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A bright future for South Africa

Moving on from its troubled past, the South Africa of the future is a promising business proposition. We take an in depth look at what Johannesburg and Cape town have to offer the business traveller

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South Africa is a nation of 44.8 million people living in country more than twice the size of France. Until 1994, three quarters of its citizens had no say and no prospect of any say in the running of their own country.

Since the abolition of Apartheid, the nation has undergone a massive transformation, with education, employment, and economic reforms that were unthinkable under the former regime.  The emphasis has been to get South Africa back on its feet and eliminate the equalities of the past without change jeopardising the future.

Just sorting out sound public finance strategies was a monumental task.

Public institutions – national, provincial and local government – had to be shaken up to manage budgetary and financial co ordinations; expenditure frameworks had to be set, and the restructure state assets had to be agreed.  In short, the entire South African establishment had to be shaken up from the bottom up.

Rather than fall into ruin – or worse, Marxist rule, like many predicted – South Africa has prospered like no other nation in Africa.

Luckily, South Africa has always had it’s huge natural resources to fall back on – the very thing that set the province apart in the first place. Namely, it’s vast supply of gold, diamonds, and other minerals. Of course, once South Africa was seen to have mended its ways and embrace democracy, international trade sanctions were dropped and visitors once again came streaming into this unique and impressive land.

The country has seen modest but steady growth of three percent a year over the past decade.

Since 1994 international air traffic movements have increased by more than 70 percent and the number of departing international passengers by eight percent to 2,6 million. The total number of departing passengers rose by 3.1 million to 9.5 million and aircraft landings increased by 60,000 to 190,000 over the five-year period.

What’s more, the airline industry is expected to continue growing at an average annual rate of approximately 30 percent until the year 2030.  Johannesburg International Airport is to spend 3.4-billion Rand upgrading security and facilities ahead of the 2010 Football World Cup, and another R8-billion by 2012 on building a new terminal to meet the demand of fast-growing passenger numbers.  The upgrades will enable the airport to handle the giant Airbus A380 and the rapid rail link between the airport, Johannesburg and Pretoria.

In addition to this, South Africa’s ports Richards Bay, Durban, East London, Port Elizabeth, Mossel Bay, Cape Town and Saldanha have stretched themselves to meet demands. The count for seven out of Africa’s 16 largest ports and have daily cargoes streaming in from and out to Europe, Asia, the Americas and the east and west coasts of Africa. Located the southern tip of the dark continent, bridging the point between East and West, South Africa has truly become a global transportation hub.

In 2002, South African ports handled an average of 13 000 vessels carrying 500 million tons of cargo annually – that’s just 20 percent less than the UK. In fact, a new major deepwater port is currently under development in Coega, 20 km east of Port Elizabeth. Five billion SA rand have already been ploughed into the new port which guarantees to anchor South Africa is the focal point of shipping trade in the region.

South Africa’s per capita GDP, corrected for purchasing power parity, now positions the country as one of the 50 wealthiest in the world. Head and shoulders above the rest of the continent, South Africa is shaping up as Africa’s very own super power.  In fact, it’s estimated that the nation accounts for up to 30 percent of the GDP of the entire African continent.

The Rand, the world’s most actively traded emerging market currency, was recognised by the Bloomberg Currency Scorecard as the best performing currency against the US dollar between 2002 and 2005. The Rand is now part of the Continuous linked Settlement (CLS) which eliminates the risks associated with trading currencies across time zones.

“The economic outlook is exceedingly favourable – more promising than has been seen in 40 years,” South Africa’s Finance Minister, Trevor Manuel said told the National Assembly during his 2006/2007 Budget speech. “And our policy stance, unlike that of 40 years ago, emphasises development opportunities for all South Africans, built on a foundation of social solidarity and a shared economic destiny.”

Most of South Africa’s resources are focused on four main urban areas – namely: Cape Town, Port Elizabeth, Durban, and Pretoria-Johannesburg. It’s here where the wealth and professional classes are based.  

Of course, reforms have meant that a new black middle class is gathering pace in the suburbs, but many South Africans remain poor and unemployment is high – around 30 percent.

Economists believe that South Africa’s economy would need to almost double to at least five percent – six percent a year to absorb the surfeit of job seekers.

Economic growth will stimulate investment and make it worthwhile for companies to employ people, which in turn will massage the poverty trap and help reduce South Africa’s notorious crime rate.

Thabo Mbeki succeeded Nelson Mandela as South Africa’s leader when he stepped down in 1999. He has since been elected for a second five-year term following the landslide general election victory of his governing African National Congress (ANC) in 2004.

Mbeki is committed to helping his country fulfil its promise by addressing the legacy of South Africa’s social shortcomings. Since the fall of apartheid in 1994, an additional 10 million people now have access to fresh water, four million to electricity; 1.5 million new homes have been built, South African officials say. And next on the list is education and skill development.

“Together with our social partners, we have agreed to a vigorous and wide-ranging skills development and acquisition programme to meet any shortfalls we may experience, to respond to the skills challenge in as practical a manner as possible,” Mbeki said.

The President explained to South Africa’s Parliament in Cape Town that the government’s growth strategy “confirmed the need to expand our small, medium and micro enterprise (SMME) sector, paying particular attention … to broad-based black economic empowerment and the development of women and the youth.”

“Our experience with regard to the development of this sector indicates that we must pay particular attention to issues of access to capital, entrepreneurial training, assistance with marketing, and the development of cooperatives.

“We will also speed up the consultative process to determine the measures we must take to improve the regulatory climate to facilitate the expansion of this sector.”

In February 2006, a leading UK telecommunications corporation went some way to realising Mbeki’s plans. As TalkTalk announced plans to spend R200-million setting up two call centres – one in Cape Town and the other in Johannesburg.  It’s the biggest foreign investment yet in South Africa’s burgeoning info service industry.

TalkTalk aren’t the only company who’re piling money into the region. Other companies running call centres in the Western Cape include Barclays, JP Morgan, Lufthansa, the Budget Group, Merchants/Asda, Dialogue and STA Travel. In fact, investment in the area leapt by 20 percent between 2004 and 2005, with nearly one billion Rand of foreign money being pumped into the service industries.  

A report by Datamonitor estimates that the IT service industry in South Africa is due to double in size by 2008, with around 1,000 operational call centres. The reason companies are targeting South Africa is because of low running costs – estimated to be just two-thirds of their equivalents in Britain and USA.

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