE FREE TRADE AREA (T-FTA)SADC,COMESA AND EAC (Economic Benefits)SADC,COMESA AND EAC (Economic Benefits)

• T – FTA will create a sizeable regional market with a GDP of $ 624 billion and a population of approximately 700 million

people

• An African common market without internal borders will unleash the economic growth and potential of Africa

• Developmental Integration leading to cross border infrastructure development to strengthen regional supply capacity

• North – South Corridor – Cape to Cairo to facilitate trade and reduce cost of doing business

Trade Agreements in AfricaTrade Agreements in Africa


Trade Corridors in Trade Corridors in AfricaAfrica


Africa’s Main Transport CorridorsAfrica’s Main Transport Corridors

North/South Corridor

Dares-Salam To

Durban

Trans-African Trans-African HighwaysHighways

Traffic Flows in Southern AfricaTraffic Flows in Southern Africa

BRICS (Economic Benefits)BRICS (Economic Benefits)

• Combined GDP of BRICS countries is over $ 9 trillion

• BRICS will account for 60 % of global growth in 3 years time according to the IMF

• BRICS-Africa trade is expected to show dramatic gains by 2015, increasing threefold from USD150 billion in 2010 to an incredible USD340 billion. BRIC’s share of Africa’s total trade is expected to increase from one-fifth in 2010 to one-third in five years

• BRIC’s foreign direct investment (FDI)in Africa is expected to soar to more than USD150 billion by 2015.

South African Economy: New Growth South African Economy: New Growth PathPath

Vision:

Create jobs

And to 15 %

in the next 10 years

5 millionreduce unemployment

24

Industrial Policy Action Plan IIIndustrial Policy Action Plan IIKey pillar of the New Growth Path

IPAP: value-added sectors with high employment and growth multipliers

Agriculture

Mining

Food Textiles

Wearing apparel

Leather & leather products

Wood & wood products

Motor vehicles, parts & accessories

Other manufacturing

Wholesale & retail trade Transport & storage

Financial services Government services

Paper & paper products

Basic chemicals

Basic iron & steel Basic non-ferrous metals

EGW Business services

Excl. medical, dental & vet

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

0 7 14

Employment multipliers

To

tal

Backw

ard

lin

kag

es

Low employment multipliers & strong backward linkages

Low employment multipliers & weak backward linkages

High employment multipliers & strong backward linkages

High employment multipliers & weak backward linkages

1. Other chemicals & man-made fibers 2. Furniture3. Plastic products4. TV, radio and comm equip5. Electrical machinery and apparatus6. Paper and paper products7. Rubber products8. Non-metallic minerals9. Beverages10. Glass & glass products11. Professional & scientific equip12. Metal products excl. machinery 13. Machinery & equipment14. Footwear

1

2 34

5

6

7

8 9111

1 13

14

Industrial Policy Action Plan IIIndustrial Policy Action Plan II1. Macro-economic policies which support more competitive and

stable real exchange and interest rates

2. Industrial financing channelled to more labour-intensive and value-adding sectors

3. Leveraging procurement to raise domestic production and employment in a range of sectors

4. Developmental trade policies such as tariffs and standards deployed in a selective and strategic manner

5. Competition and regulation policies: competitive input costs for productive investments and affordable goods and services for poor and working-class households

6. Skills, technology and innovation policies better aligned to sectoral priorities

7. Deploying these policies in general and in relation to more ambitious sector strategies, as set out in detailed Cross-cutting and Sector KAPs

INVESTMENT ENVIRONMENTINVESTMENT ENVIRONMENT

&&

OPPORTUNITIESOPPORTUNITIES

South African Trade AgreementsSouth African Trade Agreements• South Africa – European Union (EU) Trade, Development and Co-operation Agreement (TDCA)

• Southern African Development Community (SADC) FTA

• Southern African Customs Union (SACU) – India Preferential Trade Agreement (PTA)

• Southern African Customs Union (SACU) - European Free Trade Association (EFTA) FTA

• Africa Growth and Opportunity Act (AGOA)

