South Africa: the value proposition

South Africa: the value proposition
Why invest in South Africa? Why make South Africa part of your portfolio or supply chain? What, in a competitive global economy, sets South Africa apart? You can sum up the South African value proposition in five words: possibility, innovation, sustainability, diversity and a magic ingredient we call ubuntu. Possibility Africa is now commonly referred to as the last great investment frontier. South Africa, with its advanced infrastructure, sealane-straddling location, strong instititutions and sophisticated financial markets, is an obvious hub from which to become part of the African growth story. “Lions on the move,” is how McKinsey & Co. sees that story. Africa’s collective GDP will reach $2.6 trillion in 2020, the McKinsey Global Institute projects, up from $1.6 trillion in 2008, while African consumer spending will grow to $1.4 trillion from $860 billion, as the number of African households with discretionary incomes rises to 128 million. AT Kearney, in the same vein, looks at Africa and issues a report entitled “Africa: consumers, consumers everywhere...” Citibank looks at Africa and sees vast untapped reserves of minerals, $2.5 trillion worth in South Africa alone, which, properly managed, will enable Africa to unleash its as yet only dimly imagined economic potential. JP Morgan Chase CEO Jamie Dimon takes a first hand look at Africa and declares himself “incredibly impressed” by the opportunities he sees there. Ernst and Young interviews 500 business leaders on how they’re looking at Africa, and finds them “planning new developments and expanding existing ones, demonstrating why Africa’s share of new
Pictured opposite: BMW assembly line near Pretoria. The Gautrain high-speed train linking Pretoria and Johannesburg. Harvesting corn in the Free State. Overleaf: Durban docks.

global FDI projects has steadily improved over the past decade.” “Looking forward, capital investments are expected to grow, reaching a forecasted $150 billion in 2015.” All of which helps explain why PriceWaterhouseCoopers looks at South Africa and predicts it will be the world’s seventh fastest-growing economy, with an average real annual growth rate of 5%, between now and 2050. No less bullish on South Africa is Bank of America Merrill Lynch, which lists South Africa, with Turkey and Saudi Arabia, as having the most promising 10-year growth prospects among the nations of Europe, the Middle East and Africa. “If tough decisions are taken over the next few years, South Africa’s growth potential could accelerate beyond 2016 to 6%, in our view. “We think the thrust of government policy - on jobs, infrastructure and service delivery - will provide the backdrop for positive consumer growth that is driven by...lower income households migrating up the income ladder. Government infrastructural spending will also be a key boost to growth over the next several years.” Among the BRICS Judged solely in terms of GDP and population size, South Africa is not by itself in same league as the BRIC nations -- to use the acronym coined by Goldman Sachs for the big emerging economies Brazil, Russia, India and China. The interesting thing, though, is that the BRICs themselves see South Africa as a peer and have invited South Africa to join their club. What South Africa may lack in size, it more than compensates for as a connector with -- and dynamo for -- the last great investment frontier everyone is talking about. From the democracy they created on the ashes of apartheid through the way they prepared for and hosted last year’s FIFA soccer World Cup, South Africans have proved they are force to be reckoned with on the global stage. Under the World Economic Forum’s rating system, South Africa’s competitiveness score is all but indistinguishable from those of emerging giants Brazil and India. In areas of critical importance to investors, including financial sophistication, strength of institutions, protection of property rights, quality of infrastructure, strength of investment protection and corporate ethics, we are ranked ahead of all the BRICs, and in some cases we rank among the best in the world.

1st in strength of auditing and reporting standards. 2nd in efficacy of corporate boards. 3rd in protection of minority shareholders’ interest. 7th in effectiveness of anti-monopoly policy. 3rd in availability of financial services. 4th in financing through the local equities market. 2nd in soundness of banks. 1st in regulation of securities exchange. 8th in legal rights.
How South Africa stacked up among 142 countries in the World Economic Forum’s 2011-12 Global Competitiveness Report

In a comparison of 92 countries, South Africa’s budget process was recently ranked number one for transparency. The World Bank says that, overall, it is far easier to launch and run a business in South Africa than it is in any of the other BRICS. Innovation Possibility and opportunity in South Africa go hand-in-hand with South African creativity and innovation. Whether we’re finding consensus-based solutions to seemingly intractable divisions, as we did in launching our new democracy in 1994, or we’re mining gold from ever more challenging depths, as we do every day, we have demonstrated a knack for thinking and doing outside the box. It is no surprise that the serial entrepreneur behind PayPal, the Tesla electric car and the SpaceX Falcon rocket which NASA is looking to rely on as it outsources space launch to private contractors, is a South African, educated at Pretoria Boys High. There are plenty more like him back home. Some of them are working on the so-called Square Kilometre Array, an international project to build what will be the largest radio telescope ever constructed by several orders of magnitude. The volume of data collected by the SKA’s thousands of widely distributed receiver dishes will, according to IBM, exceed the entire current traffic flow on the World Wide Web. Computers and data highways of the power and scale needed to carry and process such information flows do not yet exist. But they will, thanks in good measure to solutions being developed by South African scientists and engineers. These solutions will have huge practical and commercial application well beyond astronomy. And if, as we hope, the SKA is built in Africa, the data superhighways needed to connect it to the rest of the world will, like the off ramps

