South Africa is situated at the southern tip of Africa forming part of the Southern Africa region and is bordered by Namibia, Botswana, Zimbabwe, Mozambique and Swaziland. Lesotho is situated within South Africa’s borders.
There are nine provinces – Gauteng, Western Cape, Kwazulu Natal, Eastern Cape, Northern Cape, Limpopo, Mpumalanga, Free State and the North West. Pretoria is the executive capital and Cape Town the legislative capital. Other major cities include Johannesburg, Durban, Port Elizabeth, Bloemfontein and East London.
The country’s climate varies from region to region. The Western Cape experiences a Mediterranean climate and the interior has a semi-desert climate with cold, dry winters and summer rainfall. Kwazulu Natal has a subtropical climate with humid conditions. Snow is uncommon and is limited to the highest lying regions of the country.
South Africa was first inhabited by the Khoisan, followed by Bantu tribes migrating from the North. These were first exposed to Europeans when Portuguese explorer Bartholomeu Dias rounded the Cape in 1488 and Vasco de Gama landed at the Cape en route to India in 1497. The first European colony was established in 1652 by Jan van Riebeek on behalf of the Dutch East India Company as a food station for ships on the trade routes.
The colony expanded as more settlers arrived and it became an important strategic point on the trade route with the Netherlands, France and Britain competing for its control. The British seized power in 1795 which they lost to the Dutch between 1803 and 1806.
The British colonial war was characterised by protracted scuffles with indigenous groups and, later, with the Afrikaners during two Anglo Boer Wars. The scorched earth policy adopted by the British in the Second Anglo Boer War left a large number of displaced people, a depressed economy and a legacy of bitterness.
In 1910 South Africa became a self-governing union as a member of the Commonwealth. Between 1910 and 1948 laws based on race were passed and protests (largely ineffective) followed. Britain continued to be influential in the union until 1948 when the National Party won the election.
The National Party implemented apartheid forced the separation of races with whites having preferential access. This was done through legislation such as the Prohibition of Mixed Marriage Act, the Population Registration Act (that introduced race classification) and the Group Areas Act. Black organisations united against apartheid and staged mass protests.
In 1961 South Africa became a republic and withdrew from the Commonwealth. The United Nations refused to recognise the republic and South Africa effectively began a 30 year period of international isolation. The country was excluded from international organisations and sporting events and also had economic and trade sanctions imposed that served to slow down the economy to such an extent that it could no longer survive in the isolation.
During these years of isolation, the government continued to intensify the implementation of apartheid and the opposition movements increased their protests. Many analysts are of the opinion that the events of June 16 1976, when Soweto’s youth protested against legislation making Afrikaans the language in which subjects were to be taught, were the turning point in the struggle against apartheid.
Political reforms started in 1986 with the repeal of certain apartheid legislation. Nelson Mandela was released in 1990 after 27 years in prison and the ANC began a process of negotiation with the National Party government. The negotiation process culminated in the drafting of a constitution and the country’s first democratic elections in 1994. In the same year the country was accepted back into international organisations.
The second national and parliamentary elections were held on June 2, 1999. In the national elections, the ANC narrowly missed a two-thirds majority. The ANC won the majority of seats in the parliamentary elections securing 233 seats, the DP won 38, the IFP 34, the NNP 28, the UDM 14, the ADP 6 and the final 14 were won by a smaller parties.
Active political parties in South Africa include:
African National Congress (ANC)
African Christian Democratic Party (ACDP)
Democratic Alliance (DA)
United Democratic Movement (UDM)
Inkatha Freedom Party (IFP)
Pan-African Congress (PAC)
Freedom Front (FF)
In October 2002, the Constitutional Court ruled on the provisions of floor-crossing legislation with regard to political parties and ruled that representatives of a political party were not allowed to defect to another political party on the national and provincial level, but this is allowed on the municipal level. The result has been shifts of power in mainly from the DA to the NNP and the ANC who have formed a coalition.
South Africa has the most advanced economy on the African continent. Since 1994, particularly, the country’s economy has grown rapidly. Its geographical position provides an ideal gateway to Sub-Saharan Africa.
The most important contributors to the economy include the mining sector, manufacturing and agriculture. Most economic activity takes place in Gauteng where most mining occurs. The country’s financial and industrial infrastructure is well-developed with excellent growth potential.
The country is plagued with the problem of large socio-economic inequalities that resulted from the apartheid regime and continues to manifest itself in the form of high unemployment rates, wide areas of poverty and increases in crime. An informal sector has developed as a result of unemployment and this poses another challenge to the country’s economic development.
In 2005 Moodys raised South Africa’s sovereign rating one notch higher to Baa1. Moody’s cited the marked improvement in SA’s foreign exchange reserves and faster economic growth as justifying a higher grade.
Mining is South Africa’s largest industry sector followed by manufacturing, oil and gas, chemicals, agriculture and tourism. The clothing and textiles, financial services and banking sectors have shown significant growth in recent years.
South Africa is globally recognised as being a leading supplier of a variety of minerals and mineral products that are exported to as many as 87 countries. Each year, approximately 55 different minerals are produced from more than 700 mining facilities, with gold, platinum group elements (PGE’s), coal and diamonds dominating exports and revenue earnings.
The structure of the mining industry is set to change dramatically, following the introduction of South Africa’s new Mining Charter that cedes all mineral rights to the State as well as introducing an empowerment component for all future mining developments in the country.