• SACU – Southern Common Market (Mercosur) Preferential Trade Agreement

South African Exports 2010 – top 10

R a n k2010

CountryName

Proportion% Total

Growth2009 - 2010

1 China 11.48% 20.28%

2 United States 10.08% 25.26%

3 Japan 9.08% 36.42%

4 Germany 8.34% 31.49%

5 United Kingdom 5.13% 4.20%

6 India 4.36% 24.23%

7 Netherlands 3.35% -7.15%

8 Switzerland 3.28% -21.29%

9 Zimbabwe 2.93% 12.53%

10 Mozambique 2.68% 5.53%

South African Imports 2010 – top 10

R a n k2010

CountryName

Proportion% Total

Growth2009 - 2010

1 China 16.89% 14.22%

2 Germany 5.45% 11.35%

3 United States 0.93% 7.14%

4 Japan 17.01% 5.34%

5 Saudi Arabia -11.01% 4.12%

6 Iran 4.04% 4.00%

7 United Kingdom 2.30% 3.81%

8 India 33.92% 3.58%

9 France 1.58% 2.93%

10 Nigeria 3.10% 2.80%

South Africa’s leading trade partnersSouth Africa’s leading trade partners

Source: Quantec, 2011

Investment in South Africa – top 102003 - 2010

Rank Country Proportion %

1 United States 17.21%

2 Australia 13.60%

3 UK 11.52%

4 Germany 7.26%

5 India 6.03%

6 Japan 5.00%

7 Canada 4.59%

8 Ireland 4.59%

9 Norway 4.06%

10 Switzerland 3.91%

South Africa’s leading investment South Africa’s leading investment partnerspartners

Investment from South Africa – top 102003 - 2010

Rank Country Proportion %

1 Qatar 18.60%

2 China 14.95%

3 Ghana 14.00%

4 Nigeria 8.33%

5 Canada 4.78%

6 Mozambique 4.64%

7 Indonesia 4.15%

8 United States 3.46%

9 Seychelles 2.70%

10 Iran 2.56%

Source: The Financial Times Ltd , 2011 (www.fdiintelligence.com

Rank Sector Proportion %2003 - 2010

1 Coal, Oil and Natural Gas 25.13%

2 Metals 20.75%

3 Automotive OEM 8.15%

4 Alternative/Renewable energy 7.53%

5 Communications 7.32%

6 Hotels & Tourism 5.49%

7 Real Estate 3.00%

8 Chemicals 2.89%

9 Building & Construction Materials 2.78%

10 Transportation 1.89%

South Africa’s FDI CompositionSouth Africa’s FDI Composition

Source: The Financial Times Ltd , 2011 (www.fdiintelligence.com

32

STRATEGIC GEOGRAPHIC POSITION TO STRATEGIC GEOGRAPHIC POSITION TO GLOBAL SHIPPING ROUTESGLOBAL SHIPPING ROUTES

• South – South Trade• Important to the BRICS countries • Important to T-FTA - SADC, COMESA

and EAC• Vulnerability of the Suez Canal

• Political instability• Somali pirates

Strategic Location on Shipping RoutesStrategic Location on Shipping Routes

34

Made by SA industrial

capabilities DubaiBurj Al Arab

Industry &Service Area

CustomsSecured

Area

ServicesEnterprises

One Stop

Center

IDZAn IDZ is located adjacent to a port allowing importation of raw materials, plant machinery & equipment; and the export of finished products;

IDZ’s are considered part of the Customs Territory of South Africa.

Coega

EL

RCB

JIA

Customs Territoryof

South Africa

CustomsControlled

Area

Industrial Development ZoneIndustrial Development Zone

36

New Deepwater Port Of NgquraNew Deepwater Port Of Ngqura

• Inner Basin 16.5 m below CD

• Entrance Channel 18m

• 175,000 DWT Bulk Carriers

• 80,000 DWT Bulk Carriers • 9 000 TEU Cellular Containership

East London IDZEast London IDZ

Multi-Level Car Terminal Containerisation

Dry Dock & Ship Repair Grain Elevator

38

Johannesburg International Airport Johannesburg International Airport IDZIDZ

Richards Bay IdzRichards Bay Idz

40

Aerospace Aviation VillageAerospace Aviation Village

New New

Aerosud Aerosud

Supplier ParkSupplier Park

Factory ExpansionFactory Expansion

Future Aviation Future Aviation Cluster Cluster

Development on Development on State LandState Land

Sector Sub-sector

Agro-processing Fisheries and Aquaculture, Floriculture, Fruit and Vegetable Processing Plants, Juices, Meat Processing, Wine Production, Confectionery, Indigenous teas and Natural Fibres.