of a traditional highway system, create prodigious opportunities for investment and growth. Already, the Cape of Good Hope is becoming the Silicon Cape, a crucible of tech start-ups like Twangoo, the “collective buying” web company recently acquired by Groupon. Other success stories include Mxit and Fundamo. The former pioneered social networking via cell phones. The latter is pushing the envelope of mobile financial services. To meet the demands of President Obama’s health care reforms, Humana, fourth largest US health insurer, needed to find a way to encourage its customers to stay healthier. Who had the solution? South Africa’s Discovery and its state-of-the-art Vitality wellness and loyalty program. Humana and Discovery have just announced a joint venture. For decades, the world has been crying out for an effective way to empower women to protect themselves from HIV infection. Caprisa, the Centre for the Aids Program of Research in South Africa, has developed a gel that has been shown to cut the sexual transmission of HIV by half. If the world is to be a safer place, we have to reduce demand for highly enriched uranium that can be used to make weapons. So a subsidiary of the Nuclear Energy Corp. of SA (NECSA) has pioneered a way to make isotopes for medical imaging using low enriched uranium and is now supplying the US market. Sustainability To us, a problem is not solved unless it’s solved sustainably. We’re proud of the work of Optimal Energy, a South African company at the cutting edge of electric vehicle technology. Its car, the Joule -named after the energy unit -- is powered by easily interchangeable batteries and has a range of 300 kms. Another example of earth-friendly innovation is South African wine which is easy both on the palate and the planet. Starting with the 2010 vintage, qualifying South African wines have a seal certifying not only their origin but that they were produced in an environmentally and socially sustainable manner. Consumers can take the numbers on each seal, enter them on a website and download details of how the wine was made from vine to bottle. Is the grower limiting use of chemicals? Reintroducing natural predators? Treating waste water? Promoting biodiversity? The seal provides a verifiable guarantee that the wine inside was made sustainably. This is just one way South Africans are striving to serve as good stewards of the environment. As hosts of the next and critical round of global climate change negotiations -- known as COP17 -- we take this responsibility very seriously.
Pictured opposite: Cape Town Convention Center. MeetKAT radio telescope. Moses Mabhida Stadium, Durban.

Our highly industrialised economy has long been fueled by plentiful reserves of low-cost coal. We are working to use this resource more efficiently and cleanly while at the same time expanding our reliance on renewables. Our new economic growth path envisages the creation of up to 300,000 jobs in the “green” economy by 2020. This includes the construction of a 5 GW solar energy complex in partnership with the Fluor Corporation, which, when completed, will be the largest such facility in the world. Yes, South Africa faces some daunting challenges, most of them in common with other rapidly transforming economies. But we have what it takes to deal with them. We are already making real progress in reducing crime, fighting and treating HIV/AIDS and overcoming the legacies of our divided past in critical areas like education, sanitation and housing. Diversity and ubuntu Our ability to tackle the toughest challenges is enhanced by our diversity. We are a diverse people in a diverse land. Historically, difference divided us and set us against each other. In that crucible, we were tested and tempered. We became more resourceful and resilient. Today our diversity is our strength. We bring to the table a broad range of experience, talent and ways of looking at things that combine to generate fresh insights, originality and solutions. The centripetal force that binds us together and enables us all benefit collectively from each other’s individual strengths is a way of being we call ubuntu. To have ubuntu is to be imbued with a sense that your happiness, wellbeing and completeness as a person is contingent upon the happiness, well-being and completeness of everyone around you. Ubuntu informs the way we seek to contribute to a safer, more prosperous, more sustainable world. It teaches us that we are all connected. It teaches the importance of listening to each other, of not casting each other as demons, of not allowing ourselves to be prisoners of history. It reinforces our resolve to move beyond old categories and ideological camps to try and see the world through the eyes of adversaries. It helps us draw on the rich diversity of our experience and tradition, philosophy and faiths, to find in concert lasting answers to our shared dilemmas. It is for us what dark matter is for the universe. The stuff that holds us together. And it is at the core of our value proposition.

Contact us: Brand South Africa 103 Central Street, Houghton, Johannesburg, 2198, Gauteng, South Africa. P.O. Box 87168, Houghton, 2041, South Africa. Tel: +27 11 483 0122 Fax: +27 11 483 0124 E-mail: Web site: SA Web Portal:

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