South African Business 2016 by Global Africa Network Media

2016 EDITION

SOUTH AFRICAN BUSINESS THE GUIDE TO BUSINESS AND INVESTMENT IN THE REPUBLIC OF SOUTH AFRICA

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CONTENTS

Introduction South Africa—an introduction A guided tour of the South African business landscape.

Operation Phakisa An overview of the dynamic initiative set to unlock South Africa’s potential.

Special features Doing business in Africa How to make the most of opportunities on the continent.

Funding 26 An overview of the various funding channels available to businesses. Skills development Effective skills development policies are vital in the battle to stay competitive.

Law firms Legal eagles are the wind beneath your wings.

BRICS 50 Top law firm ENSafrica outlines the great economic community. IPAP 2015/2016 The latest instalment of the Industrial Policy Action Plan.

Regional overviews Eastern Cape The province’s economy is driven by manufacturing and business services.

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Free State Centrally located, the Free State uses its strategic position to its economic advantage.

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Gauteng 164 Gauteng is the smallest in area but the largest contributor to the national GDP. KwaZulu-Natal 170 KwaZulu-Natal’s subtropical climate offers perfect cultivating conditions. Limpopo 172 The most northern point of South Africa, Limpopo is untamed Africa at its best. Mpumalanga 174 Mpumalanga has an incredibly varied economy, with growth in transport and business. Northern Cape The great Orange River helps to irrigate the province’s prime agricultural land.

184

North West The North West has the world’s richest source of platinum group metals (PGMs).

186

Western Cape Booming with tourism, diverse manufacturing and world-class infrastructure.

188

SOUTH AFRICAN BUSINESS 2016

CONTENTS

Economic sectors Agriculture — Striving for food security in the teeth of climate change. 68 Oil and gas — Exploration is increasing, on land and at sea. 72 Mining — The mining sector is facing tough challenges. 80 Mineral beneficiation — South Africa has significant capacity for processing minerals. 82 Energy — A vibrant and various landscape. 86 Manufacturing — Increasing manufacturing capacity is a national priority. 90 Automotive — New investments demonstrate confidence. 92 Automotive components — Original Equipment Manufacture offers hope for growth. 94 Food and beverages — The sector employs nearly a quarter-of-a-million people. 95 Chemicals and pharmaceuticals — The Dow Chemicals Company opens a unique plant. 96 Engineering — Strategic Infrastructure Projects. 97 Healthcare — New government spend revealed. 98 Water — South Africa rises to the challenge of water scarcity. 100 Transport — South Africa’s economic circulatory system. 106 Maritime — The ocean promises to deliver thousands of jobs. 110 Tourism — SA Tourism is outperforming the global average. 112 Events — Conferencing is a growth industry. 116 Trade with Africa Intra-African trade has a long way to go. 117 ICT The central nervous system of the economy. 118 Banking and financial services South Africa’s biggest economic sector. 126 Development finance and SMME support Getting small business bankable. 128 Education and training A never-ending process of refinement. 132 Waste recycling Economic opportunity in refuse. 134 Renewable energy The great South African success story that is REIPPP. 142

Reference South African business organisations Self-organising structures of economic affinity. 146 South African government The organogram of the State. 148 Index 192

SOUTH AFRICAN BUSINESS 2016

CREDITS Publisher

Chris Whales

Account representatives

Debbie Bender-Overmeyer Publishing director Robert Arendse Editor

Gabriel Venter Jeremy Petersen Malcolm Solomon Richard Whittingdale Sam Oliver Shiko Diala Sydwell Adonis Veronica Dean-Boshoff

Simon Lewis

Writing David Capel Greg Penfold John Young Editorial assistants Shannon Manuel Beverley Stone Art director

Managing director

Brent Meder

Administration & accounts Charlene Steynberg Natalie Koopman

Design Sheeth Hanief Charlie Kershaw Production

Clive During

Distribution

Edward MacDonald

Printing

CTP

Linda Tom

DISTRIBUTION South African Business is distributed internationally on outgoing and incoming trade missions, through trade and investment agencies; to foreign offices in South Africa’s main trading partners around the world; at top national and international events; through the offices of foreign representatives in South Africa; as well as nationally and regionally via chambers of commerce, tourism offices, trade and investment agencies, provincial government departments, municipalities and companies. Member of the Audit Bureau of Circulations

PUBLISHED BY Global Africa Network Media (Pty) Ltd Company Registration No: 2004/004982/07 Directors: Clive During, Chris Whales Physical address: 28 Main Road, Rondebosch 7700 Postal address: PO Box 292, Newlands 7701, South Africa Tel: +27 21 657 6200 | Fax: +27 21 674 6943 | Email: info@gan.co.za | Website: www.gan.co.za

COPYRIGHT South African Business is an independent publication published by Global Africa Network Media (Pty) Ltd. Full copyright to the publication vests with Global Africa Network Media (Pty) Ltd. No part of the publication may be reproduced in any form without the written permission of Global Africa Network Media (Pty) Ltd.

DISCLAIMER While the publisher, Global Africa Network Media (Pty) Ltd, has used all reasonable efforts to ensure that the information contained in South African Business is accurate and up-to-date, the publishers make no representations as to the accuracy, quality, timeliness, or completeness of the information. Global Africa Network will not accept responsibility for any loss or damage suffered as a result of the use of or any reliance placed on such information. PHOTO CREDITS Pictures supplied by clients, with additional pics courtesy of Transnet National Ports Authority, Transnet Engineering, Redisa, SA Tourism, MorgueFile, Sasol, Anglo American, MEGA, Brand SA, Media Club SA and sanews.gov.za.

SOUTH AFRICAN BUSINESS 2016

FOREWORD

HIGHLIGHTS SOUTH AFRICAN BUSINESS A unique guide to business and investment in South Africa.

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elcome to the fourth edition of South African Business. First published in 2011, the publication has established itself as the premier business and investment guide to South Africa, with an audited and certified distribution that has grown from 15 000 copies to 20 000 printed copies. This publication is supported by a wellread e-book edition hosted on www.southafricanbusiness.co.za. In addition to an up-to-date economic overview of the country, analyses of the main industrial sectors, plus profiles of the nine provincial economies, this edition of South African Business includes special features on key topical issues such as skills development and education, waste management and recycling, and renewable energy; as well as interviews with leading figures from business and government, including Hermann Erdmann (CEO of Redisa), Kutoane Kutoane (CEO of ECIC), Tim Harris (CEO of Wesgro) and Sean Johnson (Manager: Unconventional Resource Evaluation at the Petroleum Agency of South Africa). South African Business is complemented by nine well-established regional publications, recognised as the leading business and investment guides to each province. These unique titles are supported by nine monthly regional e-newsletters with a combined reach of over 40 000, and the e-book editions can also be viewed on their respective websites: Western Cape Business | www.westerncapebusiness.co.za Gauteng Business Guide | www.gautengbusinessguide.co.za Limpopo Business | www.limpopobusiness.co.za KwaZulu-Natal Business | www.kwazulunatalbusiness.co.za Eastern Cape Business | www.easterncapebusiness.co.za North West Business | www.northwestbusiness.co.za Mpumalanga Business | www.mpumalangabusiness.co.za Free State Business | www.freestatebusiness.co.za Northern Cape Business | www.northerncapebusiness.co.za Global Africa Network thanks the dedicated sales team and the professional and committed writers, editors and designers who worked so hard to produce this edition of South African Business.

Area (sq kms)

Land - RSA Mainland

1,220,000

Sea - EEZ of RSA Mainland & Prince Edward Islands

1,540,000

NEW EXTENDED CONTINENTAL SHELF 4

1. West Coast 2. East and South Coast

45,000 1,075,000

SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE

South Africa

A period of positive growth and development The year 2015 marked 60 years since South Africans from all walks of life adopted the Freedom Charter in 1955, in Kliptown, Soweto, as well as the 25-year anniversary of the release of Nelson Mandela from prison and the unbanning of the liberation movements. “They declared amongst other things, that South Africa belongs to all who live in it, black and white, and that no government can justly claim authority unless it is based on the will of all the people,” said President Jacob Zuma. SOUTH AFRICAN BUSINESS 2016

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n a year that saw world economic and political uncertainty, South Africans still had much cause to celebrate. Great strides have been made nationwide in building schools and hospitals, major efforts are underway in terms of job creation, skills development, SMME growth, the empowerment of women as well as innovation. After a tough period of loadshedding and energy instability, Eskom seems to have the national grid stabilised as well as solid plans for the expansion of our infrastructure.

National priorities

In his State of the Nation Address in early 2015, President Jacob Zuma said that it had been the year of “rededicating ourselves to eradicate racism and all related intolerances in our country. Zuma added that the country’s ambition of achieving a growth target of 5% by 2019 is at risk because of slow global growth as well as domestic constraints in energy, skills, transport and logistics amongst other factors. However, the situation was more promising on the jobs South Africa also hit the world headlines through front as Statistics South Africa’s report on the the discovery of a new species of human rela- last quarter of 2014 showed that there are now tive (“Homo naledi”) at the Cradle of Humankind 15.3-million people who are employed in South World Heritage Site, a local doctor successfully Africa. “Jobs grew by 203 000,” said Zuma, addcompleted the world’s first penis transplant, and ing that the economy still needed a major push Trevor Noah captured a slice of America’s cul- forward. Zuma also presented government’s tural empire by taking over as host of Comedy nine-point plan to ignite growth and create jobs. Central’s The Daily Show. SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE “A lot has been achieved in the past year. We believe that our nine-point economic intervention plan on the economy will consolidate the achievements, and ignite much-needed growth,” said Zuma. South Africa has the 24th largest economy in the world and contributes 30% of sub-Saharan GDP despite having only 6.5% of the population. Sound financial management has seen South Africa’s macro-economic fundamentals become very strong off the shaky base that the apartheid regime created. In particular, prudent controls meant that South Africa was able to withstand the shockwaves sent around the world by the international financial-sector meltdown. The country is renowned for an abundance of mineral resources, accounting for a significant proportion of both world production and reserves, and South African mining companies dominate many sectors in the global industry. South Africa produces 10% of the world’s gold (it is estimated that about one-third of the world’s unmined gold still remains in South Africa) and there has been an increase in the beneficiated minerals industry, which the government has targeted as a growth sector. National Government’s 9-point growth plan

Economy 1. Resolving the energy challenge. 2. Revitalising agriculture and the agro-proThe discovery of diamonds and gold in the 19th century laid the platform for the development of our mineral wealth. South Africa as an industrialised economy. Wool, More effective implementation of a higher wine and mohair were the country’s only exports impact Industrial Policy Action Plan. before minerals were discovered. Encouraging private sector investment. Although mining plays a far smaller role in the Moderating workplace conflict. economy than it used to, it still contributes signifiUnlocking the potential of small, medium cantly to GDP, employment and taxation income. and micro enterprises (SMMEs), coopera- Demand for platinum, iron ore and manganese tives, township and rural enterprises. from the new global powerhouses of China and State reform and boosting the role of state India is motivating investment in the sector in owned companies, information and com- South Africa. munications technology (ICT) infrastructure Mining companies account for about a third or broadband roll-out, water, sanitation and of the market capitalisation (R1.86-trillion) of the transport infrastructure. country’s stock exchange, the JSE. Operation Phakisa, which is aimed at growOne of South Africa’s fastest-growing maning the ocean economy and other sectors. ufacturing sectors, catalytic converters, also cessing value chain.

3. Advancing beneficiation or adding value to 4. 5. 6. 7. 8.

SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE

owes its existence to the minerals that make up the converters, and one of the central planks of the South African government’s economic policy is to ensure that value is added to the country’s mineral resources. The country already has many steel mills and aluminium smelters, but many thousands of tons of raw materials are exported in their raw state. A number of Industrial Development Zones and Special Economic Zones have been set up and promulgated in order to attract investment as well as to increase local manufacturing capacity. SOUTH AFRICAN BUSINESS 2016

The automotive industry is one of South Africa’s most important sectors and accounts for about 12% of South Africa’s manufacturing exports, with many of the major multinationals using South Africa to source components and assemble vehicles for both local and international markets.

Energy The country has been through a challenging period during which there have been serious energy constraints. These have proved to be

SPECIAL FEATURE beginning with a plan for improved maintenance of existing Eskom power stations, enhancing the electricity generation capacity and managing the electricity demand. The long-term plan involves finalising South Africa’s long-term energy security master plan. “As a priority we are going to stabilise Eskom’s finances to enable the utility to manage the current period,” said Zuma, adding that government was supporting Eskom with R23-billion for the 2016 fiscal year.

Agriculture Agriculture is a catalyst for growth and food security and there is a strong public-private sector drive to develop an Agricultural Policy Action Plan aimed at bringing one million hectares of under-utilised land into full production over the next three years. “Among key interventions this year, we will promote the establishment of agri-parks or cooperatives and clusters in each of the 27 poorest district municipalities to transform rural economies,” said Zuma. An initial funding of R2-billion was made available for the agri-park initiative, while the country’s agro-processing exports are attracting positive interest in new markets through Africa and China for the export of South African maize and apples to China. Apple exports alone are projected to yield R500-million in foreign exchange over the next three years. an impediment to economic growth and a major inconvenience to everyone in the country. Infrastructure Overcoming the challenge was uppermost in The National Infrastructure Development progovernment’s programme. “Government is doing everything within its gramme continues to be a key job driver and power to deal with the problem of energy short- catalyst for economic growth. Major projects age in the country. We are quite aware of the fact include the Umzimvubu Water Project in the that this is indeed a difficult period, but it shall Eastern Cape, Jozini Dam in Umkhanyakude in pass because we do have strategies in place to KwaZulu-Natal and projects in Bushbuckridge deal with this matter,” Zuma said. in Mpumalanga and phase one of the Mokolo Government has developed a sustainable Crocodile Water Augmentation in Limpopo. plan that involves short-, medium- and longProgress to improve the water supply to areas term capacity and infrastructure development, affected by shortages are underway, but the war

SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE against water losses (which costs the country R7-billion a year) is being waged through the Department of Water and Sanitation’s plan to train 15 000 artisans and plumbers who will fix leaking taps in their local communities.

of the human species and shake up our understanding of the progress of human evolution. Two years after they were tipped off by cavers plumbing the depths of the limestone tunnels in the Rising Star Cave outside Johannesburg, Berger and his team discovered what they say is a new addition to our family tree. The team Internal affairs is calling this new species of human relative “Homo naledi,” and they believe that part of their Cabinet has adopted vigorous and integrated in- tribal culture was the practice of burying their terventions to combat the vicious rhino poaching in the country, including continuous joint operations with key neighbouring countries, improved intelligence gathering as well as enhancing protection in parks and provincial reserves where rhino are present. Government has also made substantial progress in establishing a border management agency to manage all ports of entry and improve security. To further improve access to identity documents, citizens will now be able to apply for the new Smart ID Card at their local bank due to a partnership between the Department of Home Affairs and some banks in the country. In December 2014, Cabinet released the draft National Disability Rights Policy for public comment. “Local government is everybody’s business. We have to make it work. We have launched the ‘Back to Basics’ programme to promote good governance and effective administration through cutting wastage, spending public funds prudently, hiring competent staff, and to ensure transparency and accountability in municipalities,” said Zuma.