Automotives Interiors, Engine Parts/Components, Electronic, Drive Train Components, Body Parts, Aluminum Components and Diesel particulate filters.

Chemicals and Allied Industries

•Titanium Beneficiation Initiative, Fluoro chemicals Expansion Initiative, Polypropylene Conversion.•Restructuring of State Owned Chemical Enterprises.

Business Process Outsourcing & IT Enabled Services

Call Centres, Back Office Processing and Shared Corporate Services.Enterprise solutions viz. fleet management, knowledge management, asset management solutions.

Electro Technical

Manufacturing of: automotive electronics, microchips and telecommunication equipment.

Tourism Hotels and self-catering holiday resorts, Adventure-, Eco-, Sport- Conference- and cultural tourism, gaming, infrastructure development, leisure complexes and world class golf courses, harbour & waterfront developments, transfrontier conservation areas, cruise liners & transportation.

Investment OpportunitiesInvestment Opportunities

Source: DTI/TISA Source: DTI/TISA

Sector Sub-sector

Clothing, Textiles, Leather and Footwear

•Manufacturing of Industrial Textiles using Polyester•Production of other natural fibre textiles such as flax•Wool and mohair production – downstream opportunities for yarns, knitwear and fabric.•Footwear – manufacturing of leather uppers.

Mining and metal based industries

Aluminum smelter capacity, Capital equipment: machine tool manufacturing and petrochemical equipment, downstream processing and value-adding of iron, carbon steel, aluminum, platinum group metals and gold, ferro-alloys, gold and stainless steel.

Aerospace, Rail and Marine

Aerospace: Rotor and fixed wing aviation equipment and services, Helicopters and aircraft components, Aviation training services for African airlines, IDZ at Johannesburg International Airport, warehousing for aircraft parts.

Rail: Rolling stock and services for the domestic market, estimated R7 billion Gautrain which includes infrastructure development and rolling stock, Rail infrastructure of the African continent through NEPAD and Rehabilitation of low density rail line.

Marine: Development of boat yards and wet docks/floating docks, Joint ventures with local shipyards, manufacture of boats, yachts, catamarans and fleet racing boats, custom-made vessels (tugs) and training schools.


Source: DTI/TISA Source: DTI/TISA


Sector Sub-sector

Capital Equipment Re-capitalisation of:•Forgings & Castings•Boilers•Tool dies & mouldsExpansion & export development•Pumps, valves, material handling & straddle crane carriers•Mechanised miningNew investments in:•Turbine assembly•Production of turbine components•Machine tool manufacturing

Film •Film studios and post production facilities.•Co-production ventures.•Distribution infrastructure

IncentivesIncentivesIncentive Benefit Main Conditions

The EnterpriseInvestment Program(EIP)

The EIP (manufacturing) is a cash grant for locally based manufacturers who wish to establish a new production facility, expand an existing facility or upgrade an existing facility in the clothing and textiles sectors

the EIP will be used to stimulate investment within manufacturing and tourism, it will also be used to deliver on some of the IPAP's key performance areas, as well as priority sectors.

Foreign Investment Grant

To compensate qualifying foreigninvestors for the cost of movingqualifying new machinery andequipment from abroad to SA.

Foreign investors only

Industrial Development Zone

Exemption from VAT when sourcing goods and services from South African customs territory and duty-free imports of raw materials and inputs for export

Prospective IDZ operator

companies must apply for

permits to develop and operate

an IDZ

IncentivesIncentives

Incentive Benefit Main Conditions

Section 12i Tax

Allowance

Tax deductions of up to R

900m depending on status viz.

preferred or qualifying

projects.

Training allowance/ deduction

of up to R30m or R36 000 per

employee.

Valid until December 2015

Capital investment > R 200m

Critical Infrastructure Fund

Infrastructure projects

intended to service IDZ, shall

qualify for a grant of 30% of

the qualifying infrastructure

development cost

The minimum qualifying

infrastructure development cost

is R15m

South Africa’s investment environmentSouth Africa’s investment environment

South Africa today is one of the most sophisticated and promising South Africa today is one of the most sophisticated and promising emerging markets globally, mainly because of …emerging markets globally, mainly because of …

Political & economic stability with sound

macro-economic management

Competitive sectors/industries

Favourable cost of doing business

Skillsavailability

World class financial system

Excellenttransport &logistical

infrastructure

Abundantnatural

resources

transport investors conference 2011 investing into south africa

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