INTERNATIONAL MARKETING ASSIGNMENT

ON BUSINESS ENVIRONMENTAL
ANALYSIS AND ITS IMPACT ON
MARKETING DECISIONS

South Africa: Alive With Possibilities

Sirsanath Banerjee
Roll Number: 31
S.Y.B.M.S. ‘B’
S.I.E.S. Nerul
 South Africa

OFFICIAL NAME
Republic of South Africa

Geography

Area: 1.2 million sq. km. (470,462 sq. mi.).

Cities: Capitals--Administrative, Pretoria; Legislative, Cape Town; Judicial,
Bloemfontein. Other cities--Johannesburg, Durban, Port Elizabeth.
Terrain: Plateau, savanna, desert, mountains, coastal plains.
Climate: moderate; similar to southern California.

General Information:

Annual growth rate (2006 World Bank Group): 1.1%.

Population (2007, 47.9 million): Composition--black 79.7%; white 9.1%;

colored 8.8%; Asian (Indian) 2.2%.

Languages: Afrikaans, English, isiNdebele, isiXhosa, isiZulu, Sepedi,

Sesotho, Setswana, Siswati, Tshivenda, and Xitsonga (all official
languages).

Religions: Predominantly Christian; traditional African, Hindu, Muslim,

Jewish.

Education: Years compulsory--7-15 years of age for all children. The South
African Schools Act, Act 84 of 1996, passed by Parliament in 1996, aims to
achieve greater educational opportunities for black children, mandating a
single syllabus and more equitable funding for schools.

Health: Infant mortality rate (2005)--55 per live births. Life expectancy--52
yrs. women; 49 yrs. men.
 Government

Type: Parliamentary democracy.

Independence: The Union of South Africa was created on May 31, 1910;
became sovereign state within British Empire in 1934; became a republic
on May 31, 1961; left the Commonwealth in October 1968; rejoined the
Commonwealth in June 1994.
Constitution: Entered into force February 3, 1997.
Branches: Executive--president (chief of state) elected to a 5-year term by
the National Assembly. Legislative--bicameral Parliament consisting of 490
members in two chambers. National Assembly (400 members) elected by a
system of proportional representation. National Council of Provinces
consisting of 90 delegates (10 from each province) and 10 nonvoting
delegates representing local government. Judicial--Constitutional Court
interprets and decides constitutional issues; Supreme Court of Appeal is
the highest court for interpreting and deciding nonconstitutional matters.
Administrative subdivisions: Nine provinces: Eastern Cape, Free State,
Gauteng, KwaZulu-Natal, Mpumalanga, North-West, Northern Cape,
Limpopo, Western Cape.
Political parties: African National Congress (ANC), Democratic Alliance
(DA), Inkatha Freedom Party (IFP), Vryheidsfront Plus/Freedom Front Plus
(FF+), Pan-African Congress (PAC), African Christian Democratic Party
(ACDP), United Democratic Movement (UDM), and Azanian Peoples
Organization (Azapo).
Suffrage: Citizens and permanent residents 18 and older.

Economy

GDP (2006): $255 billion.

Real GDP growth rate (2006): 5.0%.
GDP per capita (2006): $5,390.
Unemployment (September 2007): 25.5%.
Natural resources: Almost all essential commodities, except petroleum
products and bauxite. Only country in the world that manufactures fuel
from coal.
Industry: Types--minerals, mining, motor vehicles and parts, machinery,
textiles, chemicals, fertilizer, information technology, electronics, other
manufacturing, and agro-processing.
Trade (2006): Exports--$42.1 billion; merchandise exports: gold, other
minerals and metals, agricultural products, motor vehicles and parts. Major
markets--U.K., U.S., Germany, Italy, Japan, East Asia, Sub-Saharan Africa.
Imports--$51.5 billion: machinery, transport equipment, chemicals,
petroleum products, textiles, and scientific instruments. Major suppliers--
Germany, U.S., Japan, U.K., Italy.
GDP composition (2003): Agriculture and mining (primary sector)--11%;
industry (secondary sector)--24%; services (tertiary sector)--65%. World's
largest producer of platinum, gold, and chromium; also significant coal
production.

People

Until 1991, South African law divided the population into four major racial
categories: Africans (black), whites, coloreds, and Asians. Although this
law has been abolished, many South Africans still view themselves and
each other according to these categories. Black Africans comprise about
79% of the population and are divided into a number of different ethnic
groups. Whites comprise about 10% of the population. They are primarily
descendants of Dutch, French, English, and German settlers who began
arriving at the Cape of Good Hope in the late 17th century. Coloreds are
mixed-race people primarily descending from the earliest settlers and the
indigenous peoples. They comprise about 9% of the total population.
Asians descend from Indian workers brought to South Africa in the mid-
19th century to work on the sugar estates in Natal. They constitute about
2.5% of the population and are concentrated in the KwaZulu-Natal
Province.

Education is in transition. Under the apartheid system schools were

segregated, and the quantity and quality of education varied significantly
across racial groups. The laws governing this segregation have been
abolished. The long and arduous process of restructuring the country's
educational system has begun and is ongoing. The challenge is to create a
single, nondiscriminatory, nonracial system that offers the same standards
of education to all people.

HISTORY

People have inhabited southern Africa for thousands of years. Members of

the Khoisan language groups are the oldest surviving inhabitants of the
land, but only a few are left in South Africa today--and they are located in
the western sections. Most of today's black South Africans belong to the
Bantu language group, which migrated south from central Africa, settling in
the Transvaal region sometime before AD 100. The Nguni, ancestors of the
Zulu and Xhosa, occupied most of the eastern coast by 1500.

The Portuguese were the first Europeans to reach the Cape of Good Hope,
arriving in 1488. However, permanent white settlement did not begin until
1652 when the Dutch East India Company established a provisioning
station on the Cape. In subsequent decades, French Huguenot refugees,
the Dutch, and Germans began to settle in the Cape. Collectively, they form
the Afrikaner segment of today's population. The establishment of these
settlements had far-reaching social and political effects on the groups
already settled in the area, leading to upheaval in these societies and the
subjugation of their people.

By 1779, European settlements extended throughout the southern part of

the Cape and east toward the Great Fish River. It was here that Dutch
authorities and the Xhosa fought the first frontier war. The British gained
control of the Cape of Good Hope at the end of the 18th century.
Subsequent British settlement and rule marked the beginning of a long
conflict between the Afrikaners and the English.

Beginning in 1836, partly to escape British rule and cultural hegemony and
partly out of resentment at the recent abolition of slavery, many Afrikaner
farmers (Boers) undertook a northern migration that became known as the
"Great Trek." This movement brought them into contact and conflict with
African groups in the area, the most formidable of which were the Zulus.
Under their powerful leader, Shaka (1787-1828), the Zulus conquered most
of the territory between the Drakensberg Mountains and the sea (now
KwaZulu-Natal).

In 1828, Shaka was assassinated and replaced by his half-brother Dingane.

In 1838, Dingane was defeated and deported by the Voortrekkers (people of
the Great Trek) at the battle of Blood River. The Zulus, nonetheless,
remained a potent force, defeating the British in the historic battle of
Isandhlwana before themselves being finally conquered in 1879.

In 1852 and 1854, the independent Boer Republics of the Transvaal and
Orange Free State were created. Relations between the republics and the
British Government were strained. The discovery of diamonds at Kimberley
in 1870 and the discovery of large gold deposits in the Witwatersrand
region of the Transvaal in 1886 caused an influx of European (mainly
British) immigration and investment. In addition to resident black Africans,
many blacks from neighboring countries also moved into the area to work
in the mines. The construction by mine owners of hostels to house and
control their workers set patterns that later extended throughout the
region.
Boer reactions to this influx and British political intrigues led to the Anglo-
Boer Wars of 1880-81 and 1899-1902. British forces prevailed in the conflict,
and the republics were incorporated into the British Empire. In May 1910,
the two republics and the British colonies of the Cape and Natal formed the
Union of South Africa, a self-governing dominion of the British Empire. The
Union's constitution kept all political power in the hands of whites.

In 1912, the South Africa Native National Congress was founded in

Bloemfontein and eventually became known as the African National
Congress (ANC). Its goals were the elimination of restrictions based on
color and the enfranchisement of and parliamentary representation for
blacks. Despite these efforts the government continued to pass laws
limiting the rights and freedoms of blacks.

In 1948, the National Party (NP) won the all-white elections and began
passing legislation codifying and enforcing an even stricter policy of white
domination and racial separation known as "apartheid" (separateness). In
the early 1960s, following a protest in Sharpeville in which 69 protesters
were killed by police and 180 injured, the ANC and Pan-African Congress
(PAC) were banned. Nelson Mandela and many other anti-apartheid leaders
were convicted and imprisoned on charges of treason.

The ANC and PAC were forced underground and fought apartheid through
guerrilla warfare and sabotage. In May 1961, South Africa relinquished its
dominion status and declared itself a republic. It withdrew from the
Commonwealth in part because of international protests against apartheid.
In 1984, a new constitution came into effect in which whites allowed
coloreds and Asians a limited role in the national government and control
over their own affairs in certain areas. Ultimately, however, all power
remained in white hands. Blacks remained effectively disenfranchised.

Popular uprisings in black and colored townships in 1976 and 1985 helped
to convince some NP members of the need for change. Secret discussions
between those members and Nelson Mandela began in 1986. In February
1990, State President F.W. de Klerk, who had come to power in September
1989, announced the unbanning of the ANC, the PAC, and all other anti-
apartheid groups. Two weeks later, Nelson Mandela was released from
prison.

In 1991, the Group Areas Act, Land Acts, and the Population Registration
Act--the last of the so-called "pillars of apartheid"--were abolished. A long
series of negotiations ensued, resulting in a new constitution promulgated
into law in December 1993. The country's first nonracial elections were held
on April 26-28, 1994, resulting in the installation of Nelson Mandela as
President on May 10, 1994.
Following the 1994 elections, South Africa was governed under an interim
constitution establishing a Government of National Unity (GNU). This
constitution required the Constitutional Assembly (CA) to draft and
approve a permanent constitution by May 9, 1996. After review by the
Constitutional Court and intensive negotiations within the CA, the
Constitutional Court certified a revised draft on December 2, 1996.
President Mandela signed the new constitution into law on December 10,
and it entered into force on February 3, 1997. The GNU ostensibly remained
in effect until the 1999 national elections. The parties originally comprising
the GNU--the ANC, the NP, and the Inkatha Freedom Party (IFP)--shared
executive power. On June 30, 1996, the NP withdrew from the GNU to
become part of the opposition.