History One of South Africa’s premier museums and tourist attractions is The Cradle of Humankind, an ancient destination that celebrates the fact that present-day South Africa has been home to the human species for thousands of years. Early ion 2015 a team of archeologists, led by Professor Lee Berger of the University of the Witwatersrand, made a discovery that would pose new and vital questions about the origins SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE dead - a behavior scientists previously thought tion of one of the greatest stories of democracy was limited to humans. ever told. What lies ahead is an exciting period of The team believes that the chamber, located growth as the country strives to realise its potential 30 metres underground in the Cradle of Humanity to be the gateway to Africa and, in so doing, helpWorld Heritage Site, was a burial ground–and that ing to unlock the enormous economic and social Homo naledi could have used fire for light. The potential within the continent. discovery was poignant considering South Africa’s energy crisis, but it was also cause for celebration Sources: Jacob Zuma’s State of the Nation of South Africa’s position in the story of mankind, Address 2015, SouthAfricaInfo, BrandSA, Media starting from the birthplace of man to the evolu- Club South Africa.

SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE

Operation Phakisa hits the ground running Through Operation Phakisa the National Government aims to implement its policies and programmes better, faster and more effectively.

resident Jacob Zuma has been the driving force behind Operation Phakisa, a project designed in line with the goals of the National Developement Plan (NDP) 2030, which is promoting economic growth and boost job creation.

“We had announced in June this year that we are chasing a growth target of 5% by 2019. To achieve that target, we require new and faster ways of doing things, and Operation Phakisa represents that new spirit of moving faster in meeting our targets,” said Zuma, speaking at his 2014 State of the Nation Address. Operation Phakisa adapts the Big Fast Results methodology first applied by the Malaysian Government, successfully, in the delivery of its economic transformation programme. The operation addressed their national key priority areas such as poverty, crime and unemployment. It involves setting up clear targets and follows up with on-going monitoring process which makes the results public. Through this initiative, the Malaysian government was able to register impressive results within a short period. President Zuma said South Africa has renamed the Malaysian Big Fast Results approach as Operation Phakisa — from a Sesotho word, which means “Hurry Up”, to highlight the urgency with which government wants to deliver on some of the priorities encompassed in the NDP. The initiative will initially be implemented in two sectors—the ocean economy and health.

Diving into the blue economy The first phase of the implementation will focus on unlocking the economic potential of South Africa’s oceans. This will be done together with SOUTH AFRICAN BUSINESS 2016

representatives from government, industry, labour, civil society and academia to collaborate in unlocking the economic potential. Speaking at the launch of the initiative at the Inkosi Albert Luthuli International Convention Centre, in Durban, President Zuma said government chose the ocean economy with good reason. “South Africa is uniquely bordered by the ocean on three sides — east, south and west.

SPECIAL FEATURE With the inclusion of Prince Edward and Marion invaluable contribution of oceans and coasts to Islands in the southern ocean, the coastline is the development from throughout the continent. approximately 3 924km long,” he told the del- “The long-term developmental programmes of the egates, which included industry, labour, civil so- world can no longer be based on land resources ciety and academia. But despite this, the vast only; it must also include the coast and ocean ocean space is relatively unexplored in terms of resources.” its economic potential. Government has identified four priority focus“The ocean has a potential to contribute to sectors for Operation Phakisa. These are marine the Gross Domestic Product (GDP) up to R177- transport and manufacturing activities (such as billion. The ocean also has a potential to con- coastal shipping, trans-shipment, boat building, tribute between 800 000 and one million direct repair and refurbishment) offshore oil and gas jobs,” said President Zuma. exploration; aquaculture as well as marine proIn 2010, the oceans contributed approxi- tection services and ocean governance. mately R54-billion to South Africa’s GDP and The second implementation of Operation accounted for approximately 316 000 jobs. Phakisa was to pilot the health sector’s Ideal Also at the launch, Environmental Affairs Clinic Initiative to improve service delivery in the Minister Edna Molwea acknowledged the country’s clinics nationwide, which commenced

SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE late in 2014. The health sector laboratory will be undertaken in collaboration with provinces, districts and clinic managers with the aim of producing a detailed plan for improving service delivery in public sector clinics in all provinces, including indicators, targets and timeframes, in addition to a guideline for clinic managers to develop and sustain these improvements.

Success of Operation Phakisa “The key step in Operation Phakisa’s approach,” said the President, “will be the intensive work sessions necessary to deliver complete and signedoff action plans for presentation to Cabinet. These work sessions will help create transparency and

SOUTH AFRICAN BUSINESS 2016

help to remove bottlenecks and resolve the most critical challenges facing a sector.” Once the detailed delivery plans have been completed, President Zuma said government will then move into the implementation phase of Operation Phakisa—with him taking a personal interest in monitoring the progress and implementing the project. “The people of South Africa deserve much better from all of us. Through Operation Phakisa and all our other key strategic interventions to achieve the goals of the National Development Plan, we must work tirelessly to move our country forward and build a better life for all, especially the poor and the working class,” he said, urging key role players to commit fully to the success of this programme.

SPECIAL FEATURE Meeting targets Highlights of the Operation include the cabinet approved issuing to Transnet Port Terminals (TPT) of a permanent operating licence to operate the manganese container terminal at the Port of Ngqura. Significant economic opportunities arising out of this development include the upgrading of the rail network (R2.3-billion) from Northern Cape to Port of Ngqura in order to support axle loads of 26t. Knock-on effects occur along the rail infrastructure value chain, with significant opportunities for localisation, such as signalling systems. The relocation of manganese operations from the Port of Saldanha would open opportunities for offshore oil and gas activities such as rig repair and maintenance. There is an opportunity to capture the lucrative repair market by extending and expanding our port capabilities to service current and future vessels in East and West Africa. Opportunities for local shipbuilding industry have arisen as a result of tenders issued by Armscor for a new hydrographic vessel under Project Hotel and six new offshore and inshore patrol vessels under Project Biro. The acquisition of the six IPVs/OPVs by the Navy is a major boost to the local shipbuilding industry as 60% local content is required. Projected spend over the next three to four years is approximately R6.6-billion, providing the opportunity to deepen component manufacturing and rebuild domestic capabilities. Transnet National Ports Authority (TNPA) and Transnet SOC Limited have adopted a PublicPrivate-Partnership (PPP) model to finance new Operation Phakisa infrastructure. TNPA has committed R7-billion for public sector investment in domestic ports to support industrial opportunities in the ports. Saldanha Bay port has been established as an oil and gas hub, the total scope of the initiative amounting to a R9.2-billion investment (public and private). TNPA has appointed transactional advisors for the refurbishment and maintenance of port

facilities. The scope and maintenance refurbishment requirements have been completed and The dti has designated working vessels for local procurement (60% local content). A R1.4-billion tender by TNPA for the procurement of tug boats was awarded to a South African company in support of local procurement. The dti is in the process of developing a strategic marketing campaign and value proposition for investors into the MTM sector. In addition to the Marine sector, progress has occurred within the oil and gas and aquaculture sectors, a Delivery Unit and Steering Committee was established at DMR and is fully functional. The financial analysis of South African offshore oil and gas sector procurement has been completed ahead of schedule. This work included the determination of product and service categories and spend (values); compilation of suppliers’ database and classification of procurement (with measurement and standards criteria) in terms of domestic vs foreign value addition in final goods and services. Setting of minimum targets for local production and supply awaits the finalisation of Mineral Petroleum and Resources Development Amendment Bill (MPRDA) legislative process. A total of 10 catalyst projects are in progress with funding secured from the Aquaculture Development Enhancement Programme (ADEP), the private sector investment at R305million, and Government investment at R105million. The National Regulator for Compulsory Specifications (NRCS) has been co-opted for sampling and food safety standards. Public Works has signed off leases on four projects. South Africa is ideally positioned to serve the East-West cargo traffic lane and the booming African offshore oil and gas industry through marine manufacturing, which includes ship and rig repair, refurbishment and boatbuilding. Despite this competitive advantage, we currently capture only 1% of the global market of ship repair and refurbishment. Efforts are underway to ensure that all of Operation Phakisa’s Oceans Economy initiatives are prioritised and resourced accordingly. SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE

Understanding Africa Lebo Motshegoa (MD of Foshizi Mass Market Research and Strategy), says there are seven essentials that South Africans as well as international business people need to know about doing business in Africa.

ost of us believe that business is business, so it’s easy to think the same rules apply everywhere. The fact of the matter is that this just isn’t true, especially in Africa. Socio-economic differences between countries-and even within countriesare significant, and this needs to be taken into account when entering into new markets on the continent.

companies within the same country, they are also competing against other South African companies entering the same space. To make matters even more complicated, they are competing against the local operations of other foreign companies, which already have a well-established presence in Africa. This means that an in-depth understanding of market dynamics is essential for success. 3. English isn’t the language most commonly used to do business in Africa. People who I’ve learnt some important lessons on my many work with tourists speak English, but it’s a business trips into Africa, and these are the seven different story in the business environment. things I believe all South Africans need to consider It’s therefore important to have at least a when doing business in other African countries: 1. Africa is a big continent with many different lanbasic knowledge of the local language if guages and cultures. The same social norms you intend to do business in Africa. Greeting simply don’t apply everywhere, and it’s imporpeople in their own language is a great icetant to be aware of this when doing business. breaker, even if you can’t hold a conversation with them in their language. If you intend to enter into a new African market, it’s vital to research the social and religious 4. South Africa is not necessarily the leader on the continent in all aspects of business and customs of the countries in which you intend social life. For example, the Nigerian econto operate, and to make a concerted effort to omy is significantly larger by value than the understand workplace dynamics. 2. While South African companies compete South African economy, and other economies are catching up quickly. Mobile money mainly against each other for share of market within the country, the competitive ensolutions are also much more developed. In vironment is very different in other African Kenya, for example, you can buy anything countries. Companies entering a market from a cow to your lunch using a mobile in Africa are not only competing with other phone. South Africa has a long way to go SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE

before it reaches this point, so it is important Firstly, it’s essential to keep an eagle eye on to acknowledge that some African countries currency exchange rates to ensure they don’t are way ahead of us in certain things, and adversely affect business deals or business not to come across as arrogant when doing expenses. business with African counterparts. Then, while South Africa adheres to a sin5. South Africa is the last of the African coun- gle time zone, Africa spans five time zones tries to have become a democracy, with from east to west. This is the same number of many other countries having been inde- time zones as in the United States (excluding pendent for twice as long as we have. We Alaska), so time differences need to be taken have a lot to learn from these countries, into account when doing business with or in which have faced many of the challenges other African countries. we’re currently facing. We need to show a Similarly, the weather may influence how willingness to learn, and should not set out a customer does business, and may affect to impose our own ideas and solutions on the needs of that business. It’s crucial to take our African counterparts. these seemingly unimportant things into ac6. It may come as a surprise, but many African count because they could have an adverse countries are streets ahead of us when it impact on efficiency and, therefore, on the comes to technology. For example, re- bottom line. search done by Net Index put Ghana at the Africa has many varied opportunities for top of the pile in terms of download speed, both corporations and entrepreneurs, and which averages 4.78Mbps. Zimbabwe is now is the time to take advantage of that. The ranked second, while South Africa comes benefits of moving into other African markets in at only sixth place. And, as already men- goes beyond money, though, as there is a tioned, the use of mobile banking technol- real opportunity for a meaningful exchange ogy is widespread across the continent, of ideas. All it takes is insight and sensitivity even in rural areas. to the dynamics of the many different markets 7. Finally, even seemingly mundane things can on the continent in order to unlock them. influence business success and business relations. Lebo Motshegoa

SOUTH AFRICAN BUSINESS 2016

INTERVIEW

Job creation on track Alan Winde, Minister of Economic Opportunities for the Western Cape Government, on the drive for employment.

T Alan Winde

BIOGRAPHY Alan Winde became MEC for Finance, Economic Development and Tourism in May 2009, shortly after the Democratic Alliance won the Western Cape Province. Winde has been a member of the Western Cape Provincial Legislature since 1999. During his first term he served as provincial ﬁnance chairman and executive committee member with the Democratic Party. He has also served as chief whip of the ofﬁcial opposition in the Western Cape, as the DA spokesperson on Environment and Planning and as the deputy DA spokesperson on Economic Development and Tourism. SOUTH AFRICAN BUSINESS 2016

he Western Cape Government’s first strategic goal is to create opportunities for jobs and growth. At the start of a new five-year term, this government has taken a new, focused approach to achieving its goals. We are currently engaging with the private sector to develop action plans for high-potential sectors where we have a clear competitive advantage. This process is called Project Khulisa. Khulisa means ‘to grow’ in isiXhosa. Project Khulisa identified Tourism, Agri-Processing and Oil and Gas as the sectors which are either growing the fastest or have the highest job creation potential. Our goal is to dramatically accelerate growth in these key sectors through a series of targeted projects. As we implement this growth strategy, giving support to small businesses also remains an important priority. We know that entrepreneurs are important job creators. The National Development Plan states that about 90% of jobs will be created in small and expanding companies by 2030. This is why we have prioritised the support of SMMEs. In the past five years, the Provincial Department of Economic Development and Tourism has assisted 26 000 entrepreneurs with a range of services to help them grow. This includes reducing unnecessary regulations through our Red Tape Reduction Unit, which has handled more than 3 000 cases since its launch in 2011. Along with red tape, project funding can pose a challenge for many small businesses. Ensuring that entrepreneurs have access to financial support networks is a key part of our assistance package. We have recently embarked on innovative initiatives such as partnering with Deloitte to host the Western Cape Funding Fair and we aim to build on these successes by ensuring that even more entrepreneurs get the support they need to play a meaningful role in growing our economy. We can only do this through partnerships between spheres of government, the private sector and the residents of the Western Cape. I am confident that this guide will be a valuable tool in forming these partnerships, providing an excellent platform to connect entrepreneurs with the right investors. Over the past five years we have created over 200 000 jobs and have the lowest expanded unemployment rate in the country. Over the next five years we will continue to work, better together, to deliver meaningful growth and real job opportunities.

