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SWOT SOUTH AFRICA

STRENGHTS

* South Africa is today one of the 30 most industrialized countries in the world and the
Africa’s largest economy
* South Africa's economy has been growing at almost 5 % a year for the past several
years - 32 consecutive quarters of positive growth. Following the global economic
recession, this figure was expected to drop in 2008/09, but will accelerate moderately in
2010 and beyond. (South African Government website)

* The South African stock exchange is the 17th biggest exchange in the world.
* Its financial system and capital markets are among the most advanced in the world.
* South Africa’s infrastructures are known as really effective and enable the
distribution of commodities to the urban centers of the country.
I.e. Tambo International Airport, major ports make a central and crucial position
* Strong governmental policy framework
* Sound and efficient financial services and ICT sector

* A good tertiary and technical educational system

* Well established international trading regime: AGOA, EU Free Trade Agreement,


WTO membership, SADC membership, Motor Industry Development
Programme(MIDP).

Weaknesses
* deficiencies in government’s capacity
* the volatility of the currency
* low levels of investment infrastructure and infrastructure services
* shortages of suitably skilled graduates, technicians and artisans
* insufficient competitive industrial and service sectors and weak sector strategies
* inequality and marginalisation, resulting in many economically marginalised people
being unable to contribute to and/or share in the benefits of growth and development (the
Second Economy).
* Some of the infrastructure, such as the electricity system, don’t meet the demand and
slow growth phase. Electricity infrastructures have failed to adequately maintain existing
power stations (2007) (343 billion have been invested to create new generation of
stations)
* bidirectional links between economic and social problems, as evidenced by the recent
violence against immigrants, accused to be the reasons for the increasing unemployment
and lower wages.
* Low skill levels
* High cost of labour
* Lack of entrepreneurial spirit

* Low productivity

* Unstable currency

* Government’s lack of expertise and experience in governing and international


relations, trade negotiations in particular, ethnic divisions.

OPPORTUNITIES

* South Africa is regarded as one of the easiest places to do business in Africa as well as
having one of the lowest costs of dealing with construction permits. In recent years,
South Africa has attracted an increasing number of FDI projects, with figures rising from
60 FDI projects in 2003 to 114 projects in 2008. ( FDI magazine)

* The fact that South Africa has been chosen to host the 2010 World Cup FIFA is one
sign among others that this country is now considered a stable prestige. New airports and
roads built for the occasion will attract more foreign investment to provincial cities

* Aggressive skills development programmes

* Highly sophisticated and sound banking and financial services sector

* NEPAD’s African development programme.

* Various initiatives to increase access of young people to high-quality education and


skills acquisition are in place, such as teacher training for Mathematics, Science,
information and communications technology (ICT) and language competence.

* 20th largest consumer of IT products and services in the world

* Technological industry revenues in South Africa are growing at the level well above
the average GDP growth rate.

* Intends to provide duty-free treatment by 2012

THREATS

* The authorities need to calibrate their policy response in order to maintain price and
external stability, mitigate systemic risks, and make progress on structural reforms to
remove long-standing barriers to growth and employment.

* Budget deficit for fiscal year 2009/2010 is projected to be 5.7 percent of GDP, but
with revenue growth turning out to be much weaker than expected, and with interest costs
rising, public sector debt levels and the cost of debt service are likely to rise sharply in
the near term.
* South Africa is a mixture of first and third world economy. The apartheid legacy has
left severe grievances among the population as 50% below poverty line and
unemployment is relatively high (24.3%).
* According to the HIV effects studies in South Africa (2009), the high level of
HIV/AIDS has the following effects on the economy : - decline in total labour effect,
decline in total labour productivity, increased government expenditure, decreased
aggregate demand, savings and Investment
* IMF states that the unemployment , large wealth disparities and poverty are the major
threats and challenges for South African Economy
* Stock theft
* High unemployment and crime
* Poorly negotiated Free trade Agreements

* Depopulation of the rural areas

• Cost of labour and inflexible labour legislation.

OTHER MATTERS

Price inflation

The steps taken by the Reserve Bank to bring down inflation are working. Inflation was
9.8 in 2008 and to average 4,9% in 2009. Inflation should return to the target range in
2010 (forecast: 6.1) aided by a substantial output gap and the feed through of past rand
appreciation.

Some factors were still of concern, necessitating continued vigilance in the application of
anti-inflationary policy. These included:
* high and volatile international crude oil prices
* high grain prices due to adverse weather conditions, low inventories of agricultural
goods and higher food prices
* uncertainty concerning exchange-rate developments
* salary and wage settlements being significantly in excess of the inflation target range
* possible second-round effects of the abovementioned factors
* fairly high rates of money supply and private credit-extension growth alongside
continued buoyancy in domestic demand conditions
* Increases in certain administered prices in excess of the inflation target range.
GDP

According to the OECD, Real GDP growth was negative in 2009 : -2.2 , but should turn
positive in 2010 :2.7 boosted by the World Cup
http://www.oecd.org/publicationanddocuments/0,3395,en_33873108_39418625_1_1_1_
1_1,00.htmll
| 2009 | 2010 |
Real GDP | -2.2 | 2.7 |
Consumer Prices | 7.2 | 6.2 |
* Source: OECD

Interest Rates = approximately 7%


The most recent consumer price index inflation forecast by the Reserve Bank showed that
CPI inflation was still expected to continue its moderate downward trend and to enter the
Bank's target range of three to 6% during the second quarter of 2010.
It was expected to remain within the target range for the rest of the forecast period ending
2011

INFLATION
Turning to the outlook for inflation, he said the Bank's most recent forecast remained
"more or less unchanged" compared with the previous forecast.
"However, CPI inflation is still expected to continue its moderate downward trend and to
enter the target range during the second quarter of 2010, and to remain within the target
range for the rest of the forecast period ending 2011,"
South Africa | 7.0% | 7.5% | 9 |
|
Diagram http://www.fxstreet.com/fundamental/interest-rates-table/

Exchange Rates

The rand is the currency of the Common Monetary Area between South Africa,
Swaziland and Lesotho
The rand has the symbol "R", It replaced the South African pound as legal tender, at the
rate of 2 rand = 1 pound. The rand was introduced on 14 February 1961 the same year
that the Republic of South Africa was established.
Today, 1 British pound = 12.0477391 South African rands!!
Less to invest than years ago

South Africa had a well-developed financial system that made it easy for people to enter
the financial markets, and unfortunately also easy to move out -- as was happening.
One of the major issue is the dubious distinction of having one of the world's most
volatile currencies. This should be of serious concern to the country's policymakers.

The country had depended on foreign investors to service the current-account deficit
since 1994, attracting only a handful of long-term capital inflows and 90% of a short-
term nature.

The risk had been that, if these investors caught fright because of the situation in
Zimbabwe, for example, the money being attracted from offshore could flow out
overnight -- as was being seen now.
Rand weakness would might hit the country's public service infrastructure projects --
such as those of Eskom and Transnet -- with roughly 40% of their budgets to be spent on
imports.

South African markets would remain volatile while the international markets were
volatile, but in South Africa's case the ups and downs can be even more pronounced.

Exports Imports
The current account deficit narrows (13.9 in 2009) this year but should widen thereafter
as imports outpace exports. The downturn and the attendant large deficits have also made
it more urgent to increase the efficiency of public expenditure.