During Nelson Mandela's 5-year term as President of South Africa, the

government committed itself to reforming the country. The ANC-led
government focused on social issues that were neglected during the
apartheid era such as unemployment, housing shortages, and crime.
Mandela's administration began to reintroduce South Africa into the global
economy by implementing a market-driven economic plan known as
Growth, Employment and Redistribution (GEAR). In order to heal the
wounds created by apartheid, the government created the Truth and
Reconciliation Commission (TRC) under the leadership of Archbishop
Desmond Tutu. During the first term of the ANC's post-apartheid rule,
President Mandela concentrated on national reconciliation, seeking to
forge a single South African identity and sense of purpose among a diverse
and splintered populace, riven by years of conflict. The diminution of
political violence after 1994 and its virtual disappearance by 1996 were
testament to the abilities of Mandela to achieve this difficult goal.

Nelson Mandela stepped down as President of the ANC at the party's

national congress in December 1997, when Thabo Mbeki assumed the
mantle of leadership. Mbeki won the presidency of South Africa after
national elections in 1999, when the ANC won just shy of a two-thirds
majority in Parliament. President Mbeki shifted the focus of government
from reconciliation to transformation, particularly on the economic front.
With political transformation and the foundation of a strong democratic
system in place after two free and fair national elections, the ANC
recognized the need to focus on bringing economic power to the black
majority in South Africa. In April 2004, the ANC won nearly 70% of the
national vote, and Mbeki was reelected for his second 5-year term. In his
2004 State of the Nation address, Mbeki promised his government would
reduce poverty, stimulate economic growth, and fight crime. Mbeki said
that the government would play a more prominent role in economic
development.
 GOVERNMENT AND POLITICAL CONDITIONS

South Africa is a multiparty parliamentary democracy in which

constitutional power is shared between the president and the Parliament.

The Parliament consists of two houses, the National Assembly and the
National Council of Provinces, which are responsible for drafting the laws
of the republic. The National Assembly also has specific control over bills
relating to monetary matters. The current 400-member National Assembly
was retained under the 1997 constitution, although the constitution allows
for a range of between 350 and 400 members. The Assembly is elected by a
system of "list proportional representation." Each of the parties appearing
on the ballot submits a rank-ordered list of candidates. The voters then
cast their ballots for a party.

Seats in the Assembly are allocated based on the percentage of votes each
party receives. In the 2004 elections, the ANC won 279 seats in the
Assembly, more than a two-thirds majority and an increase of 13 seats from
1999; the Democratic Alliance (DA) won 50, the IFP 28, the New National
Party (NNP) 7, the United Democratic Movement (UDM) 9, and other groups
won the remaining 27. In the 2004 electoral campaign, the ANC aligned with
the NNP, and the DA aligned with the IFP. On August 6, the NNP announced
that it would merge with the ANC. Elected representatives of the party
would, however, continue to hold their seats in the national and provincial
legislatures as NNP members until the next floor-crossing period in
September 2005.

The National Council of Provinces (NCOP) consists of 90 members, 10 from

each of the nine provinces. The NCOP replaced the former Senate as the
second chamber of Parliament and was created to give a greater voice to
provincial interests. It must approve legislation that involves shared
national and provincial competencies as defined by an annex to the
constitution. Each provincial delegation consists of six permanent and four
rotating delegates.

The president is the head of state. Following the April 14, 2004 elections,
the National Assembly reelected Thabo Mbeki as President. The president's
constitutional responsibilities include assigning cabinet portfolios, signing
bills into law, and serving as commander in chief of the military. The
president works closely with the deputy president and the cabinet. There
are currently 28 posts in the cabinet. Of the 28 ministers, Mbeki appointed
two from outside the ANC--one from the former NNP and one from the
Azanian Peoples Organization (Azapo). On June 14, 2005, President Mbeki
informed the South African Parliament that then-Deputy President Jacob
Zuma was being "released" from his duties following the conviction of a
close associate on corruption charges relating to monetary payments to
Zuma. On June 22, Mbeki named former Minister for Minerals and Energy
Phumzile Mlambo-Ngcuka to the position of Deputy President, the first
woman to hold this office.

On December 18, 2007, the African National Congress elected Jacob Zuma
to the post of ANC President after a hard-fought campaign between Zuma
and Thabo Mbeki. Mbeki remains the country's President despite this
victory and a shake-up in the composition of the ANC National Executive
Committee membership.

The third arm of the central government is an independent judiciary. The

Constitutional Court is the highest court for interpreting and deciding
constitutional issues, while the Supreme Court of Appeal is the highest
court for nonconstitutional matters. Most cases are heard in the extensive
system of High Courts and Magistrates Courts. The constitution's bill of
rights provides for due process including the right to a fair, public trial
within a reasonable time of being charged and the right to appeal to a
higher court. The bill of rights also guarantees fundamental political and
social rights of South Africa's citizens.

Challenges Ahead

South Africa's post-apartheid governments have made remarkable

progress in consolidating the nation's peaceful transition to democracy.
Programs to improve the delivery of essential social services to the
majority of the population are underway. Access to better opportunities in
education and business is becoming more widespread. Nevertheless,
transforming South Africa's society to remove the legacy of apartheid will
be a long-term process requiring the sustained commitment of the leaders
and people of the nation's disparate groups.

The Truth and Reconciliation Commission (TRC), chaired by 1984 Nobel

Peace Prize winner Archbishop Desmond Tutu, helped to advance the
reconciliation process. Constituted in 1996 and having completed its work
by 2001, the TRC was empowered to investigate apartheid-era human
rights abuses committed between 1960 and May 10, 1994; to grant amnesty
to those who committed politically motivated crimes; and to recommend
compensation to victims of abuses. In November 2003, the Government
began allocation of $4,600 (R30,000) reparations to individual apartheid
victims. The TRC's mandate was part of the larger process of reconciling
the often conflicting political, economic, and cultural interests held by the
many peoples that make up South Africa's diverse population. The ability of
the government and people to agree on many basic questions of how to
order the country's new society will remain a critical challenge.

One important issue continues to be the relationship of provincial and local

administrative structures to the national government. Prior to April 27,
1994, South Africa was divided into four provinces and 10 black
"homelands," four of which were considered independent by the South
African Government. Both the interim constitution and the 1997
constitution abolished this system and substituted nine provinces. Each
province has an elected legislature and chief executive--the provincial
premier. Although in form a federal system, in practice the nature of the
relationship between the central and provincial governments continues to
be the subject of considerable debate, particularly among groups desiring
a greater measure of autonomy from the central government. A key step in
defining the relationship came in 1997 when provincial governments were
given more than half of central government funding and permitted to
develop and manage their own budgets. However, the national government
exerts a measure of control over provinces by appointing provincial
premiers.

Although South Africa's economy is in many areas highly developed, the

exclusionary nature of apartheid and distortions caused in part by the
country's international isolation until the 1990s have left major
weaknesses. The economy is now in a process of transition as the
government seeks to address the inequities of apartheid, stimulate growth,
and create jobs. Business, meanwhile, is becoming more integrated into
the international system, and foreign investment has increased
dramatically over the past several years. Still, the economic disparities
between population groups are expected to persist for many years,
remaining an area of priority attention for the government.
 Human Rights

The 1997 constitution's bill of rights provides extensive guarantees,

including equality before the law and prohibitions against discrimination;
the right to life, privacy, property, and freedom and security of the person;
prohibition against slavery and forced labor; and freedom of speech,
religion, assembly, and association. The legal rights of criminal suspects
also are enumerated, as are citizens' entitlements to a safe environment,
housing, education, and health care. The constitution provides for an
independent and impartial judiciary, and, in practice, these provisions are
respected.

Since the abolition of apartheid, levels of political violence in South Africa

have dropped dramatically. Violent crime and organized criminal activity
are at high levels and are a grave concern. Partly as a result, vigilante
action and mob justice sometimes occur.

Some members of the police commit abuses, and deaths in police custody
as a result of excessive force remain a problem. The government has taken
action to investigate and punish some of those who commit such abuses.
In April 1997, the government established an Independent Complaints
Directorate to investigate deaths in police custody and deaths resulting
from police action.

Although South Africa's society is undergoing a rapid transformation,

some discrimination against women continues, and discrimination against
those living with HIV/AIDS remains. Violence against women and children
also is a serious problem.
 ECONOMY

South Africa has a two-tiered economy; one rivaling other developed

countries and the other with only the most basic infrastructure. It therefore
is a productive and industrialized economy that exhibits many
characteristics associated with developing countries, including a division
of labor between formal and informal sectors, and uneven distribution of
wealth and income. The formal sector, based on mining, manufacturing,
services, and agriculture, is well developed.

The transition to a democratic, nonracial government, begun in early 1990,

stimulated a debate on the direction of economic policies to achieve
sustained economic growth while at the same time redressing the
socioeconomic disparities created by apartheid. The Government of
National Unity's initial blueprint to address this problem was the
Reconstruction and Development Program (RDP). The RDP was designed
to create programs to improve the standard of living for the majority of the
population by providing housing--a planned 1 million new homes in 5
years--basic services, education, and health care. While a specific
"ministry" for the RDP no longer exists, a number of government ministries
and offices are charged with supporting RDP programs and goals.

The Government of South Africa demonstrated its commitment to open

markets, privatization, and a favorable investment climate with its release
of the crucial Growth, Employment and Redistribution (GEAR) strategy--the
neoliberal economic strategy to cover 1996-2000. The strategy had mixed
success. It brought greater financial discipline and macroeconomic
stability but has failed to deliver in key areas. Formal employment
continued to decline, and despite the ongoing efforts of black
empowerment and signs of a fledgling black middle class and social
mobility, the country's wealth remains very unequally distributed along
racial lines. However, South Africa's budgetary reforms such as the
Medium-Term Expenditure Framework and the Public Finance Management
Act--which aims at better reporting, auditing, and increased accountability--
and the structural changes to its monetary policy framework--including
inflation targeting--have created transparency and predictability and are
widely acclaimed. Trade liberalization also has progressed substantially
since the early 1990s. South Africa has reduced its import-weighted
average tariff rate from more than 20% in 1994 to 7% in 2002. These efforts,
together with South Africa's implementation of its World Trade
Organization (WTO) obligations and its constructive role in launching the
Doha Development Round, show South Africa's acceptance of free market
principles.
 Financial Policy

South Africa has a sophisticated financial structure with a large and active
stock exchange that ranks 17th in the world in terms of total market
capitalization. The South African Reserve Bank (SARB) performs all central
banking functions. The SARB is independent and operates in much the
same way as Western central banks, influencing interest rates and
controlling liquidity through its interest rates on funds provided to private
sector banks. Quantitative credit controls and administrative control of
deposit and lending rates have largely disappeared. South African banks
adhere to the Bank of International Standards core standards.

The South African Government has taken steps to gradually reduce

remaining foreign exchange controls, which apply only to South African
residents. Private citizens are now allowed a one-time investment of up to
750,000 rand (R) in offshore accounts. Since 2001, South African
companies may invest up to R750 million in Africa and R500 million
elsewhere.