SPECIAL FEATURE

Public-private push for entrepreneurship The 2015 Western Cape Funding Fair highlighted the need for job creation driven by the public and private sectors

eloitte, in partnership with the Western Cape Department of Economic Development and Tourism (DEDAT), launched the inaugural Western Cape Funding Fair at the CTICC in March 2015. The Fair afforded entrepreneurs and innovators the opportunity to pitch ideas were in need of funding to potential funders.

“We had three main criteria,” said Marius Alberts, Deloitte Western Cape regional leader. “The new enterprises had to be based in the Western Cape, create a significant number of jobs to contribute to the economy of the Western Cape, and require at least R10-million in funding. To be a finalist at The Western Cape Funding Fair you need to have something that can be converted into an actual business in the medium term, not something that requires another nine years of research. We want to find business ideas that are ready to work. People need to say ‘this is my value proposition, this is how I intend to make it

work, and this is my target market’. It is crucial that an entrepreneur is able to articulate their idea in a way that shows they understand the business behind it and that they have the ability to articulate the value proposition clearly.” Over 600 entries were received, which were whittled down to a group of 40 finalists who pitched their ideas to funders at the Fair. “The day those 600 applicants decided to pitch was the first step in their future competitiveness in their industry sector,” said DEDAT Minister Alan Winde, who called on South African banks to take more risks when it comes to entrepreneurs. “Our banks were praised for their low risk rating when the global recession hit, but if we want to change the ecosystem for entrepreneurs in this country, they are going to have to be open to more risky ventures. Job creation is key for our future, and neither government nor the private sector can make the changes happen on their own. It is partnerships like this one that are the key to our future growth,” said Winde. SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE

Business funding There is a massive amount of funding available for businesses, from multi-national corporations through to SMMEs. The key is knowing how to access it.

SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE

“

efore any bank funding is sought, a business needs to have equity, a proven track record and experienced team, guaranteed inputs or raw materials, proven market demand; and a robust project finance model,” says Andre Pottas, Corporate Finance Partner at Deloitte. “If these attributes are not all in place, as is common for startups and new, innovative technologies, then alternatives to bank debt must be sought.” Pottas stresses that it all depends on the type of business that is being developed, in addition to the level of the returns that can be realistically predicted. “For innovators and disruptors, who often have little own equity to contribute, selling their idea can be really difficult and self-funding may be the only option available in the short term. For example, to get equity finance, it is a trade-off between the new networks and expertise you expose your business to, and the percentage of equity and control that you are willing to give away. Loan finance on the other hand guarantees that you keep all of your shares and can run the business as you like, yet the loan can create a strain on the cash flow of the business,” says Pottas. An alternate source of funding that is gaining in popularity is crowdfunding, which allows business owners to raise capital in small amounts from a variety of funders, typically via social media. “Crowdfunding had been incredibly successful in the United States and Europe, but those are very developed markets, and they are working from a much higher base of business skills and IT penetration. In South Africa, there are so many people and youth coming out of school, starting up ideas, but our education system has not actually prepared us to run enterprises. Coming up with ideas we are good at. Figuring out how to make them ideas that will work we’re not so good at,” says Thundafund co-founder Patrick Schofield. “There are several reasons for that prudence, or inability to take risk by the venture capitalists. Most importantly is that they can’t get their money back. If you loan someone money, below R500 000, because of the legal processes it takes to get the cash back, you might as well give the damn stuff away. If they don’t give it back, to get it back through the legal routes is very expensive and almost not worth it. So it makes it very difficult for anyone to loan cash, which

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SPECIAL FEATURE in turn makes it very difficult for people to borrow cash to start businesses.”

manufacturing, commercial, franchising as well as supply chain operations. The Masisizane Fund operates on a loan basis, but includes mentorship and a great deal of business support, guidance as well as helping to connect SMMEs with other SMMEs or larger organisations where there is the potential for a shared business relationship.

Support for SMMEs

Although there is a huge amount of potential funding available in South Africa, it’s essential that entrepreneurs and business owners approach the issue of funding with care and careful consideration. Not only is it essential to have all Debt finance paperwork in place, but it’s also vital that there The concept of debt finance is simple: basically, is a clear strategy and business plan in place. Many funding organisations will assist with a it’s money that you borrow to run your business. lot of this legwork, but at the core is the need In other words, it’s when a business raises capifor a business or venture that is sustainable and/ tal by borrowing. Naturally, it’s a two-way thing: In or profitable, with job creation sometimes being exchange for lending the money, the individuals or institutions become creditors of the business an additional important criteria. The Masisizane Fund (011 217 1854) invests and are entitled to the payment of interest and to in SMMEs that have a registered business, have their loan repaid at the end of a given pein addition to a clear marketable product or riod. Debt financing comes in particularly handy service, and who create and retain jobs. The for start-up companies, who often use this form Fund provides loan financing in the agribusiness, of financing to finance their operations.

SOME KEY SOURCES AND TYPES OF FUNDING Source of financing

Who?

How?

Government/DFI

Start up & Early stage

Primarily grants

Banks

Established businesses with track records and collateral

Debt

Private Equity

Primarily accelerate & growth stages

Primarily equity

Venture Capital

Start up through to growth stages

Primarily equity

Range of impact investing type funds / angel investors

Early & Accelerate stages

Grants, loans and/or equity, depending on the mandate

B-BBEE funding

Wide range of SMEs that meet a certain ownership demographic

Grants, loans and/or equity, depending on the mandate

Crowd funders

Stage up & Early Stage

Grants and equity SOURCE: SIMANYE GROUP

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SPECIAL FEATURE Bank finance

equity companies usually seek to invest large sums of money into big businesses, but there are smaller private equity firms in South Africa that may be interested in making smaller investments. Be warned though, that securing private equity can be a time-consuming and difficult process.

The word “overdraft” need not have the negative connotations often associated with it. Indeed, an overdraft is the ideal way to manage your cash flow. It is linked to your business account and you can use as much as you need, up to your limit. It’s quick and easy to arrange, the cash is available when you need it, and you only pay Venture capital interest on what you use, not on the full amount Early-state, high-potential, high-risk ventures at which your limit is set. Many small businesses use this type of fund- benefit from venture capital (VC), a type of private ing to get going (and to keep it going) and it is equity funding provided by outside investors. especially useful for companies that need short- They achieve above-average returns. The VC term finance for their start-up requirements. capital fund makes money by owning equity in Debtor finance is a form of funding to obtain the companies it invests in, which usually have a the working capital needs of growing businesses. new technology or business model in high-tech Standard Bank purchases approved trade debt- industries. This form of funding is attractive for or invoices with an agreed portion, usually 75%, new companies with limited operating history being paid at the time of purchase and a similar (and a tried and tested concept) that are too portion paid on all future approved trade debtor small to raise capital in the public markets and invoices. There are a number of conditions that have not reached the point where they are able need to be met with such funding. to secure a bank loan or complete a debt offering. Asset finance enables the business owner to buy movable assets and equipment in a way that makes it easiest to manage cash flow. Banks Government funds finance all types of capital equipment. South African government funding assists previously disadvantaged South Africans to develop Angel investors new businesses. Angel investors are wealthy individuals who are willing to take a chance and invest smaller amounts of money in high-risk businesses, with the hopes of gaining high returns within a set period of time (usually five to 10 years). They use their own funds to finance projects that they believe will be lucrative, or where they can use their talent and skill to mentor new entrepreneurs.

Private equity Private equity is of money from third-party investors that is pooled together and then invested into other businesses. They can commit large sums of money for long periods of time. Private

Department of Trade and Industry (dti) The dti provides financial support to qualifying companies in various sectors of the economy. Contact: 0861 843 384, www.thedti.gov.za

Khula Enterprise Finance Khula helps SMMEs to secure loans from banks. It does not lend money itself. Khula also provides mentorship to entrepreneurs, helping them to manage their businesses successfully. Contact: 012 394 5560 / 5900, www.khula.org.za SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE Contact: 012 394 1805, www.samaf.org.za, www.thedti.gov.za

National Empowerment Fund (NEF) The NEF’s role is to support B-BBEE. It anticipates future funding and investment requirements to assist black entrepreneurs and communities achieve each element of the Codes of Good Practice. Contact: 0861 843 633, www.nefcorp.co.za

South African Micro Finance Apex Fund (Samaf)

Funding Guide: Government grants

Samaf gives financial services to small-scale entrepreneurs living in rural and outer urban areas. Samaf does not lend money directly to the public. It uses existing institutions within communities to handle the funds and lend to qualifying entrepreneurs.

Grants do not have to be repaid, but they do require a considerable amount of paperwork. You will also be required to account for how you spend the money.

BASIC FUNDING TYPES Type

Pros

Cons

Grant

• No repayment needed

• May require onerous impact measures • Lots of competition

• Better for funding higher risk ventures and startups • Can fund non-income-generating activities Debt

Equity

• Issues with slow payouts • Difficult to get operating cost grants • Often very rigid • Often not available to for profits

• Greater flexibility than grants

• Often require security or guarantees

• Lower competition (assessed individually) • Build credit history and improve financial management • Can be quicker to get

• Repayment with interest • Rarely given to start ups

• Good for raising larger sums • Doesn’t require security

• Your own ownerships are diluted

• No need to pay back in most cases • Investors can provide strategic input to • Can fund startups • Can be easier to get debt finance later

• Influence over your business • Only for for-profits • Will need to demonstrate strong potential SOURCE: SIMANYE GROUP

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MASISIZANE FUND BUILDING SUSTAINABLE BUSINESSES THROUGH SUCCESSFUL PARTNERSHIPS

The Masisizane Fund (NPC) is an initiative of Old Mutual South Africa, established in 2007 following the closure of the Unclaimed Shares Trust. The mandate of the Fund is to contribute meaningfully to employment creation, poverty eradication and reduction of inequality, economic growth and the attraction of investment. This is done through promotion of entrepreneurship, enterprise finance and support to small, micro and medium enterprises. The target market is enterprises that are 51% or more owned by previously disadvantaged individual(s) giving priority to rural and peri-urban/township areas. Masisizane is biased towards businesses with 51% or more women owned, youth and people with disabilities and targets productive and labour absorbing sectors as approved by the Board of Directors from time to time. The Fund’s success is driven through a focused approach on high impact industry sectors, coupled with a comprehensive SMME finance solution that includes business support. The Fund provides loan finance in the following sectors: • Agriculture • Manufacturing • Supply Chain • Franchising • Commercial Enterprise Non-financial value adding services include capacity development, business management and technical support, financial education, market development and product/service quality standards and compliance. A Business Acceleration Program has been established where potential clients receive training and support to grow into a business eligible to receive financial support.

omms 10.2015 L8555

Masisizane operates nationally with its head ofﬁce in Gauteng and regional ofﬁces in KwaZulu Natal, Limpopo, Eastern Cape and Western Cape.

For more information and where to ﬁnd us visit: www.masisizane.co.za

Old Mutual is a Licensed Financial Services Provider

SPECIAL FEATURE Black Business Supplier Development Programme (BBSDP)

Funding Agencies in South Africa

The Black Business Supplier Development Programme (BBSDP) is a cost-sharing grant offered to black-owned small enterprises, to assist them in improving their competitiveness and sustainability, in order for them to become integrated into the mainstream economy and create employment. Contact: 011 363 3000, www.bbsdp.co.za

Enterprise Investment Programme (EIP) The Department of Trade and Industry’s (the dti’s) Tourism Support Programme (TSP) is a sub-programme of the Enterprise Investment Programme (EIP). It is a targeted incentive, aimed at supporting the development of tourism enterprises, thereby stimulating job creation and encouraging the geographic spread of tourism investment. Contact: 0861 843 384, www.thedti.gov.za

Support Programme for Industrial Innovation (SPII) The Support Programme for Industrial Innovation (SPII) is designed to promote technology development in South Africa’s industry, through the provision of financial assistance for the development of innovative products and/or processes. Contact: 0861 843 384, www.thedti.gov.za

The Co-Operative Incentive Scheme (CIS) The Co-operative Incentive Scheme (CIS) is a 90:10 matching cash grant for registered primary co-operatives (a primary co-operative consists of five or more members). Contact: 0861 843 384, www.thedti.gov.za Source: Standard Bank

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South African government funding and grants are focused on providin g funding for business ventures that can make a difference to the economy. The Department of Trade and Industry (dti) provides funding to qualifying businesses from a range of sectors. The National Empowerment Fund (NEF) supports B-BEEE and previously disadvantaged individuals and communities. It offers a funding for start ups and expansion as a loan, equity funding. The National Youth Development Agency (NYDA) provides enterprise funds for young entrepreneurs aged between 18 and 35 years old and aims to assist them in starting a business or growing an existing one. The Industrial Development Corporation (IDC) has multiple funds available offering financial support to start-up businesses needing capital for equipment, working capital and buildings. It also funds business expansion. The KZN Growth Fund’s primary mandate is investment in infrastructure to promote economic development with in the Province. The KFW Development Bank as part of the KFW banking group is responsible for Financial Cooperation with developing countries. In terms of volume, this form of cooperation is the most important instrument in German development cooperation. The Land Bank offers a wide range of loans for all financial needs like buying land, equipment and working capital for agricultural projects. Applications require a business plan. The Small Enterprise Finance Agency is founded in 2012 and has access to R1.4-billion in funding given by IDC and the Government for South African small businesses over the next three years. The Technology Innovation Agency (TIA) was established in 2008. The objectives are stimulating and intensifying technological innovation in order to improve economic growth. The goal is to increase the quality of life of all South Africans by developing and exploiting technological innovations. Sources: Fundingconnection.co.za, Mediaclubsouthafrica.com

OVERVIEW

SEZs and IDZs Industry is growing thanks to Government’s incentivised and structured industrial zones.

