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Why Expand to South Africa?

Welcome to the Rainbow Nation, the largest and most developed economy in the African continent. South Africa has immense potential as an investment destination, with a highly developed economic infrastructure and one of the most promising and vibrant emerging market economies across the globe.

South Africa accounts for 40% of the entire African continent industrial output, and 25% of its GDP. At the border of the country you will find the sign open for business. The legal and market environment are highly favorable, the country has a well-developed financial, legal, communications, energy and transport sectors. Moreover, the South African economy has been growing substantially for twenty consecutive years prior the global economic meltdown. Domestic competitiveness, growth and employment have been strengthened by robust investment and domestic expenditure. The trend, slowed by the global crisis, is still heading north, also thanks to an ambitious £56 billion government programme, focused on the transport and power generation sectors.

The costs for companies expanding a business in South Africa can vary from province to province, however, low electricity costs, skilled and competitive labor force and robust infrastructure guarantee a general convenient and wealthy environment for your investments. Licensing or incorporating a business in South Africa are also valuable options.

South Africa's abundant supply of natural resources has helped to generate a strong, well-rooted and promising economy. Historically, the geographic location and the huge amounts of diamonds and gold had attracted attention from colonist nations, including Britain. Colonist were set free to pursue commercial farming, leading to the dominance of agriculture in the local economy. Today agriculture contributes only for the 4% of the gross domestic product. The main products are wine (SA is the fifth largest producer worldwide), maize (with massive exports in the countries of Southern Africa) grapes, apples, cherries, pears, peaches and citrus. Sheep farming (for wool and mutton) and cattle farming are also common in the country. The agricultural industry in the country is completely self-reliant.

The main industrial sectors are mineral resources mining and processing: South Africa is the world's largest exporter of gold and platinum. The manufacturing industry is world leading also in railways rolling stock, synthetic fuels, and mining equipment and machinery. South Africa has a population of almost 50 million people and occupies a strategic location on world sea trade routes. The country ranks as one of the 50 wealthiest in the world with a GDP per capita of US $5,906.

Attractions for UK business

Setting up a business in South Africa is ideal for UK companies because of similar financial and legal systems, a familiar business culture where English is the business language and a time difference that is never more than 2 hours. South Africa has a longstanding history of business with the UK. In fact the UK is one of South Africa's most significant trading partners with over £7 billion in two-way trade in goods and services. The invitation of several business agencies in UK is to follow Vodafone, Virgin, Rolls-Royce, Associated British Foods, Barclays Bank, Cadburys they all have chosen to expand a business in South Africa.

In a recent survey conducted by UK Trade & Investment, the British government's international business development agency, South Africa was ranked fourth in a top 10 list of new wave investment markets. The report, available on the UKTI website, highlights opportunities stemming from the South African government's multi-billion pounds infrastructure development plans.

According to UK Trade & Investment CEO Andrew Cahn: "South Africa is a fast growth economy with infrastructure plans to match, with investment opportunities in both private and public sectors, coupled with a severe skills shortage, now is the time for UK companies to take advantage of the construction boom."
"Its ambitious plans for mass transport, water projects, prisons, hospital and prison upgrades provide plenty of opportunities for UK companies," Cahn said. He added: "By establishing a business in South Africa, UK companies can gain a foothold into sub-Saharan Africa."

South Africa's infrastructure spending plan is set to accelerate the annual growth of the economy by between 4.5% and 6%.

Business opportunities

There are strong opportunities for UK companies thinking about setting up a business in South Africa in a wide range of sectors. They include:

agri-technology - In particular food supply chain technologies, dairy/beef, equine science, training in several sub-sectors

advanced engineering & design

construction - The industry is suffering severe skills and capacity shortages which create opportunities for participation by international construction companies

railways - Various opportunities thanks to a generous governmental investment plan

chemicals

mining

education & skills - In particular educational software, vocational training

ICT - Interactive whiteboards and on-line training and assessment programmes, wireless application services, new network operators

environment - Solid waste management and recycling, hazardous waste, water and waste water treatment, co-generation and renewable energy project, marketing environmental goods and service

power - Alternative sources and nuclear (South Africa government planned to build 24 brand new nuclear site in the next 20 years). Eskom, the state-owned monopoly, has embarked on a comprehensive new build programme in which some £22.9 billion will be spent in the next five years on new generation capacity.

creative industries

healthcare

sports & leisure infrastructure

Challenges

Corruption is the biggest obstacle on South Africas road to economic success. Companies setting up in South Africa must be aware of the legislation set by the Broad Based Black Economic Empowerment.

South Africa is one of the most multicultural countries in the world. In urban areas many different ethnic groups make up the population. In addition to the indigenous black peoples of South Africa colonialism and immigration have brought in white Europeans, Indians, Indo-Malays, Chinese and many more. As such it is difficult to generalise at all on South African etiquettes and culture due to the diversity. For instance there are vast differences between the values of the rural and urban dwellers. Make sure you meet the requirements of business etiquette and protocol and collect information about the area you intend to establish a business in South Africa.

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