Trade and Investment

South Africa has rich mineral resources. It is the world's largest producer
and exporter of gold and platinum and also exports a significant amount of
coal. During 2000, platinum overtook gold as South Africa's largest foreign
exchange earner. The value-added processing of minerals to produce
ferroalloys, stainless steels, and similar products is a major industry and
an important growth area. The country's diverse manufacturing industry is
a world leader in several specialized sectors, including railway rolling
stock, synthetic fuels, and mining equipment and machinery.

Primary agriculture accounts for about 4% of the gross domestic product.

Major crops include citrus and deciduous fruits, corn, wheat, dairy
products, sugarcane, tobacco, wine, and wool. South Africa has many
developed irrigation schemes and is a net exporter of food.

South Africa's transportation infrastructure is well-developed, supporting

both domestic and regional needs. The Johannesburg International Airport
serves as a hub for flights to other southern African countries. The
domestic telecommunications infrastructure provides modern and efficient
service to urban areas, including cellular and Internet services. In 1997,
Telkom, the South African telecommunications parastatal, was partly
privatized and entered into a strategic equity partnership with a consortium
of two companies, including SBC, a U.S. telecommunications company. In
exchange for exclusivity to provide certain services for 5 years, Telkom
assumed an obligation to facilitate network modernization and expansion
into unserved areas. The government is evaluating a proposal to establish
a second network operator to compete with Telkom across its spectrum of
services. Three cellular companies provide service to over 9 million
subscribers.

South Africa's GDP is expected to increase gradually during the next few
years, and the government recently revised upward its 2007 estimated
growth to 4.7%. Annual GDP growth between 1994 and 2004 averaged 3.0%.
In 2003, real GDP growth slowed to a rate of 2.8%, but increased to 3.7% in
2004. The government estimates that the economy must achieve growth at
a minimum of 6% to offset unemployment, which is estimated at 28%,
although unofficial sources put it as high as 41%. In an effort to boost
economic growth and spur job creation, the government has launched
special investment corridors to promote development in specific regions
and also is working to encourage small, medium, and microenterprise
development. One of the great successes of the ANC government has been
to get consumer inflation, which had been running in the double digits for
over 20 years, under control. By 1998, inflation had fallen to 6.9%, and in
1999 and 2000 inflation was running at less than 6.0%. The rand's rapid
depreciation in late 2001, however, led to greater inflationary pressure,
causing 2002 inflation of 9.2%. The South African government cut the
inflation rate to 4% in 2004, and the rand appreciated 39% from 2002 to
2004. The South African Reserve Bank increased interest rates and along
with the 28% rand appreciation in 2003 led a reduced consumer inflation of
5.8%. The government also has made inroads into reducing the fiscal
deficit and increasing foreign currency reserves. The government deficit
was 1.1% of GDP in 2002 and 2.6% in 2003. The government's 2005 budget
called for a moderate increase in spending to promote faster growth and
poverty alleviation, while curbing budget deficits.

Exports reached 29.1% of GDP in 2007, up from 11.5% a decade ago. South
Africa's major trading partners include the United Kingdom, the United
States, Germany, Italy, Belgium, and Japan. South Africa's trade with other
Sub-Saharan African countries, particularly those in the southern Africa
region, has increased substantially. South Africa is a member of the
Southern African Customs Union (SACU) and the Southern African
Development Community (SADC). In August 1996, South Africa signed a
regional trade protocol agreement with its SADC partners. The agreement
was ratified in December 1999, and implementation began in September
2000. It intends to provide duty-free treatment for 85% of trade by 2008 and
100% by 2012.
South Africa has made great progress in dismantling its old economic
system, which was based on import substitution, high tariffs and
subsidies, anticompetitive behavior, and extensive government
intervention in the economy. The new leadership has moved to reduce the
government's role in the economy and to promote private sector
investment and competition. It has significantly reduced tariffs and export
subsidies, loosened exchange controls, cut the secondary tax on corporate
dividends, and improved enforcement of intellectual property laws. A new
competition law was passed and became effective on September 1, 1999. A
U.S.-South Africa bilateral tax treaty went into effect on January 1, 1998,
and a bilateral trade and investment framework agreement was signed in
February 1999.

South Africa is a member of the World Trade Organization (WTO). U.S.

products qualify for South Africa's most-favored-nation tariff rates. South
Africa also is an eligible country for the benefits under the African Growth
and Opportunity Act (AGOA), and most of its products can enter the United
States market duty free. South Africa has done away with most import
permits except on used products and products regulated by international
treaties. It also remains committed to the simplification and continued
reduction of tariffs within the WTO framework and maintains active
discussions with that body and its major trading partners.

As a result of a November 1993 bilateral agreement, the Overseas Private

Investment Corporation (OPIC) can assist U.S. investors in the South
African market with services such as political risk insurance and loans and
loan guarantees. In July 1996, the United States and South Africa signed an
investment fund protocol for a $120 million OPIC fund to make equity
investments in South Africa and southern Africa. OPIC is establishing an
additional fund--the Sub-Saharan Africa Infrastructure Fund, capitalized at
$350 million--for investment in infrastructure projects. The Trade and
Development Agency also has been actively involved in funding feasibility
studies and identifying investment opportunities in South Africa for U.S.
businesses.
 HIV/AIDS

South Africa is one of the countries most affected by HIV, with 5.3 million
HIV infected individuals. Nineteen percent of the 15-49 year old population
is infected, and in parts of the country more than 35% of women of
childbearing age are infected. Overall, 11-12% of the population is infected.
About 1,700 new infections occur each day, and approximately 40% of
deaths are believed to be AIDS-related. There are approximately 660,000
children who have lost one or both parents, and by 2008 1.6 million
children will have been orphaned by AIDS. Without effective prevention and
treatment 5-7 million cumulative AIDS deaths are anticipated by 2010 (with
1.5 million deaths in 2010 alone), and there will be over 1 million sick with
AIDS. The epidemic could cost South Africa as much as 17% in GDP
growth by 2010. The extraction industries, education, and health are among
the sectors that will be severely affected. A 2003 national operational plan
provides the structure for a comprehensive response to HIV and AIDS,
including a national rollout of antiretroviral therapy.

Environment

South Africa's Government is committed to managing the country's rich

and varied natural resources in a responsible and sustainable manner. In
addition, numerous South African non-governmental organizations have
emerged as a potent force in the public policy debate on the environment.
In international environmental organizations, South Africa is seen as a key
leader among developing countries on issues such as climate change,
conservation, and biodiversity. This leading role was underscored by South
Africa's selection to host the World Summit on Sustainable Development in 2002.
 FOREIGN RELATIONS

South African forces fought on the Allied side in World Wars I and II and
participated in the postwar UN force in Korea. South Africa was a founding
member of the League of Nations and in 1927 established a Department of
External Affairs with diplomatic missions in the main west European
countries and in the United States. At the founding of the League of
Nations, South Africa was given the mandate to govern Southwest Africa,
now Namibia, which had been a German colony before World War I. In 1990,
Namibia attained independence, with the exception of the enclave of Walvis
Bay, which was reintegrated into Namibia in March 1994. After South Africa
held its first nonracial election in April 1994, most sanctions imposed by
the international community in opposition to the system of apartheid were
lifted. On June 1, 1994, South Africa rejoined the Commonwealth, and on
June 23, 1994, the UN General Assembly accepted its credentials. South
Africa served as the African Union's (AU) first president from July 2003 to
July 2004.

Having emerged from the international isolation of the apartheid era, South
Africa has become a leading international actor. Its principal foreign policy
objective is to promote the economic, political, and cultural regeneration of
Africa, through the New Partnership for African Development (NEPAD); to
promote the peaceful resolution of conflict in Africa; and to use multilateral
bodies to insure that developing countries' voices are heard on
international issues. South Africa has played a key role in seeking an end
to various conflicts and political crises on the African continent, including
in Burundi, the Democratic Republic of Congo, and the Comoros. South
Africa has pursued "quiet diplomacy" in its approach to the crisis in
Zimbabwe.
 South Africa: The Untapped Market

Africa? Until recently, few foreign

exporters have headed in that direction
for business expansion. For one thing,
only knowledgeable observers made a
distinction between the nations beset by
extreme poverty and civil strife–often
the food aid recipients–and countries
where real market opportunities exist.

For another thing, South Africa was

marginalized economically and
politically until apartheid ended and democracy was restored in 1994.

But now that a national reconciliation is underway, things are changing. In fact,
South Africa appears to have entered a new era of economic and political
opportunities as well as challenges.

There’s no denying the clout of South Africa’s market. It’s the largest for U.S. goods
and services in sub-Saharan Africa. The country has the most advanced, broadly
based and productive economy in Africa.

Following the restoration of democracy, foreign investment has increased, with

American companies leading the way, although at a slower pace than originally
expected.

South Africa offers medium- and long-term opportunities for many American
exporters with the right products, resources, business acumen, creativity and
stamina. Plenty of market opportunities exist, but proper positioning and promotion
are key considerations, and returns are not likely to be immediate.
 Market Trends

Reflecting the country’s considerable ethnic and socioeconomic diversity, the South
African market is complex . This country of 40 million still has a large percentage of
the population with limited purchasing power (business sources estimate that 50
percent or more are considered poor/very poor), a middle-income group (close to 45
percent) with some level of disposable income, and a small upper middle/upper class
layer (approximately 5 percent or 2-2.5 million) who can afford high-value specialty
food products. Most consumer-ready food imports, particularly from the United
States, are considered high-value and specialty products.

The supermarkets are sophisticated: stocked

with a range of high-quality local, and, to a
lesser degree, imported foods. U.S. products
are still limited, principally because of stiff
competition from the local processing sector
and imports (primarily from southern and
western Europe), different consumer
preferences, the strength of the dollar and
unfamiliarity with U.S. products.

Observant U.S. exporters can spot

opportunities in specialty and niche food
products for the retail market and in intermediary food ingredients for the food
processing and food services sectors.

The market also extends beyond South Africa’s borders. In fact, it should be
approached as the Southern African regional market, since many big supermarkets
have opened outlets in Namibia, Botswana and Zimbabwe.

Supermarket buyers are especially looking for novelty products, as listed at the end
of this article. In return, they expect the U.S. supplier to be prepared with a
marketing strategy as well as the ability to finance in-store promotional programs.
 Foraging Habits of the South African Yuppie

The lifestyle of the upper middle income group is similar to that of young
professionals in other developed countries. They tend to be working couples with
one or two children, conscious of healthy and nutritious eating habits (preservative-
free, lean and low-fat items are popular). These are consumers who seek
convenience, like "prepared fresh" foods, as well as fun/healthy foods for their
children.

Families still tend to do more of their own home meal preparation and use
individual touches to cook their dinners.

In the South African marketplace, frozen products are considered to be of lower

quality than chilled and fresh.

South Africans’ taste profile is decidedly spicier than that of U.S. consumers; sales of
Tex/Mex foods stand to benefit from that preference.

While salsa, chips, or tortillas are interesting diversions that may have novelty
appeal, families would more regularly prefer pasta-and-sauce dinners that provide
value and variety.