he South African government established Innovation, Efficiency, Growth and Sustainthe Industrial Development Zones (IDZ) to ability are key to the East London Industrial attract Foreign Direct Investment and ex- Development Zone’s (ELIDZ’s) reason for existport of value-added commodities. These ence. Established in 2003, as part of the South zones were developed with the aim to increase African government initiative to improve industrial industrial growth.There are currently five operat- competitiveness and economic growth in the ing IDZs in South Africa. country, the zone has become a prime industrial park in South Africa, renowned for its customThe Coega IDZ is the largest IDZ in Southern ised solutions for various industries including Africa. It was designated in 2001 and became automotive, agro-processing and aqua-culture. The ELIDZ offers growth oriented companies South Africas first Industrial Development Zone. It is located in the Nelson Mandela Bay a specialised manufacturing platform, innovative Metropolitan Municipality in the Eastern Cape industrial and business solutions access to new Province and it is strategically located on the markets and strategic industry networks. The Saldanha Bay Industrial Development east-west trade route to service both world and Zone (IDZ) received its operator permit on 31 African markets. The Coega IDZ leverages public sector in- October 2013 at Saldanha Bay in the Western vestment to attract foreign and domestic direct Cape Province. This newly established IDZ will investment in the manufacturing sector with an serve as the primary oil, gas and Marine Repair export orientation. The IDZ has attracted invest- engineering and logistics services complex in ment in the agro-processing,automotive, aqua- Africa, servicing the needs of the upstream Oil culture, energy, metals logistics and business Exploration Industry and Production service process services sectors. companies operating in the oil and gas fields The Richards Bay Industrial Development off Sub-Saharan Africa. Zone (RBIDZ) is a purpose built and secure Dube TradePort is a catalyst for global trade industrial estate on the North-Eastern South and a portal between KwaZulu-Natal and the African coast. The N2 business corridor links world. It’s the only African facility that brings the Province’s two major ports, Durban and together an international airport, a cargo Richards Bay, and connects with Maputo in terminal, warehousing, offices, a retail sector, Mozambique and, ultimately, areas of East Africa. hotels, and an agricultural area. It comprises It is linked to an international sea port of the Dube TradeZone, which aims to focus on Richards Bay, tailored for manufacturing and manufacturing and value-addition primarily for storage of minerals and products to boost ben- automotive, electronics and fashion garments, eficiation, investment, economic growth and, and the Dube AgriZone, a high-tech, future most importantly, the development of skills and farming facility and host to the c ontinent’s employment. First-world infrastructure allows largest climate-controlled growing area under for the full exploitation of the areas’ natural and glass will focus on high-value, niche agricultural strategic advantages. and horticultural products.

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SPECIAL FEATURE

The evolution of skills development The skills development landscape in South Africa is changing, but thankfully a powerful partnership is ensuring the economy is fed by a vital skills pipeline.

overnment, the South African Qualifications Authority (SAQA), Sector Education and Training Authorities (Setas) and professional bodies are working in partnership to build a much-needed skills pipeline for the South African economy.

Setas form an integral part of this partnership and they add much value to their stakeholders and to the South African economy as a whole. Setas operate in terms of the Skills Development Act (SDA Act 97 of 1998 as amended) and the Skills Development Act of 1999 (as amended). These pieces of legislation provide an institutional framework for Setas to develop and implement national, sectoral and workplace strategies to develop and improve the skills of the national workforce resulting in improvements in employability and productivity, while contributing to the country’s global competiveness. Deputy Minister of Education and Training, Mduduzi Manana, highlights the Teaching Development Grant (TDG) as an important initiative. “We have earmarked funds (comprising approximately R600 per annum) towards programmes SOUTH AFRICAN BUSINESS 2016

that are designed to assist in decreasing drop-out rates in universities, including for first year students where students are most at risk of drop-out. These funds support a range of programmes that focus on supporting students at various levels of their studies (from undergraduate to postgraduate level),” says Manana, who as a youngster wanted to be a history teacher because he wanted to understand how the past shaped the present and to teach young people to do the same. “The introduction of the student attendance and punctuality policy has increased the attendance of students in colleges, thus leading to improved retention rates. The preliminary throughput studies for three-year qualifications (contact and distance combined) show that there has been an improvement in the throughput rate for minimum time to completion more than two years from 33% for the 2000 first time entering cohort to 38.5% for the 2007 first time entering cohort. “The DHET has also recently implemented the ‘Staffing South Africa’s Universities’ Framework. This innovative programme targets academics at all stages of the academic pipeline, and provides relevant teaching development opportunities at

SPECIAL FEATURE skills interventions, which are not only achieving the NSDS III goals and other national imperatives, but which are also addressing employer demand for skills within the sector in practical ways. Three skills upliftment initiatives are very important in this regard: Fasset’s lifelong learning interventions, the disbursement of PIVOTAL Grants (grants for Professional, Vocational, Technical and Academic Learning programmes) and the Seta’s TVET Workplace Experience Project. Given that Finance and Accounting Services is a professional sector, it is imperative that the skills of employees and employers within the sector remain current. The majority of Fasset’s members are SMME practitioners, where budgets for training are limited. Fasset is able to add considerable value to its SMME stakeholders through the Seta’s lifelong learning interventions. Over 116 046 delegates have attended these initiatives since inception. New Seta funding regulations released in December 2012 opened the way for more effecall stages. This year, 125 new academics are be- tive interventions via the PIVOTAL Programmes ing appointed as part of the New Generation of (Professional, Vocational, Technical and Academic Academics Programme (nGAP). A total of 80% Learning Programmes) that results in a qualifiof the appointees will be women and/or black cation or part of a qualification on the National academics. These academics will benefit from Qualifications Framework. Developing PIVOTAL skills gives employees structured teaching development and research portable quality-assured qualifications which are development opportunities,” said Manana. better aligned to specific occupations and to a specific career path. This is beneficial to both The role of Setas the individual and to the organisation, and is also proving to be more sustainable and value-adding Setas are also required to deliver against the than short courses. National Skills Development Strategy (NSDS) III, PIVOTAL Programmes are implemented by are expected to be aligned to and deliver against way of the PIVOTAL Grant. For example, Fasset’s national policies and imperatives including the PIVOTAL Grant addresses priority scarce and Medium Term Strategic Framework (MTSF), the critical skills needs identified in Fasset’s Sector Human Resource Development Strategy for Skills Plan. The grant incentives employers to South Africa (HRDS-SA), Industrial Policy Action develop the skills that they have identified to be Plan (IPAP), the New Growth Path (NGP) and in short supply and, as such, are needed for the the White Paper for Post-school Education and sound functioning of the sector. Training. Fasset is also changing the skills developOne example of this in action is Fasset (the ment landscape for Technical and Vocational Finance and Accounting Services) Seta, which is Education and Training (TVET) College learners changing the skills development landscape in its through Fasset’s TVET Workplace Experience sector by facilitating the delivery of sector-specific Project. Participating Fasset employers are

SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE providing TVET learners, who have completed the N6 Certificate in Business Studies, with the 18-months work experience required to achieve the National N Diploma. Most importantly, employers have been exposed to a new talent pipeline for mid-level skills. These developments come at a time when skills gaps have become a serious preoccupation within the private sector globally.

The importance of educating matriculants

as to enhance our education and training policy position as guided by the notion of post school education and training. “Against a backdrop of unemployment, inequality and poverty, we should not ignore the reality that the fibreprocessing and manufacturing sectors have the potential to create hundreds of thousands of new jobs for the benefit of our economy. I must applaud FP&M SETA for having recently conducted extensive surveys pertaining to work integrated work learning placements within organisations in the FP&M sector,” said Manana. “South Africa has made tremendous strides in improving the lives of our people, but the road ahead is still very steep. Your commitments will forever be necessary for the realisation of a successful post school education and training system.”

Manana said in order for us to ensure a simple post-school education and training system, the Department of Higher Education and Training will continue to promote the working relationships and structured interface between universities, colleges, the SETAs, quality councils and other stakeholders in the post-school education and training system, so that they may interact with one another, introducing the knowledge and skills our An international perspective society and the economy at large needs to thrive. “These relationships would also assist in ensur- A PwC global survey of over 1 300 CEOs in ing that learners who have undergone training are 68 countries discloses that after a number of also provided with places to practice what they years of headcount cuts, half of organisations have learnt in order for them to get easy employ- surveyed are looking to hire again. Organisations ment or to get employed. Therefore, in support in the Middle East (71%), the South East Asian of this summit, I am sure that by the end of delib- Nations (54%) as well as China (53%) plan to erations, a variety of issues will be covered and make the most net hires over the next 12 months, progressively discussed and consolidated, so while business services (51%), insurance (49%) and technology (46%) are the sectors looking to make the most net hires. Despite the positive outlook for jobs, the research shows that business leaders are more concerned than ever about being able to find the right people to fill these roles. Sixty-three percent of CEOs (an increase of 5% from 2013) report that the availability of key skills is the biggest threat to their organisation’s growth. CEOs in Africa (96%), the South East nations (90%) and South Africa (87%) are most concerned about the lack of skills. Technology and engineering firms are struggling the most with the shortage of skilled employees. The growing skills gap and rising cost of labour in emerging markets is forcing organisations to look to new markets for talent. Many SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE multinationals have already raided the pipeline of graduates and skilled young workers emerging from China and India, and there are signs that employees in these regions are beginning to favour domestic employers over their western rivals. Organisations are now widening their reach for new talent into Indonesia, Vietnam and the Philippines. The research also shows that business leaders are looking to government to do more to help plug the skills gap. Two in five CEOs say creating a skilled workforce should be one of government’s top three priorities and over half (52%0 believe that regulation is hampering their ability to attract the best people. Only one in five

feels that their government has been effective in improving workforce skills in their region. In contrast, an overwhelming majority of business leaders (93%) say they need to change their strategy for attracting and retaining talent, but three in five haven’t taken any steps to do this yet. According to PwC, “CEOs are laying much of the blame for the skills shortage at the feet of government and legislators, but they should accept that they need to rethink the way they think about, look for and value their employees. CEOs should be taking advantage of the developments in HR data analytics to predict the skills they will need and plan for changes in demand and supply”.

SOUTH AFRICAN SETAs AgriSETA — Agricultural Sector Education Training Authority www.agriseta.co.za BANKSETA — Banking Sector Education and Training Authority www.bankseta.org.za CETA — Construction Education and Training Authority www.ceta.org.za CHIETA – Chemical Industries Education & Training Authority www.chieta.org.za CATHSSETA — Culture Arts, Tourism, Hospitality and Sports www.cathsseta.org.za ESETA — Energy and Water www.ewseta.org.za.org.za ETDPSETA — Education Training and Development Practices www.etdpseta.org.za FASSET SETA- Finance, Accounting, Management Consulting and other Financial Services www.fasset.org.za FP&MSETA – Fibre, Processing & Manufacturing www.fpmseta.org.za

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HSETA — Health and Welfare www.hwseta.org.za INSETA — Insurance www.inseta.org.za LGSETA — Local Government www.lgseta.co.za MERSETA — Manufacturing, Engineering and Related Services www.merseta.org.za MICTSETA — Media, Advertising, Information & Communication Technologies www.mict.org.za MQASETA — Mining and Minerals Sector www.mqa.org.za PSETA — Public Service Sector SETA www.dpsa.gov.za SASSETA — Safety and Security SETA www.sasseta.org.za SERVICESETA — Services www.serviceseta.org.za SSDSETA — Social Security and Development TETASETA — Transport www.teta.org.za W&RSETA — Wholesale and Retail SETA www.wrseta.org.za

PROFILE

FP&M Seta Facilitating and maximising skills development in the Fibre Processing & Manufacturing Sector Education and Training Authority.

Proﬁle The Fibre Processing and Manufacturing (FP&M) SETA was established by the Honourable Minister of Higher Education and Training on 1 April 2011 after government took a decision to cluster sectors in order to strengthen value-chain linkages between related industries. FP&M’s vision is to be a credible and effective skills development partner ensuring the delivery of service excellence that will produce a highlyskilled world-class workforce through various Mdudzi Manana (Honourable Deputy Minister, skills development interventions. DHET) with Ms Felleng Yende (CEO, FP&M SETA). According to its mission statement, the FP&M SETA will establish a credible institutional mech- expected to create interventions and shape soluanism that facilitates an efficient and effective tions that address skills needs within their sectors. skills development process, through a range of All SETAs are responsible for the management of quality services and partnerships, to contribute the skills development levies paid by employers. to the achievement of sector competitiveness, SETAs receive 80% of the skills development transformation and economic growth. levies paid by employers and must allocate the funding as follows: SETA Administration (10.5%), Mandatory Grants (20%) and Discretionary Grants (49.5%). • Provide skills development services to the clothing, footwear, forestry, furniture, general CONTACT INFO goods, leather, packaging, printing, print media, publishing, pulp and paper, textiles and wood Gauteng products sectors. Forum 1B, 2nd Floor, Braampark Office Park, • Implement the objectives of the National Skills 33 Hoofd Street, Braamfontein, Joburg 2001 Development Strategy (NSDS III), which strives Tel: 011-403 1700 to increase access to training and skills develWestern Cape opment opportunities and transform inequities 3rd Floor, West Wing, Palms Centre, 145 Sir linked to class, race, gender, age and disability. Lowry Road, Woodstock, Cape Town • Ensure that people obtain the critical or scarce Tel: 021-462 0057 skills that are needed to build the capacity of KwaZulu-Natal the sector to become economically sustainable 2nd & 3rd Floor, Umdoni Centre, 28 Crompton and globally competitive. Street, Pinetown, 3601 Tel: 031-702 4482 The value added by SETAs is their understandEmail: info@fpmseta.org.za ing of labour market demands in their respective Website: www.fpmseta.org.za industrial and economic sectors. SETA are also

Services

SOUTH AFRICAN BUSINESS 2016

INTERVIEW

The challenge of developing artisans There are obstacles blocking the path of artisan development, but the HRDC remains positive for the future. Why did the HRDC establish the Artisan Development Technical Task Team?

