The Economic Environment of South Africa

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INVESTING IN SOUTH AFRICA

The economic environment, Prof. André Roux | Danny Jansen, EMBA10

Table of content
Perception or reality? .............................................................................................................................. 2 the Broad-Based Black Economic Empowerment Act............................................................................. 4 Other legal boundaries ............................................................................................................................ 5 Uncertainties of the future...................................................................................................................... 6 Strains on resources ................................................................................................................................ 7 Come one come all? ................................................................................................................................ 8 Finance for International Business .......................................................................................................... 8 Should my company invest in South Africa? ........................................................................................... 9 Should other companies invest in South Africa? .................................................................................. 10 References ............................................................................................................................................. 11 Other references read ........................................................................................................................... 11

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Perception or reality?
When any person would be asked on his opinion of Africa in general or South Africa specifically, this opinion would by large be formed by what the media have been showing; corruption, riots, bad infrastructure with dirt roads and the believe that most people still live in clay huts or self-built constructions made out of cardboard, plywood and corrugated sheets. Although my own opinion was formed by these images as well, seeing South Africa in person changed a lot of my perceptions of the country. Definitely on what the country looks like in real life, the mentality of the people and on the potential it has. When having to attract foreign investors into the country this misperception of the country is one of the strongest forces South Africans need to battle against. The stereo typing of items like corruption though are real and need to be battled internally. Besides that there is also the fact that South Africa is seen as being part of Africa. Geographically that is absolutely correct, however, there are large differences within the continent when it comes to division of resources, (industrial) developments and heritage. The globalization of the world and the development of technology should enable South Africa to influence the perception of others. Africa as a whole is already improving, but South Africa should be able to distinguish itself between the rest of its fellow African countries. A survey performed by Ernst & Young in 2012 already shows an improvement of the situation.

Figure 1 Source: Ernst & Young’s 2012 Africa attractiveness survey. Total respondents: 505

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Figure 2 Source: Ernst & Young’s 2012 Africa attractiveness survey. Total respondents: 505

When looking at the real number of investments one can tell that the situation as such is improving.

Figure 3 Foreign Direct Investments in African countries since 2003, Source: fDi Intelligence, data as of 3 February 2012; Ernst & Young

These figures show that there is a lot of trust in South Africa by foreign investors. However, when drilling down further, one could argue this as well. Table 1 Source: fDi Intelligence, data as of 3 February 2012; Ernst & Young

Sector Services Manufacturing Extraction Infrastructure related Other...
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