Italian foods and Mediterranean foods in general are exceedingly popular, thanks
perhaps to climatic similarities and ethnic affinity (a large population with
Portuguese and other European background).

Afrikaners like sweets, in general. Some cities have substantial Muslim populations
and thus require halal meat. Also, South Africa’s Jewish population consumes a
variety of kosher and other specialty products.

Consumers are highly brand conscious, particularly

in non-food products (sports goods and clothing), a
trend that one buyer attributes to the "aspiration
aspect" of buying products beyond one’s means.
"People would pay a premium for the snob value,"
commented one contact. Still, in food there seems to
be a preference for local food suppliers.

American influence is noticeable on television, as

well as in movies and clothing stores. In food
services, the Hard Rock Café, KFC, McDonald’s,
TGI Friday’s and Morton’s Seafood can be found
in upscale shopping centers or areas frequented by
tourists. In addition, some local restaurants like Spur Santa Ana capitalize on the
cachet of Native American and Western themes and menu, but are wholly owned
and operated by locals.

Similarly, some products in the supermarkets bear American motifs–yet are locally
made. Examples include Belly Beans (jelly beans), "Texan Chili" flavored chips,
American Mix (trail mix of pretzels and salty snacks). All these are actually South
African products.

U.S. Presence in the Market

The official retail market is dominated by a handful of big supermarket chains,

convenience chains and some independent stores.

According to industry sources, Pick ‘n Pay has about 40 percent of the market;
Shoprite/Chequers/OK/Hyperama group about 40 percent; Spar, 3-4 percent (some
put it higher); and Woolworth, 5 percent. Convenience stores such as 7-Eleven (no
relation to the U.S. chain), 8-Time and stores at gas stations are increasing in
numbers.

And that’s without measuring growth in unaccounted street vendors and small
independent stores.

Imported products can be primarily found in upscale stores like Thrupps,

Woolworth, and Pick n’ Pay, although they can be found in Shoprite and Hyperama
stores as well.

Although some U.S. products are already on supermarket shelves, the majority of
imported foods come from Europe, Canada and Australia, with a smaller number
from Asia.

Convenience stores tend to carry the general brands like Kellogg, Pillsbury, Old El
Paso, Pringles, Frito Lay and Heinz products, which sometimes turn out to be made
in Australia, Europe or locally. From the United States, only rice (repackaged
locally) was consistently found in food stores.
 Bright Ideas for foreign Suppliers

The following products were suggested by store managers, buyers and exhibitors at
Hostex, a local food and hospitality show, as products of potential interest.

Consumer items include:

• specialty rices
• Tex/Mex food products
• biscuits
• snacks
• pet foods
• flavored prunes (lemon/orange)
• dehydrated tomatoes
• packaged salad toppings
• crushed garlic
• specialty chocolates and coffees if not very expensive
• shelf-stable nacho-with-cheese packages

Food ingredients are also in demand for bakery sector:

• poppy and sesame seed

• pie fillings (blueberry, cherry)
• preservatives
• sugar byproducts and syrups
• liquid shortening
 Marketing/Business Approach

In some stores such as Spar, there is

centralized purchasing; in others, such as
Hyperama/Shoprite, individual buyers
must be approached. In the case of
Woolworth, the importing agent must be
contacted, although the company is
known to visit major food shows.

As a buyer from Spar stores stated,

"Anything sells if the price is right." He
personally welcomes novelty products, provided companies come with marketing
program and promotional funds. Exceptions are possible, if the product is unique.

Most other stores are also willing to entertain promotion of U.S. products.
Woolworth, which is currently doing "Taste of the Far East," also carries "Taste of
America" (fajitas and salsa in chilled form). In the past, they’ve undertaken U.S.
promotions (mostly hamburgers, pizza, Tex/Mex). Woolworth charges a fee to
companies to carry out its private-label promotions. Imports are handled through
their local or a European agent. Hyperama recommended piggybacking promotions
with larger U.S. companies (such as Heinz and Pillsbury) that already have a
presence in the market and product lines to offer.

For a regular promotion, store advertising cost as little as $5,000, but can run as
high as $100,000, depending on the advertising media–store flyer, TV, or radio.

Major Food Shows

There are two major food-related shows that U.S. companies should consider if they
want to begin to get a foothold in the market.

Food & Hotel Africa is a food-and-beverage show exclusively. In 1998, it had 164
exhibitors occupying 2,500 square meters; most exhibitors were African companies ,
but several international pavilions were also organized, including ones from the
United States, Australia, and Zimbabwe. Other international presence included
Italian, British, Turkish, and French exhibitors. Approximately 6,600 visitors
attended.

The show has the backing of the Federation of Hospitality of African States. The
United States had 10 exhibitors and about 20 companies were represented with
sample products in the American Café, organized by FAS.
The show will next be held on Sept. 17-20, 2000, occupying a 3,500-square-meter
area at Sandton Convention Center, north of Johannesburg.

Hostex had 367 exhibitors in 1999, with four halls dedicated to food and hospitality-
related equipment. About 25 percent of the exhibitors were food-related companies.
The show organizers expected approximately 17,000 plus visitors. About 100 chefs
performed cooking demonstrations. No national pavilions were present, but
companies from the United Kingdom, Italy, Spain, and a few from the United States
participated in the show. Products in the food hall were mixed, with heavy emphasis
on coffee, tea, energy drinks, bakery supplies, and food ingredients intended for the
bakery sector. Some food ingredient suppliers regarded the show as the best venue
to reach the food services and the food processing sector.

In 2001, organizers plan to have a separate wine and spirits pavilion, which will add
a new dimension and customer base.

The FAS Trade Show Office and the U.S. Agricultural Office in Pretoria strongly
encourage U.S. companies to participate in the shows to enhance their competitive
position in this exciting market.
 FACTORS TO BE CONSIDERE BEFORE STARTING A
BUSINESS IN SOUTH AFRICA:

An environmental analysis should be continuous process and feed all

aspects of planning for any organisation. The organisation's environment is
made up of:

1. The internal environment e.g. staff (or internal customers), office

technology, wages and finance

2. The micro-environment e.g. our external customers, agents and

distributors, suppliers, our competitors

3. The macro-environment e.g. Political (and legal) Factors, Economic

Factors, Sociocultural Factors, and Technological Factors. These are known
as PEST Factors.

Political Factors
The political arena has a huge influence upon the regulation of health care,
the money available, the priorities for disease management. You must
consider issues such as:

1. ecological/environmental issues
2. current legislation home market
3. future legislation
4. SADC/international legislation
5. regulatory bodies and processes
6. government policies
7. government term and change
8. trading policies
9. funding, grants and initiatives
10.home market lobbying/pressure groups
11.international pressure groups
12.wars and conflict
 Economic Factors
Marketers need to consider the state of a trading economy in the short and
long-terms. This is especially true when planning for international
marketing. You need to look at:

1. home economy situation

2. home economy trends
3. overseas economies and trends
4. general taxation issues
5. taxation specific to product/services
6. market and trade cycles
7. specific industry factors
8. market routes and distribution trends
9. customer/end-user drivers
10.interest and exchange rates
11.international trade/monetary issues

Socio-cultural Factors
The social and cultural influences on business vary from country to country.
It is very important that such factors are considered. Factors include:

1. lifestyle trends
2. demographics
3. consumer attitudes and opinions
4. media views
5. law changes affecting social factors
6. brand, company, technology image
7. consumer buying patterns
8. fashion and role models
9. major events and influences
10.buying access and trends
11.ethnic/religious factors
12.advertising and publicity
13.ethical issues
 Technological Factors
Technology is vital for competitive advantage, and is a major driver of
globalization. Consider the following points:

1. competing technology development

2. research funding
3. associated/dependent technologies
4. replacement technology/solutions
5. maturity of technology
6. manufacturing maturity and capacity
7. information and communications
8. consumer buying mechanisms/technology
9. technology legislation
10.innovation potential
11.technology access, licencing, patents
12.intellectual property issues
13.global communications
 Guidelines to a Food Products Exporter setting-up
operations in South Africa

Entering the South African Market

South Africa is one of the most multicultural countries in the world. In

urban areas, many different ethnic groups will make up the population.
There are major differences in communication styles depending upon the
individual's cultural heritage. In addition to the indigenous black peoples of
South Africa, colonialism and immigration have brought in white Europeans,
Indians, Indo-Malays, Chinese and many more. As such, it is difficult to
generalize at all on South African etiquettes and culture due to the diversity.

Due to the diversity, South Africa has 11 official languages. All

documentation is presently printed in English and Afrikaans. English is more
frequently used commercially and most companies in South Africa are able
to correspond in either language. A majority of the white population speaks
both languages, as does a considerable proportion of the non-white
population. There is some language sensitivity in South Africa, particularly
among the Afrikaner population; consequently, many firms print much of
their literature, including annual statements, in both languages. You should
try to do the same with your literature and proposals. The effort will be
appreciated.

Relationships are built in the office and most businesspeople are looking for
long-term business relationships. Even though the country leans towards
egalitarianism, businesspeople respect senior executives and those who
have attained their position through hard work and perseverance. Most
South Africans, regardless of ethnicity, prefer face-to-face meetings to more
impersonal communication mediums such as e-mail, letter, or telephone.
South Africans want to maintain harmonious working relationships, so they
avoid confrontations. Don’t be surprised when your counterpart uses
metaphors and sports analogies to demonstrate a point.

Women in South Africa have not achieved senior levels in business. If

sending a female representative, be prepared to face condescending
behavior and to be tested; whereas, a male contact would not. Women need
to prove themselves worthy in the South African business world.
Generally, business hours are weekdays from 8:00 a.m. to 1:00 p.m. and
2:00 p.m. to 4:30 p.m. Most offices observe a five-day week, but shops are
generally open from 8:30 a.m. to 5:30 p.m. weekdays and from 8:30 a.m. to
1:00 p.m. on Saturdays. Business transactions in South Africa are commonly
carried out on open terms with payments being made within 45 to 50 days
after bill of lading. However, when working with new clients, irrevocable
letters of credit are advisable. Cash against documents arrangements are
also used, although there are some risks in these arrangements that make
letters of credit a safer alternative for the exporter.

Gift giving is not a common business practice. If being entertained at a

South African’s home, it is common to bring a gift. Take time in wrapping
your gift, it shows extra effort and is valued. Good gifts to bring to the
hostess are flowers, good quality chocolates, or a bottle of good South
African wine. When giving a gift, present it with either both hands or the
right hand. Never give a gift with the left hand. Gifts are opened upon
receiving.

South Africa is a large fresh fruit exporter: 38% of all fruit produced in 2003
was exported. The top three fruits are: oranges, grapes, and apples. South
Africa is the Southern Hemisphere’s largest orange exporter. South Africa
also exports many citruses.

South Africa is considered self-sufficient in vegetables. The top vegetables

exported from South Africa are tomatoes, onions, and cucumbers.