The Human Resource Development Council of South Africa’s Secretariat provides strategic, technical, administrative and logistic support, and assumes responsibility for, among other aspects, management of the multi-sectoral response to human resource development matters. SOUTH AFRICAN BUSINESS 2016

The need for increased numbers of artisans as well as the need to improve the quality of artisan training has long been recognised as a key driver of both economic growth and employment opportunities in South Africa. The Task Team was therefore established by the HRDC in 2012 to address these challenges by looking into the main blockages facing the artisan development system at that time and to propose recommendations that would address these. The key blockages were identified as follows: • The lack of accurate data on artisans and artisan training- for example, how many artisans does South Africa need and in which trades, how many learners are currently being trained in the various trades and what workplaces exist to provide workplace training for these learners? • The lack of a single guaranteed funding model for all artisan trades as well as a single, simple administration and grant payment system for employers who train artisans; and • The lack of an agreed national system that assists support workers in the engineering field to qualify as artisans. A fourth blockage was subsequently identified by the Task Team – namely, that apprentices are considered to be employees in terms of current labour legislation, which discourages some employers from offering apprenticeships to artisan learners. The HRDC agreed to the following measures recommended by the Task Team to address these challenges: • The establishment of the National Artisan Development Support Centre, based at the Ekurhuleni East Technical Vocational Education and Training College. The Centre now collects artisan learner data onto a single national database and intends to expand the system to include, inter alia, data on existing artisans as well as statistics on the demand for artisans in which sectors and trades • A policy which eliminates the previous sector-based approach to artisan grant funding by establishing a uniform grant per learner (currently R150 000) when they enter into an apprenticeship or learnership with a company as well as a uniform grant payment system; and

INTERVIEW • The development of a national system, to be called the Artisan Recognition of Prior Learning System, designed to recognise the existing skills of support workers and to assist these workers to obtain whatever additional skills they need to qualify as artisans. Investigations are also currently taking place into how best to address the problems relating to the employment conditions of apprentices. Once agreement is reached on this matter, the recommended changes will be referred back to the HRDC for final approval.

• Occupational knowledge learning. • Workplace learning. • Trade testing. • Certification as an artisan. A possible review of these steps is presently being considered. One change being discussed is, for example, to contract a learner with an employer earlier on in the process in order to better integrate the theoretical and practical parts of the training and to ensure that the candidates obtain an apprenticeship.

How does the future look for artisans? What are the opportunities for new arti- The future for artisans is bright and much is besans today? ing done to address the existing problems and The demand for new artisans has become more difficulties. Some of this is outlined above. Steps limited as a result of the current economic con- are also being taken to update the curricula and ditions in South Africa, especially in mining and improve the quality of teaching at the TVETs, as manufacturing. However, hopefully this situation well as to increase the opportunities for learners will change as economic conditions improve and and lecturers at TVET colleges to obtain workit is essential for South Africa to maintain and place experience. There are also moves in place indeed increase its number of qualified artisans to improve the quality of career guidance for in the longer term. young learners and to encourage more learners to train as artisans, as well as to improve the What are some of the challenges faced by current trade test system. While the number of artisans during their training? apprentices passing their trade tests has imThe lack of apprenticeship opportunities is one of proved considerably in recent years, steps are the main obstacles facing artisan learners, which being taken to increase the current pass rates means that while a young person may achieve still further. a suitable qualification at a TVET college, he or Lastly, many private sector and SOC employshe may subsequently discover that they cannot ers have excellent artisan training systems in obtain the necessary work experience in order to place and are committed to train beyond their enable them to take a trade test. The poor quality own needs. of teaching in many of the TVET colleges also results in a high dropout rate among learners. However, a great deal of work is being done to address these challenges. What are the steps towards artisanship?

There are a number of possible routes to becoming an artisan, but the current national model (the so-called “Seven Steps”), is: • Career guidance and management. • General / vocational fundamental knowledge learning (usually at a TVET college). • Learner agreement registration and contracting with an employer.

SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE

College of Cape Town for TVET The College is a public Technical and Vocational Education & Training (TVET) College, under the Department of Higher Education & Training.

ased in the Mother City, The College of Cape Town is South Africa’s oldest Technical and Vocational Education and Training Institution, with a proud history dating back to the beginning of the 20th century.

Engineering, as well as Travel & Tourism. Students can receive qualifications that range from Certificates to Higher Certificates, Diplomas, UNISA B.Ed Degree (Foundation Phase), Skills Programmes and Learnerships. The College is also an Accredited Trade Test Centre for various Louis van Niekerk disciplines.

The College is committed to being an institution of excellence that develops the potential of clients through quality Education and Training in response to the skills development needs of the country. Their vision is to be the preferred provider of Further Education and Training. Four former technical colleges (the Athlone, Cape, Sivuyile and Western Province Technical colleges) were officially merged on 1 February 2002 to become the College of Cape Town. This arose from a rationalisation in TVET Colleges in which some 150 colleges around the country were reduced to 50.

Training campuses The College is situated in the central area of the Peninsula, with campuses located in Athlone, Cape Town’s city centre, Crawford, Gardens, Guguletu, Pinelands, Thornton and Wynberg. The Central Office is located in Salt River, Cape Town. The College also has three residences.

Why the College of Cape Town?

Key facts and ﬁgures

A leading provider of Education and Training focussing mainly on Technical and Vocational Education and Training (TVET), the College has much to offer students and prospective partners as an alternative to Basic and Higher Education and Training. Qualifications include skills programmes as well as technical, vocational and occupational training that lead to recognised, accredited qualifications that are in high demand by commerce and industry throughout South Africa. The qualifications offered by the College are accredited, affordable and quality assured by Umalusi, various SETAs and SAQA. Faculties offered include Art & Design, Beauty Therapy, Building & Civil Engineering, Business Studies, Education & Training, Electrical Engineering, Haircare, Hospitality, Information & Communication Technology, Mechanical SOUTH AFRICAN BUSINESS 2016

Year established: February 2002 No of staff: 620 (full-time) No of registered students: 14 219

CONTACT INFO Key contact people: Louis van Niekerk, Principal Wilfred Jackson, Chief Financial Officer Sharon Grobbelaar, Marketing Manager Email: info@cct.edu.za Tel: +27 21 404 6700 Info Centre: 086 010 3682 (SA only) Fax: +27 21 404 6701/086 615 0582 Physical address: 334 Albert Road, Salt River, Cape Town 7945 Postal address: PO Box 1054, Cape Town 8000 Website: www.cct.edu.za

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Champions of change Five dynamic ladies from Columbus Stainless (Pty) Ltd shared their insight into the recent changes in transformation and empowerment mandated by our progressive government. We currently provide free space on site (as well as other benefits) for qualifying beneficiaries. The free benefits include supplying water and electricity, training and payment of licences for forklifts and hysters, provision of PPE, cleaning material and transport. The businesses that benefit include laundry operations, logistical services, employee assistance services, stores operations and kiosk services. The aim is to free up profits for the entities with which they are able to expand their businesses. A big hurdle for businesses is to get suppliers that provide the correct type of goods and services on their approved vendor list, which is why we launched a Local Preferential Procurement Database, through the Middelburg Chamber of Commerce, to get all black local suppliers in the Steve Tshwete municipal area registered on a centralised database.

Left to right: Nocwaka Ntshangase, Verina Roach, Charmain Kritzinger, Kutala Bizana and Carlien van der Merwe.

South Africa’s new BBBEE Codes aim to focus government and corporate spending on local suppliers, in so doing creating opportunities for companies across the supply chain. Columbus Stainless is proud of the success realised through their many training programmes, designed to empower and provide women with the necessary skills for our country and for the economic liberation of our female employees. Charmain Kritzinger, Purchasing Manager Columbus Stainless has identified several initiatives to ensure our supplier network and other enterprises will benefit from the value adding process of its operations. SOUTH AFRICAN BUSINESS 2016

Kutala Bizana, General Manager, Legal and Transformation Compliance with BBBEE is one of the pillars of Columbus’ corporate strategy and this vision and strategy is translated into detailed objectives, measures and targets that link directly to individual KPI’s throughout the company. It is in our country’s long-term national interest that a broad-based, diverse pool of skills is developed to unleash the potential within all South Africans. Columbus undertakes to continually redress the inequalities present in its employee base with regards to race, gender and disability, and, through its on-going commitment to BBBEE compliance, to accelerate the representation at Management level through structured skills development programmes as well as the injection of talent. To remain a leader in the stainless steel sector, we have to facilitate, create and retain skills to help create technically qualified professionals

FOCUS with a high level of skills and experience. In order materials, to the above-inflation increases in the to promote Supplier and Enterprise Development, cost of electricity,transport, gas and labour that Columbus believes in promoting black-owned it has suffered over the past few years. enterprises and, as a result, we are committed to the development of these enterprises. The Nocwaka Ntshangase, company also supports the Chamber and the Senior Local Sales Manager, Mpumalanga Stainless Initiative (MSI), which is Commercial Department a facility to assist emerging entrepreneurs to Columbus Stainless is optimistic establish sustainable businesses in the stainless about the development of the downsteel industry. stream stainless steel industry, although the conColumbus acknowledges Socio-Economic traction of the local manufacturing sector – partly Development (SED) as an important component due to inflationary increases and cheap imports of its corporate citizenship and have taken a – does present us with a challenge. We support developmental and transformational approach government intervention as means of supportto initiatives linked to the upliftment of SA’s black ing the industry, for example through dti proyouth, especially in terms of education. grammes such as Product Designation. We also support development through initiatives such Verina Roach, Strategist as the Mpumalanga Stainless Steel Cluster and Columbus Stainless is the only the Mpumalanga Stainless Initiative. These have producer of stainless steel flat been created in order to establish independent, products in Africa, and the largest sustainable businesses as a result of training and in the southern hemisphere. We developing emerging individuals who are from a export over 70% of our production, yet we still previously disadvantaged background. produce 85% of all stainless steel flat products used in South Africa. Our company has the Carlien van der Merwe, great advantage of having an existing modern Human Resources production facility worth over R2.5-billion. The Development Manager investments have been made in increasing and Traditionally the manufacturing inimproving our production facilities to meet the dustry is a male dominated area of ever-growing demand for stainless steel. work, however this landscape is slowly but surely We confer a great advantage to local custom- changing through active skills development of ers as we can deliver quickly, deftly and regularly, women. We have followed a strategy of developminimising any risk for our customers associated ing women so that they can enter our business with fluctuations in foreign exchange rates and in various fields and levels. raw materials prices. Its close proximity to its Over the course of the past eight years, domestic customers also enables the company Columbus Stainless has accelerated the to deliver excellent technical support development of women in the fields of Fitter Being part of the Acerinox Group – widely seen and Turner, Millwright, Electrician, Fitters and as one of the most cost effective stainless steel Instrumentation Mechanician, Plant Operators, producers in the world, this allows Columbus Industrial Engineers, Analytical Chemistry, access to the Acerinox global sales network. Finance, Human Resources, Logistics and The Acerinox Group further allows Columbus Metallurgy. to take part in the Group’s strategic program, Columbus Stainless is proud of the success the Excellence Plan, where technical and other of our training programmes. These programmes expertise is shared among the group companies. empower and provide women with skills that are From a cost perspective, Columbus loses much necessary for our country and the economic of the advantage it gains by its proximity to raw liberation of our female employees.

SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE

The top law firms South Africa has an independent judiciary, subject only to the Constitution and the law.

outh Africa’s legal system is based primarily on the South African Constitution and legislation passed by Parliament, with influences from Roman-Dutch and English common law, customary law, with case law being the primary agent for the development of the law, in line with current trends in business and society.

Hofmeyr and ENSafrica. Medium-sized firms are predominantly boutique firms that focus on providing a high-quality service to a small basket of major clients. In matters where there is an amount of over R500 000 at issue, the High Court has jurisdiction, and this requires briefing an advocate to appear in the High Court to argue the case. The advocate is appointed by the attorney and Due to the Constitution, the South African legal is chosen for their specialisation in the relevant system is rated very highly internationally, and the area of law applicable. South Africa is not party to any international extent of the human rights afforded to marginalised groups makes us a leader worldwide and in Africa. court that has jurisdiction over disputes arising Business operating in South Africa enjoy nu- from international trade or business. However, merous advantages, with access to the courts the private international law rules are applied being available for all civil disputes of any level by the South African courts. In essence, if the of complexity. Despite a long waiting period foreign company or individual has attachable for matters to be heard in the courts (six to 14 property in South Africa that can be used to months, depending on the court), the outcome satisfy the financial outcome of the case, then is usually of a very high standard. the courts allow the hearing of the matter to take Matters of complexity are handled by large place in South Africa. as well as medium-sized firms, as well as adWith the right legal advisors, the South African vocates who are the South African equivalent legal system is easy to navigate and evenof the UK’s Queens Councils. The large firms handed in all matters. This provides certainty to are often termed the ‘Big Five’ (Norton Rose, international businesses and investors. Bowman Gilfillan, Webber Wentzel, Cliffe Dekker Tim Dunn, LLB (Admitted Attorney) SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE THE COURT SYSTEM No person or organ of state may interfere with the functioning of the courts, and an order or decision of a court binds all organs of state and people to whom it applies. The Constitution provides for the following courts: • Constitutional Court • Supreme Court of Appeal (SCA) • high courts • magistrate's courts • any other court established or recognised in terms of an Act of Parliament There are also special income tax courts, the Labour Court and the Labour Appeal Court, the Land Claims Court, the Competition Appeal Court, the Electoral Court, divorce courts, small claims courts, "military courts", and equality courts. The Constitutional Court, Supreme Court of Appeal and High Courts have the power to protect and regulate their own processes, and to develop the common law. The courts are also required to declare any law or conduct that is inconsistent with the Constitution to be invalid, and develop common law that is consistent with the values of the Constitution, and the spirit and purpose of the Bill of Rights.

THE DEPARTMENT OF JUSTICE AND CONSTITUTIONAL DEVELOPMENT IS RESPONSIBLE FOR ENSURING AN ACCESSIBLE JUSTICE SYSTEM THAT PROMOTES AND PROTECTS SOCIAL JUSTICE, FUNDAMENTAL HUMAN RIGHTS AND FREEDOMS.

THE NAMING OF COURTS

Judges in the various courts are appointed by the President in consultation with the Judicial Service Commission, the leaders of parties represented in National Assembly, and, where relevant, the President of the Constitutional Court. The Judicial Service Commission includes the Chief Justice, the President of the Constitutional Court and the Minister of Justice. It is a widely representative body, with the transformation of the judiciary remaining one of government's key priorities.

