South Africa's economic leadership and institutional infrastructure in Africa

South Africa is the economic leader in the continent in terms of industrial output and mineral production (Brand South Africa 2012). It produces a large part of the electricity in Africa. Its natural resources are robust. Its financial, legal, communication, energy and transport sectors are well in place and delivering. Its stock exchange ranks within the top 20 in the world. It boasts of a modern infrastructure, which efficiently sustains the distribution of goods throughout the region. Its legal framework is world-class and progressive. Its financial system is equally efficient and sophisticated. Its banking sector ranks among the top 10 in the world with regulations likewise rated as world-class. These features demonstrate that South Africa is more than an important and emerging economy but also the gateway to other African markets (Brand South Africa).

History

With the subjugation of the Cape of Good Hope region in 1806, many Dutch settlers, called the Boers, proceeded to the North and set up their own republics (CIA 2003). The discovery of diamonds in 1867 and gold in 1886 brought in wealth and attracted immigrants, who overruled the native inhabitants. The Boers fought the British but lost to them in the Boer War from 1899 to 1902. The Union of South Africa was established and run under an apartheid policy. Apartheid politically ended in the 1990s, followed by black majority rule (CIA).

III. Geography

South Africa lies at the southern edge of the African continent (CIA 2003) and bordered by Namibia, Botswana, Zimbabwe and Mozabinque (Maxwell 2012). It has a total land area of 1,219,912 sq km. It completely surrounds Lesotho and almost completely, Swaziland. It has a semi-arid climate. Prolonged droughts are its natural hazards (CIA).

V. Demographics

South Africa's current population is 50,586,757 (Niekerk 2012). Majority of the population is between 15 and 3 years old at 18,714,750. Population growth by 2003 estimates was 0.01%, birth rate was 18.87 per thousand persons; death rate was 18.42 per thousand. Infant mortality was 60.84 per thousand; life expectancy at birth was 46.56 years, Ethnics were 75.25% black; 13.6% white; 8.6% color; and 2.6% Indian. The people were 68% Christian. They spoke 11 official languages. Those aged 15 and older could read and write at 86.4% of the population. Of this, 87% were male and 85.7% were female (Niekerk).

VI. Sectors

A. Economic

1. Overview - South Africa is considered a middle-income, emerging market

(CIA 2003). It boasts of abundant natural resources, well-developed financial, legal, communications, energy, and transport sectors. Its stock exchange is among the 10 largest in the world. Its sophisticated infrastructure insures the efficient distribution of goods to major urban points in its region. But its high unemployment rate and other economic problems keep its economic growth a bay. These other problems, which date back from apartheid times, are poverty, lack of economic empowerment among the disadvantaged, high crime and HIV-AIDS infection rates. Solutions may lie in targeting inflation and liberalizing trade to increase employment and household incomes (CIA).

2. Development -- the New Growth Path, or NGP, and the Industrial Policy

Action Plan II (IPAP II) are the major initiatives in recent years (Brand South Africa 2012). NGP situates employment at the center of economic policy meant to raise efficiency levels for the 21st century. Through a collaborative approach, it intends to encourage trade, innovation and economic growth to 7% yearly to maintain the country's economic status. By August 2011, the initiative created almost 60,000 jobs through the Department of Trade and Industry programs for 2010-2011. The IPAP II and similar infrastructure programs addressed the repair of old water and sanitation infrastructure, the imbalance of freight to increase rail capacity, and the control of the degradation of non-toll road network in support of the NGP thrust (Brand South Africa).

3. Privatization -- Assuming power in 1994, the African National Congress needed to deal with big debts and poorly operating public utilities by privatizing (the Economist 1999). It privatized roughly 11 billion-rand worth of assets but 150 billion rand-worth more to dispose of. The sale of State companies could not proceed smoothly because of several obstacles. Many of these companies were in shambles: they were over-staffed and buried in debt. Investors would want the government to handle these troubles in addition to other troubles. High unemployment, powerful trade unions and conflicting aims. Most union leaders reject privatization. And the government confronts dilemmas. It wants to privatize but it also wants to extend better service to the poor, especially black poor who can use it as means of black empowerment. These dilemmas stalled the privatization inertia. If ordinary South Africans supported the program, would-be entrepreneurs would have the collateral to start their small businesses and benefit the poor blacks. But that would leave out well-connected black elite who benefits from black empowerment (the Economist).

4. Trade and trade finance and Investment -- the country is well-located as a trans-shipment point between emerging markets in Central and South America and the bustling newly industrialized South and Far East Asian countries (Maxwell 2012). Investment opportunities are myriad domestically and globally as the world leader in specialized manufacturing, valuable exports, and mineral processing. The country is also rapidly trailing in other investment areas, like tourism, agriculture and livestock development, construction and service. These hold much promise of attracting foreign investment in the coming years (Maxwell).

B. Financial

1. Overview - South Africa's economy has undergone unprecedented change since

1994 (Brand South Africa 2012). Macroeconomic reforms built a strong structure, cut taxes, reduced tariffs, reined fiscal deficit, controlled inflation and relaxed exchange controls. Budget deficit zoomed down from 5.1% of GDP in 1993-1994 to 0.5% in 2005-2006. Its first budget surplus of 0.3% was posted in 2006-2007. Consumer inflation went below 5% from 2004-2006 until global prices raised it to 6.5% in 2007 (Brand South Africa).

2. taxes and tariffs -- South Africa follows a residence-based tax system, which subjects residents to certain exclusions (Brand South Africa 2012; Niekerk, 2012). They were taxed on their worldwide income regardless of the source. Non-residents were taxed on income from South Africa. Most of the State's income comes from income taxes. Almost a third of the government's total revenue emanate from indirect taxes, mainly from value-added taxes (Brand South Africa, Niekerk).

3. privatization -- this process was viewed to create a robust flow of business opportunities in the next many years at a range of 100-150 billion South African Rands (PGI 2012). This is equivalent to U.S.$12-20 billion. There will be estimated and sustained business acquisition opportunities in agribusiness, agriculture and fisheries; hotels, restaurants, resorts and tourism; mining and mineral extraction; forestry, logging and wood products; electricity generation and power reticulation; manufacturing; road and rail transportation; telecommunications and information technology; financial services; and water, waste water and water management. Transactions are likely to be in the form of complete or partial sales, concessions or public-private partnerships (PGI).

4. trade and trade finance and investment -- the Department of Trade and Industry

formulated the trade policy, which the Cabinet adopted in July 2010 (Brand South Africa 2012, Niekerk 2012). The policy framework promotes the development of higher value-added labor-absorbing production. As a complement, the Department formulated strategies for export development and promotion and investment promotion and facilitation. On top of these, it set up a single integrated facilitation center and formed a network of foreign economic offices abroad to assist in the transactions in behalf of South African companies. The Department furthermore provides information, financial support and practical assistance to exporters to sustain growth in traditional markets as well as connect with new high-growth ones like in China, India and Russia (Brand South Africa, Niekerk).

6. exchange control -- the South African Reserve Bank is the regulating arm of the Ministry of Finance (Brand South Africa 2012, Maxwell 2012). The Minister has also authorized certain foreign exchange dealers but with limited authority, allowing them to buy and sell foreign exchange as regulated by the Financial Surveillance Department of the Bank. Exchange-control policies have been largely reformed since 1994, aimed at the gradual liberalization and relaxation of exchange controls. The intention is to replace these with a strategy inhering to the macro-prudential approach. Liberalization aims at increasing individual foreign capital allowance and institutional investors' foreign exposure. This will allow South African companies to increase their capital and expand operations offshore (Brand South Africa, Maxwell). #