Their top exporting market is to the European Union (significantly with the
United Kingdom). Other markets are Russia, the U.A.E. and Japan. South
Africa is in more competition with Australia and Chile due to geography than
they are with the U.S. Fruit exports to the Middle East have grown in the
past few years.

Currently agriculture counts for 2.6% of South Africa’s GDP and 30% of the
country’s labor.
 Doing Business in the South African Market

First impressions are important. To help bridge the gaps, it is suggested

that:

• Upon meeting a South African, normally a hand shake and a smile is

appropriate, and leave time for some small talk.
• Dress is more informal, but for a first meeting, it is better to be
conservative. Men in dark suits, and women in elegant business suits
or a conservative dress.
• It is not required to have a long-standing relationship with business
partners, but if you are a new company unknown to South Africa, a
formal introduction will go a long way. Personal relationships are
important, so from the first meeting try to create a good rapport. This
will help prove you are trustworthy.
• Networking is a big part of the South African business culture.
• Always make appointments, even before a business call. Do so as far
in advance as possible, because it will better your chances of meeting
with higher levels of management.
• South Africans are very punctual, and South African business people
make every effort to be on time for appointments.
• Business cards are usually simple, including only the basics such as
company logo, name, business title, address, telephone number, and
fax number.
• Business meetings can be held over lunch or dinner at a good
restaurant.
• You must have developed mutual trust before negotiations can begin.
You should start with realistic figures, because South Africans don’t
like to haggle over prices.
• If negotiating, do not interrupt a South African. Also, try to reach a
consensus, your counterpart prefers win-win situations.
• Decisions are often made at the highest levels of a company after
conferring with subordinates, meaning the process is slow and
protracted so be patient.
• Include delivery dates in all contracts, because deadlines are seen as
fluid, not as firm commitments.
• When invited to a South African’s home, it will normally be a
barbecue, called a braaivleis (roasted meat in Afrikaans) or braai.
 • Avoid scheduling meetings from mid-December to mid-January and
the two weeks surrounding Easter, because this is when most South
Africans go on vacation.
• After you meet with your South African counterpart, send a follow up
letter summarizing what was decided at the meeting and the next
steps.

Consumer Preferences, Tastes, and Traditions

These ideas may help you focus your product approach. Attention to
catering to customer preferences is a key to success in the South African
produce market.

South African food retailers serve a wide range of consumers. At one end,
there are supermarkets very similar to those found in the United States.
These shops provide most of the products and services found in U.S. grocery
stores like processed foods, packaged meats, and fancy produce. South
Africans are also able to purchase organic products and vegetables, which
are fast growing segments of the retail food market (led by organic baby
food). Many supermarkets serve pre-assembled meal items such as roasted
chickens and cut vegetables ready for soup, stir-fry, and salads, while
others sell ready-made meals like sandwiches and sushi. At the other end,
consumers are also well-served by a thriving informal sector. Spazas are
independent grocers that are typically found in townships and generally
specialize in staple foods like cornmeal, rice, cooking oils, and meats.

Despite the variety of options available to South African consumers, price

sensitivity rules their behavior. A source survey in 2002 found that 47.8%
based their decisions on price and 16.9% buy store brand (generic brand)
items because they are good value for money. Only 13.4% mentioned
quality as a motivator. Products that are successful with store brand labels
include milk, syrups, dry pasta, nuts, canned fruits, and jellies.

Although many South Africans choose products according to price,

consumers in townships often demonstrate contradictory demands and
characteristics. For example, spazas and other informal shops tend to only
supply leading brand items because their customers demonstrate strong
brand loyalty. Adding to this trend is the fact that the black population’s
buying power is increasing. At the same time, product attributes that may
help a product succeed in township markets are less expensive and/or
single service package sizes and ambient-stable products that do not
require refrigeration.

Export Business Reminders

Before coming to South Africa, use the many sources of information, for
example, the U.S. Foreign Agricultural Service, state agricultural offices, and
state/regional trade organizations.

• Build at least a minimum team within your company to help on the

South African market.
• Use metric terms.
• Ensure that all sales documentation is correct.
• Be patient regarding requests for documentation, ingredients lists,
production process, and quality assurance.
• Respond to such requests with diligence and in a timely fashion.
• Use letters of credit to reduce risk.
• Hedge export values with your U.S. bank if you are concerned about
exchange rate risk.
• Set up wire transfers for payments.

Advantages and Disadvantages to doing business in South Africa

Advantages Disadvantages
Favorable exchange rate, weak dollar Retailers/consumers have little
combined with strong Rand and Euro knowledge about the variety of U.S.
make U.S. imports more affordable products
U.S. products are viewed as being high Acquired tastes/preferences for
quality local, traditional products
South African importers seek suppliers Challenging for U.S. suppliers to
who can offer quality products at respond to trade-lead inquiries in a
competitive prices timely fashion
Growing retail industry needs imported Competition from other countries and
food/beverage products locally produced products
Transparent import regulations
Steady decline in tariff levels on most
products
 Marketing of Financial Products in South Africa
For many years the marketing and distribution of financial products in South Africa
has been inadequately controlled and regulated. This has led to abuse with resultant
losses to members of the public.

For example, the sale and distribution of collective investments is currently

governed by the Unit Trusts Control Act of 1981 which is inadequate to deal with
the marketing of modern sophisticated investment products, and which has from
time to time been patched up to meet the challenges presented by the proposed
marketing in South Africa of foreign mutual funds and other collective investment
schemes. The main protection afforded by the Act is that no one may offer the
public for value an interest or undivided share in any assets or the right to
participate proportionately in the income or profits so derived, save in a registered
unit trust scheme.

In other words, it is necessary to apply for registration under the Act if it is

proposed to offer participations in a collective investment scheme to members of the
public. Registration entails the adoption of a trust deed which will govern the
activities of the proposed unit trust scheme, the appointment of trustees to the
scheme, and the registration of a management company, suitably capitalised, for the
purposes of administration of the scheme.

In order to cope with the marketing in South Africa of collective investment schemes
carried on outside South Africa, but promoted in this country, certain conditions
were published under the Act in 1998, with which foreign collective investment
schemes are required to comply. The basic requirement is that the regulatory
environment of the Home Country must be at least of the same standing as the
South African regulatory environment, and the distribution and marketing of the
scheme in South Africa must conform with South African requirements. These
procedures are similar to those applicable in the European Union.

However, the Financial Services Board (the South African authority responsible for
the regulation of the distribution of financial products) has stipulated certain
minimum capitalization requirements for representative offices in South Africa
which will be engaged in the marketing of foreign investment schemes, and a further
requirement that a level playing field should apply to both local and foreign
collective investment schemes. A foreign investment scheme may not, for example,
market investments in derivatives or hedge funds, which are currently denied to
local collective investment schemes.

Until recently, the sale and marketing of long term insurance products, both local
and foreign, was fairly loosely regulated and controlled. This was particularly so in
the case of life insurance linked investment products and associated unit trust funds.
Since the democratization process in South Africa in 1994, a number of foreign
insurers have sought to establish operations in South Africa by way of promotion of
their products by the so called "suitcase" representative canvassing for business in
this Country, or through independent brokers (IFA's), or by visits of employees who
whilst promoting the offshore product of the foreign insurer did not accept or
receive applications in South Africa, the latter being forwarded directly to the
product provider concerned. These activities caused great concern to the Financial
Services Board in that the product providers in question were regarded as carrying
on business in South Africa in contravention of the normal regulatory prudential
requirements, with the result that policyholders might have been at risk in the event
of financial instability of the product provider.

The above shortcomings are about to be addressed by an avalanche of new

legislation as foreshadowed by various proposed Bills such as the Financial Advisors
Bill, the Financial Services Regulatory Bill (which has now been withdrawn and the
terms of which are to be consolidated into the Financial Advisors Bill), and the
Collective Investment Schemes Control Bill. Furthermore, the provisions of the new
Long-term Insurance Act, 1998 go some way towards controlling the marketing of
foreign life investment products in South Africa. Under that Act any person will be
deemed to be carrying on long-term insurance business in this country (and hence
will require registration) if that person performs any act in South Africa, where the
object or result of which is that another person will enter into or vary a long-term
policy with that person; or where such act is aimed at the administration of any
long-term policy such as the collecting of premiums or settling of any claim under
that policy.

The proposed Collective Investment Schemes Control Bill will, whilst introducing
far stricter regulatory requirements, at the same time possibly provide an
environment for the creation of a far wider range of investment products than are
currently permitted under the Unit Trusts Control Act. This new legislation will
incorporate the best of international regulations pertaining to collective investment
schemes.

Under the new Long-term Insurance Act, 1998 the Registrar of Long-term
Insurance has recently published policyholder protection rules for comment. These
rules are not dissimilar to the marketing and disclosure requirements for the sale of
insurance products in the United Kingdom.

In the result, both local and foreign product providers and distributors of
investment products in South Africa may soon be confronted with regulatory
requirements. This can only have positive consequences for the investor, including
access to a far wider range of investment products than are presently available.
 Marketing Management in South Africa
Activities and functions

Marketing management encompasses a wide variety of functions and activities,

although the marketing department itself may be responsible for only a subset of
these. Regardless of the organizational unit of the firm responsible for managing
them, marketing management functions and activities include the following:

Marketing research and analysis:

In order to make fact-based decisions regarding marketing strategy and design

effective, cost-efficient implementation programs, firms must possess a detailed,
objective understanding of their own business and the market in which they
operate. In analyzing these issues, the discipline of marketing management often
overlaps with the related discipline of strategic planning.

Traditionally, marketing analysis was structured into three areas: Customer

analysis, Company analysis, and Competitor analysis (so-called "3Cs" analysis).
More recently, it has become fashionable in some marketing circles to divide these
further into certain five "Cs": Customer analysis, Company analysis, Collaborator
analysis, Competitor analysis, and analysis of the industry Context.

The focus of customer analysis is to develop a scheme for market segmentation,

breaking down the market into various constituent groups of customers, which are
called customer segments or market segments. Marketing managers work to
develop detailed profiles of each segment, focusing on any number of variables that
may differ among the segments: demographic, psychographic, geographic,
behavioral, needs-benefit, and other factors may all be examined. Marketers also
attempt to track these segments' perceptions of the various products in the market
using tools such as perceptual mapping.

In company analysis, marketers focus on understanding the company's cost

structure and cost position relative to competitors, as well as working to identify a
firm's core competencies and other competitively distinct company resources.
Marketing managers may also work with the accounting department to analyze the
profits the firm is generating from various product lines and customer accounts. The
company may also conduct periodic brand audits to assess the strength of its brands
and sources of brand equity.

The firm's collaborators may also be profiled, which may include various suppliers,
distributors and other channel partners, joint venture partners, and others. An
analysis of complementary products may also be performed if such products exist.