There are 14 high courts in South Africa. Circuit Courts are also part of the High Court system. They sit at least twice a year, moving around to serve far-flung rural areas. Other courts that fall under the High Court system are Special Income Tax Courts, Labour Courts and Labour Appeal Courts, Divorce Courts, and the Land Claims Court. The Master of the High Court administers cases of deceased estates, liquidations, and registration of trusts, among others. The Sheriff of the High Court is an impartial and independent official of the Court appointed by the Minister of Justice and Constitutional Development who must execute all documents issued by the court, including summonses, notices, warrants and court orders.

Source: Southafrica.info

Source: mediaclubsouthafrica.com

How are judges appointed?

SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE

Keeping the BRICS together Kenny Chiu and Wil Huang of ENSafrica’s China Practice Group make the call for the BRICS nations to hold high the banner of cooperation in the pursuit of creating a development path suitable for BRICS. BRICS is an association of countries with some of the fastest economic growth in the world, and includes Brazil, Russia, India, China and South Africa. They are characterised by making significant contributions to global economic development, and have served as inspiration for developing countries around the world. However, BRICS countries are currently encountering difficulties with economic development – such as China’s slowdown on economic growth, the depreciation of the Russian Ruble, high inflation rates in India, social instability on the rise in Brazil, as well as labour issues in South Africa. Nevertheless, these problems can ultimately be seen as a travail in the economic development process, and are to be expected with such rapid levels of growth. In order to survive this struggle, these countries need to cooperate in mutual development in order to jointly create a better future. SOUTH AFRICAN BUSINESS 2016

BRICS are defined in terms of being developing nations and, under these circumstances, where it can be difficult to move either forward or backwards, development on all levels is key in removing these constraints. Economic development is the first step and BRICS countries must regard this as a top priority. They need to sustain a steady growth rate, accelerate the pace of reform and strengthen the ability to innovate. Reform and innovation should be utilised as the main drivers of development in order to resolve outdated ideologies, systems and mechanisms, and to increase the level of economic development. As long as these two factors remain crucial pillars within development, the growth of BRICS countries will definitely stand out in the global economic arena. In addition, cooperation should be the unwavering ideology under which BRICS countries con-

SPECIAL FEATURE tinue to move forward together. Although the BRICS countries are at similar stages of development, they have a wide range of opportunities that they can take advantage of. China has a broad market, strong innovative ability and a relatively strong economic foundation. Russia is rich in natural resources while India, South Africa and Brazil also have unique advantages. As long as an appropriate cooperation methodology is adopted, they will be able to achieve the result of 1+1 being greater than 2. Accordingly, mutual political trust will need to be strengthened in order to bridge the gap between BRICS countries and reinforce cooperation in various areas such as the economy, culture, finances, communications and trade. The next step will be to bolster this level of cooperation amongst BRICS countries in order to improve the relationships between personnel, trade, economic investment and the exchange of information to a level whereby they can develop ideas that they can eventually convert into action. By developing a new cooperation regime, efficiency can be facilitated and their dependence on western countries can be reduced. Focus areas must be determined to maximise these cooperative benefits. For example, this has already been demonstrated in the establishment of the BRICS Development Bank in 2014, which is a result of BRICS cooperation in the financial sector. To create additional opportunities in economic collaboration, this strategy should be aimed at developing infrastructure in the energy, transport and communication sectors. Lastly, BRICS countries should openly engage with each other and intensify cooperation, but this cannot be done if the parties are narrow-minded and ring-fence themselves from developed economies when opportunities arise. In addition, cooperation with the rest of the world will be beneficial to member states so long as it does not harm the mutual interests of BRICS. Regardless of development or cooperation issues, the BRICS countries should always aim for a win-win outcome. This is a philosophy that China adheres to and for which it is advocating. Being the world’s second biggest economy (although some analysts have confirmed China as the world’s larg-

est economy), and having its economic development placed at the centre of the world stage, China is a key powerhouse to drive the BRICS countries towards success. Despite China’s economic growth having slowed down, it remains within the bounds of the rules of economic development. The Chinese economy still shows signs of new opportunities, business innovation, quality economic development and social harmony, as well as improved living standards. In future, China will be able to pass its successful experience on to other BRICS countries, strengthen its influence, and promote the development of all BRICS members.

BRICS countries should openly engage with each other and intensify cooperation, but this cannot be done if the parties are narrow-minded and ring-fence themselves from developed economies when opportunities arise. The future of economic development in BRICS countries is looking extremely bright and the current difficulties faced by these countries should not deter hope. The world economy post the economic meltdown now faces a reshuffle. As America, Japan, Europe and other developed economies remain in their state of recovery and are showing signs of lag, it is likewise inevitable that the developing BRICS countries may also experience a certain degree of struggle. However, as long as they are resolute in their aims for cooperation and joint economic development under a win-win strategy, and each country takes advantage of its potential to drive economic development, they can succeed in turning these goals into reality. • Kenny Chiu is an Executive and head of ENSafrica’s China Practice Group; Wil Huang is a Senior Transactions Manager in ENSafrica’s China Practice Group. SOUTH AFRICAN BUSINESS 2016

SPECIAL FEATURE

Keeping BEPS in check Arnaaz Camay (Executive, Tax at ENSafrica) offers an update on the tricky issue of base erosion and profit sharing On 8 June 2015, the Organisation for Economic Co-operation and Development (OECD) released a Country-by-Country Reporting Implementation Package developed under the OECD’s base erosion and profit shifting (BEPS) Action Plan 13: Reexamine Transfer Pricing Documentation. BEPS was identified as a risk to tax revenues, tax sovereignty and the tax fairness of all countries by the OECD in 2013. A 15-point Action Plan was developed to address BEPS and to ensure that profits are taxed where the economic activities generating the profits are performed and where value is created. The purpose of the OECD’s Action Plan 13 was to re-assess transfer pricing documentation requirements with the purpose of obtaining information from taxpayers so as to enable tax administrations to identify transfer pricing risks. The OECD’s recommendation under Action Plan 13 was that all countries should adopt a standardised approach to transfer pricing documentation that follows a three-tiered structure consisting of a master file, a local file, and country-by-country report. In South Africa, the tax review committee appointed by the Minister of Finance to make

SOUTH AFRICAN BUSINESS 2016

recommendations for possible tax reforms in SA is headed by Judge Dennis Davis (the Davis Committee). It is the view of Davis that the OECD’s recommendation under Action Plan 13 (ie that countries should adopt a standardised approach to transfer pricing documentation), should also be adopted in SA. Accordingly, in terms of the OECD’s Countryby-Country Reporting Implementation Packages the ultimate parent entity of a large multinational business with a group turnover of over R1-billion in SA will be required to provide aggregate information annually to the South African Revenue Service (SARS) in each jurisdiction where it does business. The information to be provided to SARS will include the global allocation of income and taxes paid (these are indicators of the location of economic activity within the group), as well as information about which entities do business in a particular jurisdiction and the business activities each entity engages in. In addition, the Davis Committee recommends that the country-by-country report for SA should contain additional transactional data regarding related party interest payments, royalty payments and especially related party service fees, so that SARS may perform risk assessments where it is difficult to obtain information on the operations of a multinational business. The OECD’s Country-by-Country Reporting Implementation Package also contains three Model Competent Authority Agreements to facilitate the exchange of country-by-country reports among tax administrations. This will ensure that all tax administrations obtain a complete understanding of the way multinational enterprises structure their operations and it will also enhance transparency by providing tax administrations with information to assess high-level transfer pricing and other BEPS-related risks.

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IPAP in action In 2015 the dti launched the latest version of their Industrial Policy Action Plan (IPAP) 2015/16-2017/18.

he IPAP is a comprehensive joint endeavour of the Economic Sectors, Employment and Infrastructure Development Cluster of Government which, framed by the National Industrial Policy Framework (NIPF), is an annual action plan which builds on the work defined and initiated in previous iterations of South Africa’s industrial policy. The IPAP seeks to continuously strengthen industrial policy instruments, build upon previous plans and jettison any programmes which have in practice been found not to work. If the National Development Plan (NDP) sets the overall vision for South Africa’s economy and society on the road to 2030, then the IPAP provides the targeted actions and rolling implementation framework for sustained and deepening industrialisation.

The importance of industrial policy Industrial theory, policy and practice is frequently misunderstood and sometimes maligned in South Africa, where it is often negatively and mechanically counter-posed to ‘market imperatives’ and asked to accommodate to ‘one-size-fits-all’ policy SOUTH AFRICAN BUSINESS 2016

prescriptions. In reality, industrial policy is pervasively practiced all over the world within both developing and developed country contexts. Wherever it is practised in a nuanced way (with a realistic grasp of the local/regional context, as well as a strong focus on longer-term outcomes), it provides the foundation stone for the indispensable coordination of government and private sector economic and social actions. Sensible and empirically grounded industrial policy develops traction through a dynamic, complex set of inter-locking and mutually supportive transversal (cross-cutting) and sector-specific interventions. Successive IPAPs have consistently been premised on an understanding that successful re-industrialisation requires a laser-focused, national industrial effort. In practice, what this means is that there is a need for strong policy coherence and programme alignment across all government departments and their agencies, with decreasing reliance on regulatory compliance and a much stronger emphasis on coordinated economic impact. In addition, there is also a need to decisively change the nature and tone of the conversation between government, business and labour to ensure that all three parties identify areas in which they can actively work together to secure

SPECIAL FEATURE and strengthen their joint efforts, factoring in the • Incentives and industrial financing tough realities of extremely difficult global and • A total of 3 384 private sector enterprises across all provinces were provided with indomestic economic conditions. centive and other support in 2014 to a value As at 31 March 2015, a total of R3.7-billion has of R13.6-billion. been approved under the programme, of which R2.6-billion has been disbursed since inception • A comprehensive bouquet of incentives is structured, in the main, as an ‘open archiof IPAP in 2010. tecture’ system. The Manufacturing Value Addition (MVA) increase, attributable to the CTCP between the • Increasingly, across all sectors the conditions for access to government support base of 2009 and 2014, is R3.9-billion (exceeding the disbursements by 50% or R1.3-billion) will not only be tightened but increasingly while the overall sector experienced declines in directed towards support for ‘winning’ companies that have demonstrated either the output and Value Added over this period. proven capacity or the clear potential to National Employment in the sector (utilising annual averages provided in the Quarterly compete in export markets and/or qualify Employment Survey) decreased by around as suppliers to global OEMs. 19 000 formal jobs between 2009 and 2014 while, during the same period, the increase in employment attributable to the CTCP was Procurement approximately 6 900 jobs. MVA per Employee increased substantially, especially for Leather, The dti has designated 16 sectors, sub-sectors indicating an improvement in labour efficiency and products for local procurement. Although as MVA growth was faster than the growth in this package of measures still falls below the levels of support deployed in many other counemployment. Labour Cost as a percentage of sales has tries, if we take into account other local procurestabilised since 2012, indicating that improved ment and supplier development programmes— process efficiencies, exceeded the increased such as the National Industrial Participation Programme (NIPP) and the Competitive Supplier cost pressures (wages, fuel, electricity, etc.). On Time In Full (OTIF) deliveries, one of the Development Programme (CSDP)—then it is most important indicators of operational ef- safe to say that the combined quantum of supficiency and customer service, has increased port is significant. The lever of designation is as overall, indicating a steadily improving delivery strong or as weak as the level of compliance reliability in in all sectors. Thus, CTCP interven- that can be achieved. Upcoming designations tions have already contributed to improved over- will thus be accompanied by much more sharply all competitiveness, sustainability and employ- focused measures to ensure compliance across ment growth for recipients. all government departments and agencies and At a cost to date of R2.6-billion disbursed, concentrated attention to the development of the CTCP facilitated the creation of R3.9-billion state capacity for local strategic sourcing and of additional MVA as well as 6 900 new jobs, in supplier development. the short term. Across the whole range of IPAP interventions, local content requirements will continue to be strengthened wherever applicable—including Transversal (cross-cutting) interventions in flagship success areas like the latest window of the Renewable Energy Independent Power IPAP 2015 also reflects and highlights steady Producers Programme (REIPPP). progress, inclusive of the following transversal The full IPAP can be downloaded from programmes: www.thedti.gov.za.

SOUTH AFRICAN BUSINESS 2016

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The path to economic growth is circular

JOIN THE JOURNEY | www.redisa.org.za |

/wasteintoworth |

@wasteintoworth | +27 87 35-REUSE (73873)

Hermann Erdmann, CEO REDISA (Recycling and Economic Development Initiative of South Africa) shares his thoughts on the importance of sustainable recycling.

he world faces many major challenges including climate change, slow economic growth and a disproportionate reliance on mineral resources, but recent research shows that adopting circular economies could provide answers for many of these global problems. The Obama administration revealed in June that the failure to act on climate change could cause an estimated 57 000 deaths a year in the United States from poor air quality by 2100. According to the European Union the air quality in Witbank is among the world’s dirtiest – even when compared to the likes of Beijing, where people wear face masks to protect themselves from air pollution. It is no coincidence that the Witbank region is also home to 11 coal-fired power stations. A 12th one is currently being built and when completed, this will be one of the world’s largest, burning 17-million tonnes of coal a year. We are creating an environmental debt that our children, and grandchildren will need to pay. In the same way you wouldn’t buy a car SOUTH AFRICAN BUSINESS 2016

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and expect your children, or grandchildren, to finance it, this debt isn’t fair. But the question remains, what can we do about it? The recently released international study developed by the Ellen MacArthur Foundation, the McKinsey Center for Business and Environment, and SUN (Stiftungsfonds für Umweltökonomie und Nachhaltigkeit), has shown “Europe’s economy remains very resource-dependent… Proponents of a circular economy argue that it offers Europe a major opportunity to increase resource productivity, decrease resource dependence and waste and increase employment and growth.” This situation is not dissimilar to the challenges facing the South African market, but what’s interesting is that the European market has something to learn from us. Positively, to reduce the pressure on our resources, SA has already implemented a circular economy within the tyre industry – which has become an internationally recognised case study as to how successful this approach can be. As a result of the implementation of the ‘Waste into

FOCUS In South Africa, the tyre industry was selected as a pilot project for circular economy development since the mapping of collection points are known – this is because tyres are exchanged at dealerships and not at homes. The Integrated Industr y Waste Tyre Management Plan was developed to fulfil a mandate of job creation and to bring order to South Africa’s recycling of tyres, a market that only processed 10 000 tonnes of tyres each year of the 240 000 tonnes sold. In two years, this project has resulted in more than 2 000 new jobs being developed, and over 190 SMME’s developed and supported – tangible proof that where some see waste, others see opportunity. The way forward True sustainability means balancing economic growth, infrastructure development and creating small business and job opportunities - while lowering our emissions and overall impact on the environment. The challenge is that generally, big business Worth’ concept for tyre waste, the European struggles to find a balance between reducing Union has appointed REDISA to serve on the carbon emissions, or protecting the environment, advisory committee on Circular Economies to while driving a positive impact on the bottom line the EU parliament. of the business. While interest in the circular economy approach is growing, it is happening Let’s move from resource-dependency at a slow pace. If it is to become more wideFor example, in cement kilns waste tyres can be spread, we must consider substituted for up to 20% of current coal usage. all industries to see how, This equals reduced reliance on coal -less de- through innovation and mand for mining coal - fewer carbon emissions cooperation, we can dou(as in the correct controlled environment, tyres ble our efforts. burn cleaner than coal) and ultimately cost savings for the cement companies that are passed BIO to the consumer. PPC De Hoek, Natal Portland Cement, AfriSam and La Farge are already doing Hermann Erdmann is an entrepreneur and this and realising the benefits. businessman who has extensive experience But what about increasing employment in the manufacturing and retail sectors having served on a number of industry-related boards. and growth? The report reveals that in Europe, the circu- Hermann’s interest in environmental sustainlar economy could create between 200 000- ability, transformation and empowerment of the 500 000 jobs; reduce unemployment by previously disadvantaged resulted in the estab50 000-100 000 and offset 7-22% of the lishment of REDISA, and the development of the expected decline in skilled employment by 2022. ﬁrst approved Industry Waste Management Plan.