Agriculture contributes 4% to the country’s GDP and consists largely of cattle and sheep farming with only 13% of land used for growing crops. Maize is most widely grown followed by wheat, oats, sugar cane and sunflowers. The government is working to develop small-scale farming in efforts to boost job creation. Citrus and decidious fruits are exported, as are locally produced wines and flowers.
The clothing and textiles industry has showed significant growth as a result of the Africa Growth and Opportunity Act. The industry earned R791 million in 2001 from exports to the US alone, an increase of 51% from the year before.
The conference and exhibition industry earned South Africa R17.4 billion in 2001 and created 246 000 new jobs. South Africa has a 2.5% share of the global market for this industry. Johannesburg is the most popular event venue with over 37% of all events held there and Cape Town is becoming more popular with the construction of the Cape Town International Convention Centre to be completed in 2002.
Since 1994 the government of South Africa has taken steps to make the country more open to foreign investment. In 1997 the Department of Trade and Industry launched a national investment agency called Investment South Africa tasked with the promotion of investment at a national and provincial level. The agency also provides investment requirements and opportunities available in every province. There is no restriction on the extent or type of foreign investment in South Africa.
The government has tried to encourage both foreign and domestic investment by the introduction of <incentives>. These cover all industries and encourage investment in the form of finance, technology, knowledge and skills.
Communications and Infrastructure
South Africa’s communication system is well-developed with 5.5 million installed telephones and 4.3 million installed exchange lines. The network is almost entirely digital with digital microwave and fibre optics serving as the main transmission media. Internet access is widely available. State-controlled Telkom is responsible for the installation and maintenance of these facilities.
A second fixed line operator was expected to be licensed in 2002, but this is expected to happen in 2005. This is one of the reform measures being undertaken by the government in order to promote empowerment in the industry. The Independent Communications Authority of South Africa (ICASA) is the regulator of the communications industry while the Department of Communication is the responsible government body. The communications industry is undergoing reform through measures
South Africa is the world’s fourth fastest growing GSM market with a growth rate of 50% per annum. There are three operators in the country namely; MTN, Cell C and Vodacom.
The country’s transport infrastructure is highly-developed with extensive road and rail networks. The Department of Transport is responsible for the upkeep of roads. The national road system links all major cities.
Spoornet controls the rail system though Metrorail provides public transport services. The rail system links major centres and is used extensively by heavy industry for freight transport.
Electricity and water services are available in all urban areas and most rural areas although there are shortfalls in some rural areas.
The Department of Health is the government body responsible for the country’s health facilities which include well-equipped hospitals and primary healthcare clinics. The government has placed much emphasis on the primary healthcare sector specifically in rural and poorer areas. Treatment for TB available free of charge at all clinics. Malaria is endemic in the low-altitude areas of the Northern Province, Mpumalanga and north-eastern KwaZulu-Natal and the highest-risk area is a strip of about 100 km along the Zimbabwe, Mozambique and Swaziland border.
Costs for admission to private and provincial hospitals vary and private hospitals usually require proof of membership to a medical scheme/aid.
The Department of Health has initiated the Extended Expanded Programme on Immunisation that aims to make immunisation facilities available to all children and women of child-bearing age. Immunisations against TB, whooping cough, tetanus, diphtheria, poliomyelitis, hepatitis B and measles are available free of charge to all children up to the age of five years.
Visitors to South Africa are required to have a visa upon arrival and valid international health certificates. Enquiries can be directed to South African diplomatic missions or to the Department of Home Affairs in Pretoria.
Tourists must satisfy immigration officials that they have the means to support themselves during their stay and are in possession of return or onwards tickets. Visitors intending to travel to South Africa’s neighbours are advised to apply for multiple-entry visas. Foreign tourists visiting South Africa can have their value-added tax (VAT) refunded, provided the value of the items purchased exceeds R20. VAT is refunded on departure at the point of exit.
Visas specifically for business purposes are available though nationals from Canada, the EU and the United States are not required to have them. An application for a business visa must include the application form, a valid passport and a letter on the parent company’s letterhead that undertakes financial responsibility for the applicant during their stay in South Africa. It is also necessary to provide flight details and addresses of businesses to be visited.
The Department of Trade and Industry offers a variety of services to those interested in establishing or conducting business in South Africa. These services include details of how to conduct business in the country as well as the requirements for the establishment of a business and the different forms that a business can take.
MBendi client Werksmans Attorneys provides valuable information in this regard.
South Africa has been reviewed and rated by the world’s most accredited risk ratings agencies including Fitch and Standard and Poors.
Standard and Poors (S&P) have South Africa a risk rating A-/Stable/A-2 BBB/Stable/A-3. This is based on the fact that the government has implemented sensible fiscal policies and has managed to bring spending under control. The country has also decreased deficits and the external debt burden. S&P praised the South African Reserve Bank for its independent nature and commitment to lowering inflation. The privatisation programme is encouraging foreign direct investment with the future looking bright in this regard.
Fitch revised the country’s rating from stable to positive as a result of a sound macroeconomic record that the company says has contributed well to public finances. The fact that government debt is generally denominated in local currency means that it is not vulnerable to volatile exchange rates. Fitch also referred to the significant decrease in external debt.
The S&P and Fitch ratings for South Africa were constrained by the huge socio-economic inequalities that exist, the structural economic weaknesses and low levels of external liquidity. The threat of HIV/AIDS and the high levels of unemployment are problems that serve to deter foreign investment. South Africa has only had modest growth rates in recent years and this is put down to the populations low saving levels. The relaxation of exchange controls makes the country increasingly vulnerable to erratic capital inflows.