Marketing management employs various tools from economics and competitive

strategy to analyze the industry context in which the firm operates. These include
Porter's five forces, analysis of strategic groups of competitors, value chain analysis
and others. Depending on the industry, the regulatory context may also be
important to examine in detail.

In Competitor analysis, marketers build detailed profiles of each competitor in the

market, focusing especially on their relative competitive strengths and weaknesses
using SWOT analysis. Marketing managers will examine each competitor's cost
structure, sources of profits, resources and competencies, competitive positioning
and product differentiation, degree of vertical integration, historical responses to
industry developments, and other factors.

Marketing management often finds it necessary to invest in research to collect the

data required to perform accurate marketing analysis. As such, they often conduct
market research (alternately marketing research) to obtain this information.
Marketers employ a variety of techniques to conduct market research, but some of
the more common include:

• Qualitative marketing research, such as focus groups

• Quantitative marketing research, such as statistical surveys
• Experimental techniques such as test markets
• Observational techniques such as ethnographic (on-site) observation

Marketing managers may also design and oversee various environmental scanning
and competitive intelligence processes to help identify trends and inform the
company's marketing analysis.

Marketing strategy:

Once the company has obtained an adequate understanding of the customer base
and its own competitive position in the industry, marketing managers are able to
make key strategic decisions and develop a marketing strategy designed to
maximize the revenues and profits of the firm. The selected strategy may aim for
any of a variety of specific objectives, including optimizing short-term unit margins,
revenue growth, market share, long-term profitability, or other goals.

To achieve the desired objectives, marketers typically identify one or more target
customer segments which they intend to pursue. Customer segments are often
selected as targets because they score highly on two dimensions:

1) The segment is attractive to serve because it is large, growing, makes frequent

purchases, is not price sensitive (i.e. is willing to pay high prices), or other factors

2) The company has the resources and capabilities to compete for the segment's
business, can meet their needs better than the competition, and can do so profitably.
In fact, a commonly cited definition of marketing is simply "meeting needs
profitably."
The implication of selecting target segments is that the business will subsequently
allocate more resources to acquire and retain customers in the target segment(s)
than it will for other, non-targeted customers. In some cases, the firm may go so far
as to turn away customers that are not in its target segment. The doorman at a
swanky nightclub, for example, may deny entry to unfashionably dressed
individuals because the business has made a strategic decision to target the "high
fashion" segment of nightclub patrons.

In conjunction with targeting decisions, marketing managers will identify the

desired positioning they want the company, product, or brand to occupy in the
target customer's mind. This positioning is often an encapsulation of a key benefit
the company's product or service offers that is differentiated and superior to the
benefits offered by competitive products.[8] For example, Volvo has traditionally
positioned its products in the automobile market in North America in order to be
perceived as the leader in "safety", whereas BMW has traditionally positioned its
brand to be perceived as the leader in "performance."

Ideally, a firm's positioning can be maintained over a long period of time because
the company possesses, or can develop, some form of sustainable competitive
advantage.[9] The positioning should also be sufficiently relevant to the target
segment such that it will drive the purchasing behavior of target customers.[8]

Implementation planning:

After the firm's strategic objectives have been identified, the target market selected,
and the desired positioning for the company, product or brand has been determined,
marketing managers focus on how to best implement the chosen strategy.
Traditionally, this has involved implementation planning across the "4Ps" of
marketing: Product management, Pricing, Place (i.e. sales and distribution
channels), and Promotion.

Taken together, the company's implementation choices across the 4Ps are often
described as the marketing mix, meaning the mix of elements the business will
employ to "go to market" and execute the marketing strategy. The overall goal for
the marketing mix is to consistently deliver a compelling value proposition that
reinforces the firm's chosen positioning, builds customer loyalty and brand equity
among target customers, and achieves the firm's marketing and financial objectives.

In many cases, marketing management will develop a marketing plan to specify how
the company will execute the chosen strategy and achieve the business' objectives.
The content of marketing plans varies from firm to firm, but commonly includes:

• An executive summary
• Situation analysis to summarize facts and insights gained from market
research and marketing analysis
• The company's mission statement or long-term strategic vision
 • A statement of the company's key objectives, often subdivided into marketing
objectives and financial objectives
• The marketing strategy the business has chosen, specifying the target
segments to be pursued and the competitive positioning to be achieved
• Implementation choices for each element of the marketing mix (the 4Ps)
• A summary of required investments (in people, programs, IT systems, etc.)
• Financial analysis, projections and forecasted results
• A timeline or high-level project plan
• Metrics, measurements and control processes
• A list of key risks and strategies for managing these risks

Project, process, and vendor management:

Once the key implementation initiatives have been identified, marketing managers
work to oversee the execution of the marketing plan. Marketing executives may
therefore manage any number of specific projects, such as sales force management
initiatives, product development efforts, channel marketing programs and the
execution of public relations and advertising campaigns. Marketers use a variety of
project management techniques to ensure projects achieve their objectives while
keeping to established schedules and budgets.

More broadly, marketing managers work to design and improve the effectiveness of
core marketing processes, such as new product development, brand management,
marketing communications, and pricing. Marketers may employ the tools of
business process reengineering to ensure these processes are properly designed, and
use a variety of process management techniques to keep them operating smoothly.

Effective execution may require management of both internal resources and a

variety of external vendors and service providers, such as the firm's advertising
agency. Marketers may therefore coordinate with the company's Purchasing
department on the procurement of these services.

Organizational management and leadership:

Marketing management usually requires leadership of a department or group of

professionals engaged in marketing activities. Often, this oversight will extend
beyond the company's marketing department itself, requiring the marketing
manager to provide cross-functional leadership for various marketing activities.
This may require extensive interaction with the human resources department on
issues such as recruiting, training, leadership development, performance appraisals,
compensation, and other topics.

Marketing management may spend a fair amount of time building or maintaining a

marketing orientation for the business. Achieving a market orientation, also known
as "customer focus" or the "marketing concept", requires building consensus at the
senior management level and then driving customer focus down into the
organization. Cultural barriers may exist in a given business unit or functional area
that the marketing manager must address in order to achieve this goal. Additionally,
marketing executives often act as a "brand champion" and work to enforce
corporate identity standards across the enterprise.

In larger organizations, especially those with multiple business units, top marketing
managers may need to coordinate across several marketing departments and also
resources from finance, R&D, engineering, operations, manufacturing, or other
functional areas to implement the marketing plan. In order to effectively manage
these resources, marketing executives may need to spend much of their time focused
on political issues and inte-departmental negotiations.

The effectiveness of a marketing manager may therefore depend on his or her ability
to make the internal "sale" of various marketing programs equally as much as the
external customer's reaction to such programs.[1]

Reporting, measurement, feedback and control systems:

Marketing management employs a variety of metrics to measure progress against

objectives. It is the responsibility of marketing managers -- in the marketing
department or elsewhere -- to ensure that the execution of marketing programs
achieves the desired objectives and does so in a cost-efficient manner.

Marketing management therefore often makes use of various organizational control

systems, such as sales forecasts, sales force and reseller incentive programs, sales
force management systems, and customer relationship management tools (CRM).
Recently, some software vendors have begun using the term "marketing operations
management" or "marketing resource management" to describe systems that
facilitate an integrated approach for controlling marketing resources. In some cases,
these efforts may be linked to various supply chain management systems, such as
enterprise resource planning (ERP), material requirements planning (MRP),
efficient consumer response (ECR), and inventory management systems.

Measuring the return on investment (ROI) of and marketing effectiveness various

marketing initiatives is a significant problem for marketing management. Various
market research, accounting and financial tools are used to help estimate the ROI of
marketing investments. Brand valuation, for example, attempts to identify the
percentage of a company's market value that is generated by the company's brands,
and thereby estimate the financial value of specific investments in brand equity.
Another technique, integrated marketing communications (IMC), is a CRM
database-driven approach that attempts to estimate the value of marketing mix
executions based on the changes in customer behavior these executions generate
 4 Ps of marketing

Marketing decision variables are those variables under the firm's

control that can affect the level of demand for the firm's products. They
are distinguished from environmental and competitive action variables
that are not totally and directly under the firm's control.

The four marketing decision variables are:

• Product - An object or a service that is mass produced or manufactured

on a large scale with a specific volume of units. A typical example of a
mass produced service is the hotel industry. A less obvious but ubiquitous
mass produced service is a computer operating system. Typical examples
of a mass produced objects are the motor car and the disposable razor.

• Price – The price is the amount a customer pays for a product. It is

determined by a number of factors including market share, competition,
material costs, product identity and the customer's perceived value of the
product. The business may increase or decrease the price of product if
other stores have the same product.
• Place – Place represents the location where a product can be purchased.
It is often referred to as the distribution channel. It can include any
physical store as well as virtual stores on the Internet.

• Promotion – Promotion represents all of the communications that a

marketer may use in the marketplace. Promotion has four distinct
elements - advertising, public relations, word of mouth and point of sale.
A certain amount of crossover occurs when promotion uses the four
principle elements together, which is common in film promotion.
Advertising covers any communication that is paid for, from television
and cinema commercials, radio and Internet adverts through print
media and billboards. One of the most notable means of promotion
today is the Promotional Product, as in useful items distributed to
targeted audiences with no obligation attached. This category has grown
each year for the past decade while most other forms have suffered. It is
the only form of advertising that targets all five senses and has the
recipient thanking the giver. Public relations are where the
communication is not directly paid for and includes press releases,
sponsorship deals, exhibitions, conferences, seminars or trade fairs and
events. Word of mouth is any apparently informal communication about
the product by ordinary individuals, satisfied customers or people
specifically engaged to create word of mouth momentum. Sales staff
often plays an important role in word of mouth and Public Relations
 New Marketing tools adopted in South Africa

EXHIBITIONS:

In recent years exhibitions and events have grown into a core position of the
strategic business plan in the modern organizations of South Africa. They attract
customers and potential business to your company. It is an enabler for pre-qualified
prospects and allows you to meet the market face to face. Visitors can touch and feel
your products; you can demonstrate them in real-time and answer questions and
offer solutions during dialogue. There is no “shotgun” approach in terms of target
audience definition, as the vast majority of people who attend exhibitions and events
– including suppliers, buyers and procurement influencers, consultants and the
media – want to be there in the first place. The fact that visitors are there by choice
underscores the power of exhibitions and events, contrary to other means of
communications where messages and solutions have to be pushed into the business
environment where decision makers are preoccupied with other business matters.

Exhibitions are effective and deliver measurable value. This extends from personal
selling to potential buyers, networking, building prospect databases, confirming
relations with existing customers and education. Many visitors, including students,
use the exhibition forum as a source for information. Other motivations are
demonstrating products and services, building brand awareness and generating
media exposure, product launches, corporate image – to mention a few. Exhibitions
have the potential to deliver a significant measurable return on investment,
including cost per lead and cost per sale. The recall factor due to personal
experience also lasts much longer – up to three years – compared to other forms of
communication. In many instances exhibitions form the platform for companies to
create other marketing opportunities.
ELECTRONIC MARKETING:

Electronic marketing is a new form of marketing which has been developed in

conjunction with the ever-growing popularity of the Internet and website
marketing. Being a rather new form of marketing in South Africa, the awareness of
the Internet as a tool for carrying out marketing initiatives is not so widely known
amongst the majority of corporations who continue to market themselves with use
of the traditional methods of print magazine advertisements and television
commercials.