SOUTH AFRICAN BUSINESS 2016

INTERVIEW

The riches of Africa await Kutoane Kutoane, the much-travelled CEO of the Export Credit Insurance Corporation (ECIC), is excited about the opportunities Africa has to offer. What gives you the most conﬁdence about the economic growth potential across the African continent?

ECIC CEO, Kutoane Kutoane

Most African economies have been growing at a phenomenal rate over the past 10 years, sometimes at double digits, and if one looks into the future I think the growth tempo is going to be kept up. There is good potential as I think the fundamentals are good. Of course, at any moment there is a shifting of politics or uncertainties over policies such as, for instance, the current visa regulations, then the attitude of foreign investors can effect investment in the short term. It’s very important that South Africa achieves a robust economic climate or a strong investment climate because, as we always, say it’s the gateway to Africa. Most companies would want to set up shop in South Africa as a prelude to their penetration of other sub-Saharan African countries, but unless we get our act together we may miss out on some of the lucrative export potential that is waiting to be invested. What is the attitude of foreign investors towards SA?

PROFILE The vision of the Export Credit Insurance Corporation SOC Limited (ECIC) is to be the leaders in the medium and long-term export credit and investment insurance business, focusing on project ﬁnance underwriting, customer needs, and prudent portfolio and risk management. Their mission is to facilitate and encourage South African export trade by underwriting export credit loans and investments outside South Africa, which will help contractors win international capital goods and services contracts. SOUTH AFRICAN BUSINESS 2016

Their attitude is extremely positive, although I must add that foreigners are very conscious of the level of skills in South Africa and the fact that it is affecting our ability to innovate and to be able to offer high-quality, hi-tech products. This can also lead to structural constraints for our economy, especially in terms of a lack of capacity, such as in the energy sector, either the disruptions of electricity or the core supply. The important thing for investors to see is that we are dealing with these issues, that the South African government is actively trying to avoid these big issues. It’s important that we are seen as the trendsetters in some of these areas, but it takes time, a lot of effort and a lot of investment from both the government and the private sector. Have there been any recent changes in terms of the ECIC’s business strategies? We are the insurers of last resort, so either clients will come directly to us or the banks themselves will come and seek insurance cover for credit that they want to give to their clients. Recently we have adjusted that approach and we have said that, given that we are the risk carriers of last resort, we should be getting closer to the customer. Key markets that we are looking at are the West African region, Central Africa and East Africa, so we are beginning to put

INTERVIEW and all those kind of things. That’s the kind of market that we want to capture because it’s a manifestation of proper growth. So we are looking at the potential to beneficiate and to contribute towards the regional integration of our African continent. That is going to require a concerted effort to improve trade relations, trade infrastructure, logistics and everything else within our continent, but in turn it will unlock South Africa’s potential in terms of being the almost natural export market.

The Moma titanium mine plant in Mozambique.

our people into those key markets to deal with Is there anything you’d love to see South the dynamics and try to build capacity in those Africans creating or manufacturing? areas. We want them to be aware of our abilities Absolutely – that would have to be the cars of the and to know what the ECIC can do in order to future, in particular vehicles that utilise renewable enable them to import from our manufacturers. energy. Imagine if you can park your car in the sun So we’ve taken a more pro-active stand in sup- when you get the office and you know that you’ll port of the government’s export grading. have a ‘full tank’ when you drive home. We’ve got so much sun, so you have to ask: what are How bright is Africa’s star shining in terms you doing with it? It’s natural. of the export industry? At the Trade and Export Finance conference people from various sectors looked at Africa as the next growth front, and there’s a lot of frenzy to get the deals out of Africa and we’re seeing large amounts of infrastructure spend being invested, and that’s because there’s been a lot of stability in a lot of countries. Africa is the shining star – it’s rising and everybody is looking at that. However, not every bank will reposition themself towards compliance with that, and that could limit liquidity availability for long-term financing. This is where we come in, as we will elect panels for projects, which is more convenient for long-term investments. What excites you about the export market in the coming years? I think the most important thing is that we are able to diversify our export market. We’ve been close to almost 40% building of commodities, but we’d like to grow to about 90% being more of manufactured goods, value-added product

The ﬁrst gold being poured at Liberia’s Liberty Gold Mine.

SOUTH AFRICAN BUSINESS 2016

INTERVIEW and it could actually be competing with South Africa as a gateway into Africa. The DRC have the greatest, most vast potential for growth and improvement when you look at all of its mineral reserves but, unfortunately, with all those threats of violence from rebel groups it is a very sensitive type of market. So those are the kinds of risks we look at. However, on the other side of risk is the reward. Does Africa offer investors far greater rewards for a relatively low risk? Vee Craft crew boat supplied to Nigeria.

What are the limiting factors you notice in terms of our economic growth? Unless we get our education on its proper footing so that it is more aligned with our growth strategies, then we’re going to miss out and we’ll still be looking into this mundane old stuff where we have unskilled labour producing equipment and material. The converting of materials requires a more renewed type of an employee, a worker, a worker with skills, a worker who has technological know-how... but that comes from what? Education! So that will limit our growth in a big way if we don’t get it right. Our infrastructure also needs a revamp and we need to invest more, but we are also seriously looking at maintenance issues. There’s no need to build a road that you can’t maintain. The other factor is that our policy at government level needs to be much more flexible. At the moment we have very rigid policies, but sometimes we make policies that suggest that we want to restrict rather than enable our growth. What should the average business person know about Africa and the issue of risk? There are some key issues, one of which is the heightened level of political risk in most African countries. When you look at West Africa you see all the terrorist activities that are happening there, and the rebel situation in some countries, in particular in core growth countries such as Nigeria. I believe Kenya has incredible potential SOUTH AFRICAN BUSINESS 2016

You’ve seen companies from South Africa that prove the advantage of the market in the rest of the continent. Look at Shoprite and MTN and the kind of success they have had investing in Africa and growing their markets into Africa. There are many companies that have set up shop in Africa and they are reaping serious rewards. Look at our banks, as well as brewing giant SAB. The rewards are much less in Europe, and that is something that you call a legacy perception, but, yes, most of our countries are small and come from a long period of exploitation from the West, so they certainly can offer an investor a much more faster and much higher return than you could hope to get in a mature market. I travel across the continent a lot and it always strikes me as funny that there are a lot more European dealers and other business people looking for opportunities in Africa compared to the amount of South Africans. To me, it sometimes looks like we are more scared of our continent and our country than so many of the welltravelled foreigners themselves. I mean even if you think about Zimbabwe… everyone is so scared about investing in Zimbabwe, but just think about it. What are you really scared of in Zimbabwe? Zimbabwe offers a tremendous amount of growth potential for a lot of companies. Group Five is there and we have been working with Group Five in Zimbabwe and they are very happy to continue the infrastructure building in Zimbabwe. You need to travel your country and continent and you will start to see the potential and opportunities that are waiting for you out there.

PROFILE

Export Credit Insurance Corporation SOC Limited (ECIC) The ECIC facilitates and encourages South African export trade by underwriting export credit loans and investments outside South Africa.

Proﬁle The ECIC is the national Export Credit Agency of the government of South Africa and provides political and commercial risk insurance to facilitate export trade and investments outside South Africa. The ECIC aims to facilitate and encourage South African export trade by underwriting export credit loans and investments outside South Africa, which will help contractors win international capital goods and services contracts. The ECIC’s vision is to be leaders in the medium and long-term export credit and investment insurance business, focusing on project finance underwriting, customer needs, and prudent portfolio and risk management. Their mission is to provide export credit and investment insurance solutions in support of South African Capital goods and services by applying best practice risk management principles.

Services The ECIC provides insurance that enables South African exporters to offer their services and products to the international market, with a particular focus on emerging markets in Africa that are considered too risky for conventional insurers. Its overarching goal – and its mandate from the South African government, as its sole shareholder – is to make South African exporters attractive to international buyers to attract foreign income, stimulate local economic growth and create local jobs.Founded on 2 July 2001 by the Export Credit and Foreign Investments Insurance Act (1957, as amended), the ECIC’s only shareholder is the Government

Grinrod electric locomotives supplied for use in Sierra Leone.

of South Africa, represented by Department of Trade and Industry (the dti). The ECIC is a registered financial services provider: FSB No. 30656

CONTACT INFO Key contact person Chris Thirion - Head: Stakeholder Management and Strategy Tel: +27 12 471 3800 Physical address: Block C7 & C8, Eco Origins Office Park, 349 Witch Hazel Ave, Highveld- Ext 79 Centurion Postal address: PO Box 7075, Centurion, 0004 Email: info@ecic.co.za Web: www.ecic.co.za

SOUTH AFRICAN BUSINESS 2016

PROFILE

ECIC exco proﬁles Profiles of the ECIC’s exco members Kutoane Kutoane, Chief Executive Ofﬁcer Kutoane has spent over 20 years involved in, and in many cases, leading growth agenda of diverse organizations. He has worked in organizations such as International Finance Corporation (IFC), Nedbank, Eskom, Industrial Development Corporation (IDC), Business Strategies International (BSI) and Gauteng Partnership Fund. He has experience over a range of industries dealing with business growth strategies, project finance, development finance, oil and gas, power and other infrastructure finance. Kutoane has travelled extensively in Africa and globally working

Mandisi Nkuhlu, Chief Operating Ofﬁcer Mandisi has worked for various fi nancial institutions involved in the fi nancing of infrastructure development. He spent five years at the Development Bank of Southern Africa (DBSA) as the legal advisor to the Project Finance team responsible for crossborder private sector projects. While at DBSA he was seconded to Masons in London, a law fi rm specialising in Public Private Partnerships. Mandisi later worked for the Industrial Development Corporation of South Africa Limited (IDC)

Sedzani Mudau, Chief Financial Ofﬁcer Sedzani is a qualifi ed Chartered Accountant. She has undergone numerous professional training which includes Corporate Governance course by the SOUTH AFRICAN BUSINESS 2016

on varied project finance transactions covering water resource projects, mining, transportation, power, oil and gas, renewable energy, telecoms and real estate. He has won many awards in recognition of his leadership and contribution. He is presently leading the Export Credit Insurance Corporation of South Africa Soc Ltd (ECIC) where he has spent over two years as Chief Executive Officer. Kutoane possesses the tremendous ability to operate successfully in complex cultural, economic and political environments and within public and private sectors. Kutoane holds master’s degree in economics from University of Manchester and has completed Advanced Management Programme (AMP) with Harvard Business School.

as a Senior Account Manager in the International Finance Department. Prior to re-joining the ECIC in February 2011, he was a Director of Export Finance at Standard Bank of South Africa. Mandisi has worked on numerous infrastructure and mining projects. He cut his teeth in the Mozal I and Mozal II projects and worked on the Nelspruit Water PPP Concession, the first bank-financed water PPP Concession in South Africa. An admitted attorney, Mandisi holds a B Iuris and the LLB degree from the University of the Western Cape. He furthered his studies at Wits Business School and UCT’s Graduate School of Business.

Institute of Directors (IOD) as a member of the IOD. Prior to joining ECIC more than 7 years ago as a fi nancial manager, she completed her three auditing articles with Deloitte and also worked for Standard Bank group fi nance. Sedzani is in the process of completing her MBA at the University of Witwatersrand.

PROFILE Lesego Mosupye Resume, Chief Risk Ofﬁcer

Lindelani Mphaphuli, General Counsel / Company Secretary

Lesego is a qualified CA with 15 years’ experience in the fi nancial services sector, six of which were spent in investment banking with banks such as Investec, ABSA capital and Barclays Bank. As an investment banker, he originated deals in project finance, export finance, leverage finance and debt capital markets. He spent 11 years with development finance institutions such as the Industrial Development Corporation (IDC) and the ECIC, where he is the Chief Risk Officer. As Chief Risk Officer, Lesego represented the ECIC on the insurance industry forum and consultation process for the implementation of the insurance industry-wide Solvency Assessment and Management (SAM) project. Lesego led the ECIC’s SAM readiness project and was instrumental in the establishment of the Risk function, Investment function and IT functions to ensure the ECIC is repositioned to respond to changing regulatory and market conditions.