Many companies who are experts in website marketing and have been conducting
business operations over the Internet for a couple of years are aware of electronic
marketing and the amazing results in business success it can quickly and effortlessly
achieve for a corporation. As such, website marketing experts, for example Intoweb
Marketing, who are greatly aware of the incredible things one can achieve from
marketing over the Internet, are currently promoting this new form of electronic
marketing, and encouraging corporations to not be afraid to try something new and,
as a result, experience for themselves the joys of endless success that electronic
marketing can bring to them, without even lifting one finger.

Electronic marketing is a specialty of Intoweb Marketing, and we have in turn an

adequate amount of experience in the world of the Internet and website marketing
to know which methods are the best for the marketing of the website of a company.
Essentially, electronic marketing can be described as the marketing of the
marketing of company that occurs over the Internet. The objective behind
performing electronic marketing, as is the objective behind all forms of marketing,
is to increase the awareness of a particular company amongst the consumer market.
Due to this similarity in goals, Intoweb Marketing sees email marketing and the
other longer-standing forms of print and television marketing as being one of the
same, which is why we encourage corporations to get themselves involved in the
method of electronic marketing; there is nothing but success to be achieved.
 South Africa: Business Opportunities

Johannesburg, the commercial and financial hub of South Africa, is located in the
center of the Gauteng Province. The Gauteng Province area of the former southern
Transvaal accounts for only 2 percent of the country's land mass, but it is the
powerhouse of the South African economy. The Gauteng Province generates 43
percent of the nation's gross domestic product and, at 8.7 million residents, has the
country's largest and most dense population.

As the country's transportation hub, Johannesburg is the center for all rail and road
connections and shares the country's major international airport with Pretoria, the
administrative capital of South Africa.

The Durban metropolis, with a population of over 3 million, is the second largest
urban area in South Africa and the home of Africa's busiest and most modern port.
It is also a popular tourist center because of its pleasant year-round climate.

The triangle of Durban-Pietermaritzburg-Pinetown is a manufacturing center for

such agriculturally related industries as footwear, textiles, paper, clothing, sugar and
processed food. Wood products manufacturing is an emerging industry.

Greater Cape Town is the country's third largest urban area, with a population of
2.5 million people. It is also a major tourist site due to the famed Table Mountain.

The Western Cape has excellent road, rail and air links, and Cape Town itself has a
well-equipped, modern harbor.

Cape Town's location along the coast, as well as the region's rich farmland, has led
to strong growth in the food processing industry. Other important agriculturally
related sectors include textiles, clothing, footwear and wood and furniture products.

The Port Elizabeth area has a population of nearly a million. It is South Africa's
fifth largest city, third largest port and home to the country's footwear industry. The
eastern Cape is a significant fruit and vegetable producer and is the location of the
wool and mohair industries.

Two other important market centers are Bloemfontein and East London.
Bloemfontein is the capital of the Free State Province and the Republic's judicial
capital. East London is a port on the Indian Ocean that primarily handles fruit and
grain exports.
Brief Outline Of South Africa's Distribution And Sales Channels

Foreign suppliers have a wide variety of options for distributing and selling their
products. These include using an agent or distributor; selling through established
wholesalers or dealers; selling directly to department stores or other retailers or
establishing a branch or subsidiary with their own sales force.

Slightly less than 50 percent of total merchandise sales in South Africa pass through
both a wholesaler and a retailer before reaching the final consumer. Forty percent of
sales are from the manufacturer to the retailer, bypassing the wholesaler. The
remaining 10 percent is split evenly between direct sales by wholesalers to
consumers and direct sales by producers or importers to consumers, bypassing both
the wholesaler and the retailer.

Advantages Of Selling Through An Agent Or Distributor

Agents are often particularly appropriate when products are highly competitive and
lack a large market. It is common to appoint a single agent capable of providing
national coverage either through one office or a network of branch offices.

In addition to serving as the local representatives for exporters, agents should also
be able to handle all necessary customs clearances, port and rail charges,
documentation, warehousing and financing arrangements. It is also good if they can
provide qualified local personnel capable of handling service inquiries. Servicing
delays often lead purchasers to seek alternative suppliers.

Once exporters establish contact with prospective agents, they should visit South
Africa to gain some firsthand knowledge of the market and the society. A visit will
also give them a chance to personally appraise a prospective agent or distributor.
Personal contact is very important to South Africans.

Exporters should always research the reputation and financial references of any
potential agent. They also need to establish a clear agreement delineating their own
responsibilities and those of their agents.
 Possibilities Offered By Other Distribution Channels

Consumer goods requiring maintenance of stocks and industrial raw materials often
are exported to South Africa through established wholesalers. Leading distributors
often have branches throughout South Africa and sell to both wholesalers and
retailers.

Many U.S. exporters of consumer goods sell directly to South African retail
organizations, such as consumer corporations, department stores, chain stores and
cooperative groups of independent retailers, which assume the functions of
wholesale buying, selling and warehousing.

A growing presence in South Africa are hypermarkets and discount centers which
sell large quantities of almost all consumer goods on a self-serve basis. The
hypermarkets, located in suburban shopping centers, have disrupted the traditional
distribution chain by purchasing directly from manufacturers and bypassing the
wholesaler.

Franchising is one of the most promising sectors for business growth in South Africa
today. There are currently some 90 franchisors in South Africa, 60 of whom are
members of the Franchise Association of Southern Africa (FAA).

By far the largest franchise sector in South Africa is the fast food industry. The
emphasis on nutritious food led to a 13-percent annual sales growth rate in the
chicken fast food industry between 1987 and 1990.
 South Africa 35th for ease of business
South Africa ranks 35th out of 178 countries in the World Bank and International
Finance Corporation's Doing Business 2008 report, an annual survey that measures
the time, cost and hassle for businesses to comply with legal and administrative
requirements.

The rankings track indicators of the time and cost to meet government
requirements in business start-up, operation, trade, taxation, and closure. Variables
such as macroeconomic policy, quality of infrastructure, currency volatility and
investor perceptions are not measured.

While South Africa dropped from 29th in the previous year's rankings, it remains
higher than developed countries such as Portugal (37th) and Spain (38th) as well as
major developing economies like Mexico (44th), China (83rd), Russia (106th), India
(120th) and Brazil (122nd).

South Africa also ranks ninth globally for its protection of investors, while it
recorded significant improvements in the areas of starting a business and getting
credit.

According to Doing Business 2008, South Africa carried out two reforms over the
survey period, abolishing the regional services and regional establishment levies,
and passing the National Credit Act, which requires lenders to check overall debt
levels before granting loans and guarantees borrowers the right to access and
challenge their credit records.

South Africa is the second-highest ranked country in Africa after Mauritius (27th)
in the survey.

Within sub-Saharan, South Africa ranks in the top 10 in all but four of 10
categories. It ranks first for protecting investors (9th globally), second for getting
credit (26th globally), third for starting a business (53rd globally), sixth for dealing
with licences (45th globally), seventh for closing a business (68th globally) and
eighth for registering property (76th globally).

African reformers
According to the report, the year's most improved economy - or "top reformer" -
was Egypt, which rose to 126th globally as a result of remarkable improvements in
starting a business, trading across borders, registering property, getting credit and
protecting investors.

Ghana and Kenya also both rank among the top 10 reformers worldwide for the
year, while Burkina Faso and Mozambique continued to climb the rankings.
The report finds that higher rankings for ease of doing business are associated with
higher percentages of women among a country's entrepreneurs and employees.

"The benefits of regulatory reform are especially large for women," report author
Sylvia Solf said in a statement. "Women often face regulations that may be designed
to protect them but that instead force them into the informal sector. These women
have little job security and few social benefits."

The report points out that in the Democratic Republic of Congo, women require the
consent of their husbands to start a business, and presently run only 18% of small
businesses. By contrast, in neighbouring Rwanda, which has no such regulations,
women run more than 41% of the country's small businesses.

Top economies
Singapore retains its position as the overall top-ranked economy, with New Zealand,
the US, Hong Kong and Denmark completing the top five.

Egypt, Croatia, Ghana, the former Yugoslavian Republic of Macedonia, Georgia,

Colombia, Saudi Arabia, Kenya, China and Bulgaria make up the top 10 for
improved performance.

Another 11 countries, including three in Africa - Armenia, Bhutan, Burkina Faso,

the Czech Republic, Guatemala, Honduras, Mauritius, Mozambique, Portugal,
Tunisia, and Uzbekistan - had three or more reforms during the survey period.

South Africa in global top 25 for investment

South Africa is ranked as the 18th most attractive foreign direct investment
destination worldwide in the latest Foreign Direct Investment (FDI) Confidence
Index by global management consulting firm AT Kearney.

This year sees South Africa and the Gulf states of Bahrain, Kuwait, Oman and
Qatar making their debuts in the index's top 25 FDI destinations, while Vietnam,
Malaysia and Indonesia make a return.

China and India continue to rank first and second in the 2007 index, while 15 of the
25 most attractive FDI destinations are developing markets. Brazil, the United Arab
Emirates and Russia all rank among the top 10.

"The assessment of senior executive sentiment at the world's largest companies

found corporate investors optimistic about the prospects for developing nations and
increasingly targeting them for more corporate investment in the years ahead," AT
Kearney said in a statement earlier this month.
In a reassuring sign, the detailed survey of top executives conducted after the sub-
prime crisis found that troubles in the credit markets had not dampened corporate
plans for new foreign direct investments.

AT Kearney chairman Paul Laudicina pointed out that world's centre of power
continued its "perceptible shift" from developed to developing markets.

"While global FDI recovers further from its 2003 lows, the increasingly trans-
national behaviour of corporations is reflected in their investment preferences," he
said. "Developed countries are competing with developing countries for investment
capital, and developing countries are increasingly winning out."

According to AT Kearney, emerging markets also have registered the strongest

investor optimism, with India, China, Brazil, the United Arab Emirates and
Vietnam experiencing the most positive change in investment outlook during the
past year.

"While China and India remain the top destinations for first-time investments
overall, developing country investors are more bullish about new markets such as
Vietnam, Brazil and South Africa, while developed market investors tend to stick to
familiar markets," FDI Confidence Index manager Janet Pau said.

"Developing country investors also are likely to be responsible for more than half -
54% - of the investments greater than $500-million over the next three years."

Among developed countries, the US again placed third, while Europe's economic
recovery helped Germany and the UK maintain their top 10 rankings. Australia
ranked 11, with France, Canada and Japan placing 13, 14 and 15 respectively.

The index, a regular survey of global executives, provides a unique look at the
present and future prospects for international investment flows, with companies
participating in the survey accounting for more than US$3.8-trillion in annual
global revenue.

The 25 most attractive FDI destinations according to Corporate Executives:

1. China
2. India
3. United States
4. United Kingdom
5. Hong Kong
6. Brazil
7. Singapore
8. United Arab Emirates
 9. Russia
10. Germany
11. Australia
12. Vietnam
13. France
14. Canada
15. Japan
16. Malaysia
17. Other Gulf States
18. South Africa
19. Mexico
20. Turkey
21. Indonesia
22. Poland
23. Central Asia
24. South Korea
25. Czech Republic

South Africa 'Winning The War On Poverty

South Africans across all income groups currently earn on average about 22% more
in real terms per person than in 1999, while the number of people living in poverty
has also fallen, Finance Minister Trevor Manuel told Parliament in delivering his
2007 Medium Term Budget Policy Statement on Tuesday.

"In almost every area of public service delivery, from access to schooling and health
care to refuse removal, from electrification to access to computers, from roads and
street lights, from telecommunication services to access to public transport, we can
point to steady progress in living standards," Manuel said.

Economic growth, as measured by gross domestic product (GDP), has increased

from an average of 3.3% between 1999 and 2004 to around 5% a year since then.

Employment has risen by about 2.7% a year since 2001, which the National
Treasury says is faster "than at any point in the previous two decades". By March
this year, the estimated unemployment rate was 25.5%, a decrease from 28% in
2004.

The number of South Africans living in poverty - based on a poverty line of about
R3 000 per person per year in 2000 prices - has dropped steadily from 52.1% in
1999 to 47% in 2004 and to 43.2% by March this year.
The Treasury points out that this took place amid rising government spending,
which has risen by an average of 9.4% a year for five years, making it now twice as
high as it was in 1995.

This means that government spending per person has risen from R6 800 in 1995 to
R10 560 per person in real 2007 prices.

The increased spending has been used to create no-fee schools benefiting the poorest
40% of the country's learners, to scale up HIV/Aids programmes to assist hundreds
of thousands, and to expand SA's social grant system to serve over 12-million South
Africans.

Since 1995, more than two million homes have been built and more than three
million homes have been electrified, while more than 16-million people have been
provided with first-time access clean water.

The Treasury also points out that free basic municipal services are now provided to
more than 70% of South Africa's population.

Areas that will receive continued focus include accelerating the pace of growth and
the rate of investment in South Africa's productive capacity, "decisive"
interventions to accelerate job creation, and investment in community services and
human development.

At the same time, says the Treasury, a "progressive social security net" must be
maintained, while improving the capacity and effectiveness of the state, including
boosting crime-combating and promoting a service-oriented public administration,
as well as building regional and international partnerships for growth and
development
 South Africa's 'Exploding' Middle Class

South Africans are among the most upwardly mobile people in the world, according
to a number of surveys which "paint a picture of a highly ambitious, bulging middle
class that describes itself as happy and proud to be South African," the Sunday
Times reports.

Citing studies of class mobility in South Africa by researchers FutureFact and the
University of Cape Town's Unilever Institute, the Sunday Times' Sharda Naidoo
writes that SA is breeding "an exploding middle class", with optimism pervading
the country "as millions haul themselves out of poverty".

According to the UCT Unilever Institute and Research Surveys, only around 2-
million out of SA's population of 47-million make up the country's emerging black
middle and upper classes.

However, the group accounts for over 40% of total black spending power - currently
a massive R130-billion annually - and is growing at an estimated rate of 50% a year.

And according to the Future Fact survey "Getting up and staying up," South
Africa's middle class is even bigger - if aspiration and self-perception are anything
to go by.

Of the roughly 2 500 adults surveyed by FutureFact, 45% see themselves as middle
class, 31% as working or lower class, 12% as as upper middle class and 2% as
upper class (with 10% unsure).

One-third of FutureFact's respondents believe they are in a higher class than their
parents were, while 53% believe their standard of living is higher than that of their
parents - and 60% of parents believe their children's standard of living will be
higher still when they reach the same age.

Describing these respondents, FutureFact's Jos Kuper told the Sunday Times:
"They see there has been huge progress economically, and they see an abundance of
opportunities and facilities available to them."

Separate research by the International Marketing Council of South Africa (IMC) - a

public-private body that markets the country to tourists and investors - supports
this picture of an optimistic country.

In a recent IMC survey of 3 000 people, 94% said they were proud to be South
African, 80% said their lives were better now than before 1994 - when the country
held its first democratic elections - and 89% said they thought their lives would be
better still in 10 years' time.
According to the IMC's Mmaphuti Rankapole, this optimism is crucial for class
mobility. "If South Africans feel good about the country, then it makes them world
harder and they act in the interests of the country," she told the Sunday Times.

"This gives us a competitive edge when we're marketing SA to overseas investors as

a land of unlimited business opportunity. Investment translates to economic growth,
which means more opportunities, more jobs, and better socio-economic conditions,"
Rankapole said.

"All these help people to be class-mobile."

The South African Population

 South Africa's Booming Black Middle Class

South Africa's black middle class has grown by 30% in just over a year, with their
numbers increasing from 2-million to 2.6-million and their collective spending
power rising from R130-billion to R180-billion.

That's according to a new study by the University of Cape Town's Unilever Institute
of Strategic Marketing and TNS Research Surveys. The study, Black Diamond 2007:
On the Move, is based on a sample of 4 500 people and follows two previous studies
by the research partners.

UCT/Unilever Institute director Professor John Simpson and TNS Research

Surveys' Neil Higgs say the study reveals an unprecedented movement in South
Africa's most important economic grouping.

"It is also clear that marketers and businesses have not yet got to grips with this
market and therefore may be missing the opportunities it presents," Simpson said in
a statement on Monday.

The new research shows that there is not only growth from new entrants into what
the institute terms the "black diamond" segment, but also from within its ranks as
people move up the ladder and establish themselves in the middle class.

Spending power
The combined annual spending power of South Africa's "black diamonds" had
grown tremendously since the last study, from an estimated R130-billion at the end
of 2005 to R180-billion at the beginning of 2007.

In comparison, white South Africans' annual collective buying power increased

from R230-billion to R235-billion and that of black South Africans collectively from
R300-billion to R335-billion over the same period.

Annual claimed buying Last quarter 2005

First quarter 2007 estimate
power estimate
Whites R230bn R235bn
Blacks: total R300bn R335bn
Black diamonds R130bn R180bn

"Perhaps the most important figure here is that 12% of South Africa's black
population account for over half (54%) of all black buying power," Simpson said.
"This compares with 10% accounting for 43% of black buying power 15 months
ago."
 GLOBAL COMPANIES IN SOUTH AFRICA

Since democracy returned South Africa to the world in 1994, global companies have
been flocking here to take advantage of the country's vast investment potential.

In the words of to Jim Myers, president of the American Chamber of Commerce in

South Africa: "The sophisticated business environment of South Africa provides a
powerful strategic export and manufacturing platform for achieving global
competitive advantage, cost reductions and new market access."

Almost half the members of the American Chamber of Commerce in South Africa
are Fortune 500 companies, and over 90% operate beyond South Africa's borders
into southern Africa and across the continent.

The year 2005 shattered all records on the JSE, South Africa's stock exchange, in a
boom fuelled by foreign investors buying up R50-billion in local shares, setting a 10-
year high for international investment in the exchange.

Nearly 20 years after abandoning apartheid-era South Africa, multinational

banking giant Barclays returned in 2005 with a massive R30-million purchase of a
majority stake in Absa, one of the country's big-four banks. The historic deal was
the biggest single foreign direct investment in South Africa, ever.

German motor manufacturer BMW opened its Rosslyn assembly plant near
Pretoria in 1994. The company recently announced a further investment of R2-
billion in the facility, allowing it to produce 60 000 units a year - and increasing its
South African export capacity to R50-billion over the lifecycle of future models.

The world's largest communications company, Vodafone, announced in November

2005 that it is to increase its stake in South African cell-phone company Vodacom to
the tune of R16-billion.

Other major multinationals with major operations here include Volkswagen,

General Electric, Acer, Cisco Systems, Microsoft, EDS Corp, Hertz, Levi Strauss,
Coca-Cola, Pepsi, and Indian giants Mittal and Tata.
 African Success Stories

Angola, mainly beyond the scrutiny of Western correspondents, is undergoing an

extraordinary economic revival and is set to become a regional power in the years
ahead.

Botswana, long a role model of good governance and economic efficiency, was
described recently by Barclays Chief John Varley, at a symposium at the CASS
Business School attached to London's City University, as "one of greatest
undeclared miracles of growth and economic management".

Nigeria, which is projected to be one of the word's 10 largest economies by 2020, is

moving on a trajectory of growth and accountability, and countries like Ghana,
Senegal, Tanzania, Mozambique and Zambia have become relative havens of peace
and development.

The advent of the mobile phone has given entrepreneurism a major boost
throughout the continent, and the most pressing needs lie with infrastructure
development - particularly in energy and transport - financial inclusion and access
to capital, the revival of the continent's universities, and a sound education and
health infrastructure.

Most pressing - and this is where the Western countries could deliver, but vested
interests in the US and the EU prevent it - is the need for a levelling of the rules for
global trade, in particular through scrapping agricultural subsidies.
 Seeing Africa in a Different Light

One can already begin to feel the difference in Africa. Investors are looking at Africa
in a new light and increasingly seeing the need to have a foothold there, much as was
the case with China 20 years ago. Banks talk excitedly about the opportunities and
venture capital is engaging increasingly in the once marginalized continent.

"To be successful in Africa, business leaders must reject the image of a continent in
constant crisis," said Fitzgerald, Britain's most credible and passionate Afro-
optimist. "Challenges remain but, in a continent of almost a billion people, so do
huge opportunities. The potential dividends for businesses which are bold and
forward-looking are huge."

China's involvement in Africa is strategic and long-term. There are already signs of
a shift in China's terms for business in Defer and Zimbabwe, and similar shifts are
evident in China's growing attention to intellectual property rights and anti-
corruption measures.

Western countries have long tended to dismiss China's interest as inimical to human
rights and sustainable development, but they might not be able to do so for much
longer.

"China is lining up its entrepreneurs behind a vision which is based on securing

mineral supplies and building future markets," said Fitzgerald. "This is very
powerful and we ignore it at our peril."

The marriage of China's largest bank and South Africa's Standard Bank is the
clearest sign yet that the global economic order is in the midst of fundamental
change. Its centre of gravity is moving eastwards and southwards, and the trend is
gaining momentum rapidly.

As a strategic partner of China and closely allied to Brazil and India, South Africa is
strategically placed to make the best of the new day that is coming ... just around the
bend.
SOUTH AFRICA: A WORLD WITHIN ONE COUNTRY