As General Counsel, Lindelani reports to the Chief Executive and acts as the senior legal officer of the Corporation serving on the Executive Committee. As Company Secretary, there are clear responsibilities to the board, and the reporting line is to the Chairman. Lindelani has over 20 years of corporate legal and executive background with transactional and governance experience. She has worked in deals of project finance, private equity / venture capital funds, and structured finance nature, as well as on capital and money markets both domestically and internationally. After admission as an attorney of the High Court of South Africa, Lindelani had a short stint as a lecturer of Roman Law and Law of Contracts at a South African university prior to joining a Joburg-based private commercial legal practice. The call to the public sector came in 2008 when she joined a DFI. An admitted attorney of the South African High Court, Lindelani holds a Bachelor of Arts (law) and Bachelor of Laws degree from the University of the Witwatersrand and a Master of Laws (corporate law) degree from Rand Afrikaanse Universiteit. She is a member of the Corporate Lawyers of South Africa (CLASA) and served on their board as a director (2005-2009) and Vice President (2008). Lindelani is currently on the Senior Executive Programme with the Wits Business School.

Ismail Carr (CM)SA, Executive: Marketing and Communications

Ismail is one of the chartered marketers in South Africa and is a member of the Marketing Association of South Africa (MASA). He graduated top of his class with a cum laude as a Post Graduate in Marketing from the Institute career and held various senior positions in compaof Marketing Management (IMM) and in the same year nies such as Telkom SA, IMCG (Pty) Ltd, the South won the APPETD award for the “Most Outstanding African State Theatre and the Gauteng Partnership Postgraduate Marketing Research Project in South Fund (GPF). He was also responsible for the launch Africa”. Ismail had been a board member of the Capital of various brands in the B2B market, with a strong City Business Chamber (CCBC), the Tshwane Tourism focus into the government, corporate, SMME’s and Association, and is currently an active member on the business segments. Ismail recently joined the Export Tshwane Mayoral Council in Pretoria, as well as the Credit Insurance Corporation of South Africa (ECIC) Totally Concrete Advisory Board. and currently holds the position as the Executive: He has over 20 years of professional experience Marketing and Communications. In addition, he is also working in strategic marketing, stakeholder manage- responsible for stakeholder and investor relations with ment, group communications and public relations. His his main focus being growth in brand equity, as well as extensive experience extends into CRM, advertising, increasing market share and competitive advantage for sponsorship, as well as CSI. Ismail built a successful specific target markets of the B2B market segment.

SOUTH AFRICAN BUSINESS 2016

INTERVIEW

The hub of Africa Tim Harris, CEO of Wesgro (the official Destination Marketing, Investment and Trade Promotion Agency for the Western Cape), is excited about the potential for local businesses to grow into (as well as to serve as a base for) Africa.

What is the scope of work for your department?

Wesgro CEO Tim Harris

Wesgro has a broad mandate, but the heart of our job is investment promotion and destination marketing. Performance has been strong in the last five years and we have generated more than R6.6-billion of inward investment which has created almost 4 500 jobs. In the first half of this year alone the agency facilitated a total of 14 new investments into the province in sectors as diverse as manufacturing, renewable energy, and healthcare. The agency has helped bring more than 7-million foreign tourists into the region and has secured 62 conference bids to the value of R1-billion for the region. What is the long-term potential for the region?

BIOGRAPHY Tim Harris is Chief Executive Officer of Wesgro, the Western Cape’s official Destination Marketing, Investment and Trade Promotion Agency. Wesgro is more than 30 years old and remains the oldest organisation of its kind in the country. Prior to that appointment he was the Director of Trade and Investment in the Office of the Executive Mayor at the City of Cape Town and the Shadow Minister of Finance with Democratic Alliance in parliament. He was elected to Parliament aged 29. Harris has a Masters in Economics from UCT. SOUTH AFRICAN BUSINESS 2016

Our vision is to be a business hub for Africa and the place that people think about their African strategies. The world meets to talk about mining at the Mining Indaba in Cape Town… in a place where there is no mining! People travel to the World Economic Forum to meet to solve the problems of Africa. We can build on the strategic advantages we have as the city suchwith possibly the best quality infrastructure on the continent and a high quality of life. This makes it a place where entrepreneurs and managers want to live. Key competitive advantages of the Western Cape It is arguable that the Western Cape has the best infrastructure on the continent. The result is that many companies are choosing to base themselves in the Western Cape where they can work in an enabling business environment where the government is focussed on facilitating investment and cutting red tape – while at the same time reaping all of the benefits of world-quality infrastructure. Another reason for the province’s attractiveness to business is its proximity to growth markets – both regional and domestic. With this in mind we are working hard to communicate with investors about the work we are doing to boost connectivity to the rest of Africa. Regional integration is a high priority for Wesgro and we are working closely with the Department of Transport, the Western Cape Government and the City of Cape Town to leverage the size

INTERVIEW and strength of our port, rail, and road links into the rest of the region. Improved air connectivity, especially into Africa, will be a catalyst for vibrant growth in a number of economic sectors. Red tape and visas

includes Kimberly-Clarke, who have extended their plant (they now run their Europe, Middle East and African regions from their Epping office) and Atlantis Foundries, who manufacture and export engine blocks for Mercedes-Benz trucks.

The recent changes to South African immigration New sectors law have had a negative effect on the local tourism There is a lot of interest in innovation and digital industry but they also resulted in difficulties for thanks to the city’s new broadband policies and the local film industry and English language the fibre network being installed. Over the last 6 schools. In response to these problems Wesgro years the City has installed more than 560kms met with the Deputy Minister of Home Affairs and of fibre optic cable and we encourage private then held a workshop between key stakeholders Internet Service Providers to leverage off this in the private and public sector including infrastructure. The establishment of several representatives from the DHA to discuss the “Special Purpose Vehicles” such as GreenCape, new visa regulations and find common ground. BpeSA and the Cape IT Initiative have also One of the results of the workshop was a provided the information technology, renewable commitment by the Deputy Minister to establish energy, and service sectors with a platform that a visa ‘One Stop Shop’ in the Western Cape fosters innovation, competition, and ultimately that would provide assistance with visa-related growth. This infrastructural support feeds off queries as well as be able to process fast-track what is probably the strongest education city visa applications for special industries such as on the continent; academic institutions such as film and investment. She also agreed to travel UCT, Stellenbosch, UWC and CPUT produce to China with representatives of the tourism an incredible talent pool for companies looking industry to see first-hand how difficult it is to for such high level skills give the Western Cape secure travel documents for Chinese visitors a real competitive advantage. This is part of the to South Africa. The minister also subsequently reason why software and the digital space are met with Wesgro and representatives from so prominent in the Cape – it’s a factor of the the language schools and agreed to discuss skills pipeline and the quality lifestyle in the city. a concession with regards to issuing a special We’ve had a lot of entrepreneurship in that space visa for foreign language students provided the and I think we’re going to see some of the big integrity and security considerations related to players globally starting to recognise that Cape the visas are upheld. Town is the leader on the continent. Recent key investments

How do you identify and reach investors?

In recent times the three most interesting investments would be the Chinese giant HiSense setting up a facility in Atlantis, from where they manufacture and export TVs and fridges throughout the region. We are in the process of developing a green technology cluster in Atlantis and the city is also extending its own green incentives into that zone, with German renewable giant Gestamp Renewable Industries (GRI) already having built a 12 000m² windmill tower manufacturing facility, the biggest in the region. Proof of the region’s diversified offering

We have a large research capacity at Wesgro that enables us to help investors to understand the market and to remove red tape and other obstacles to investment. We also realise the importance of exporting talent and conduct trade missions with small and large companies. We took 25 companies to Ghana in July, mainly small companies who were sponsored by the dti. However, we invested our time and efforts in these companies as we believe they are at the stage in their development that that are able to start exporting to Ghana relatively quickly.

SOUTH AFRICAN BUSINESS 2016

Key sectors Overview of the main economic sectors of South Africa.

Agriculture

Oil and gas

Mining

Mineral beneficiation

Energy

Manufacturing

Automotive

Automotive components

Food and beverages

Chemicals and pharmaceuticals

Engineering

Healthcare

Water

100

Transport

106

Maritime

110

Tourism

112

Events

116

Trade with Africa

117

ICT 118 Banking and financial services

124

Development finance and SMME support

128

Education and training

132

Waste recycling

134

Renewable energy. 142

OVERVIEW

Agriculture South Africa is ploughing forward.

he past year has not been an easy one within the agricultural sector as South Africa was plagued by the worst water shortages in 23 years along with drought conditions yet, despite these challenges, exports continue to grow fast.

Mills, is to develop small-scale mills in rural areas all around South Africa.

Fruit, sugar and wine are the products that have performed best Rural development in the modern era. These commodities have helped ensure that agricultural products make up about 7% of the country’s total The Land and Agricultural Development Bank of South export basket. Within that total, more than 50% of agricultural export is made Africa (Land Bank) and the up of processed agricultural products, a promising development African Development Bank have for the future of agri-processing. National trade policy strate- committed to a R1-billion fund to gies are intended to enhance this development. Avocados and help emerging farmers get actomatoes are among other important export crops, while the cess to finance. The development macadamia nut industry has grown exponentially in recent years. of small-scale farming and co-operatives is also being promoted at the level of provincial government Transport and logistics and district municipality. In KwaZulu-Natal, partnerSouth Africa has about 200 silos, mostly concentrated in the ships with the private sector central grain-growing areas. Getting agricultural produce from are boosting the provincial these silos to market accounts for nearly 40% of the price that government’s One Village, the end-user pays. If a plan of the National Department of Trade One Product campaign. Beer and Industry comes off, many more silos will have to be built. producer SABMiller sources The plan, in conjunction with African Micro Mills and Kuvusa 5 000 tons of yellow maize SOUTH AFRICAN BUSINESS 2016

OVERVIEW from the subsistence farmers Dams are being built, a national fencing scheme is being rolled out of Bergville, while the small- and produce markets are being established in small rural towns. scale farmers of Weenen supply chicory to the Estcourt facCrops tory of Nestlé. The entire value chain of agriculture is under scrutiny South Africa produces a full range of crops, from sub-tropical with the aim to help small- fruits, nuts, grapes and sugar to maize, wheat and sunflower scale farmers by improving seeds. The Orange River supports the cultivation of citrus and infrastructure, creating new grapes of many kinds. The region is particularly well suited for the markets and assisting them to cultivation of Valencia oranges, lemons and grapefruit and the dry, gain access to the big buyers hot conditions mean that it is easy to control pests. such as supermarkets. In many areas, private companies such as South African Maize and wheat Breweries, Woolworths and Pick n Pay are already on- A total of 70% of South Africa’s grain production is maize, which board. Massmart is commit- covers 60% of the cropping area of the country. The North West ted to creating opportunities for Province produces one third of South Africa’s maize and about emerging farmers through its 15% of its wheat. The Free State is the country’s largest supplier Direct Farm Programme. Pick of wheat (37%) and maize (34%). The Western Cape has 350 000 n Pay has contracted to buying hectares of wheat-producing land. more than 200 tons of organic vegetables from a co-operative Fruit in Tzaneen in Limpopo. Woolworth’s organic-food sales are on course to go South Africa is famous for its fruit. Export volumes, particularly in past R1-billion annually. Also tropical fruits such as mangoes and avocados, have been growin Limpopo, Woolworths has ing rapidly in recent years. The sector is highly sophisticated and agreed to buy 700 tons of to- is skilled at the refrigeration and packing required for European matoes from three emerging Union standards. farmers. NGO TechnoServe Large volumes of exports are achieved in deciduous fruits such and food-supply company, as apples, table grapes, pears, peaches, plums and apricots. Qutom, are assisting the farm- Avocadoes thrive in Mpumalanga and Limpopo and production ers. In addition, the Woolworths volumes above 110 000 tons per year have been achieved. Foundation made a loan of R1.25-million that is being used to prepare 10 hectares. DAFF aims to increase the number of smallholder producers in the country exponentially. As the DAFF strategic plan says, ‘There is a need to coordinate and integrate all the support provided to smallholder and subsistence producers.’

SOUTH AFRICAN BUSINESS 2016

OVERVIEW About 45% of production is exported. Most of South Africa’s citrus and subtropical fruit comes from the eastern part of Limpopo. Some of the world’s biggest farming enterprises operate in Limpopo Province. Westfalia, part of the Hans Merensky Group, is an avocado grower of note while ZZ2 is a huge fresh tomato enterprise. Halls has an international reputation for avocados and litchis. Companies such as Capespan and DoleSA move huge quantities of fruit around the world. South African fruit producers have initiated an ethical trading programme called the Sustainability Initiative of South Africa (Siza). Fruit South Africa has set up the system to replace several other standards and audits that were previously used (Farmer’s Weekly).

Other crops Annual sugar-production volumes are on the upsurge again, after several years of decline because of drought and rising costs. The Free State Province supplies significant proportions of the nation’s sorghum, sunflower, potatoes, groundnuts, dry beans, and almost all of its cherries. Barley and canola are produced in the Western Cape. Most of South Africa’s tobacco crop is produced on the Highveld, with about a quarter coming from Mpumalanga. British American Tobacco South Africa (BATSA) has about 86% of the legal domestic cigarette market. Macadamia and pecan nuts are cultivated in the northeastern regions and are proving a popular export commodity. Products distinctive to South Africa, such as rooibos tea (Western Cape) and marula berries (Limpopo) hold great potential to capture niche markets internationally.

Wine Export volumes have been steadily rising for South African wines. There are about 3 500 wine producers in South Africa, with the

SOUTH AFRICAN BUSINESS 2016

large majority located in the Western Cape. There are 54 producer cellars. The industry is located for the most part in the Western Cape but Orange River Cellars in the Northern Cape is growing production volumes. Europe remains the main export market but India and the Far East are growing in importance as destinations. South Africa’s new membership of the BRICS group of nations (Brazil, Russia, India, China, South Africa), will open doors to new markets for wine-makers. The Distell group produces about a third of the country’s natural and sparkling wine, and is ranked 12th in the world in global wine volumes sold.

Livestock Livestock farming is the largest agricultural subsector in South Africa. The Eastern Cape is the largest livestock province. South Africa has a beef-herd of 14-million. Clover, Africa’s largest milk processor, has a turnover of R6-billion and a staff of more than 6 500. The Eastern Cape provides approximately a quarter of South Africa’s milk. Parmalat has two plants in Port Elizabeth. There are 6.4-million goats in South Africa. The Kalahari Kid Corporation (KKC) intends to raise the standard of goat meat and expand the export market.

OVERVIEW South Africa produces about 55% of the world’s mohair, the high-quality speciality fibre taken from Angora goats. Almost all mohair farming is done in the Eastern Cape. About half the national herd of 24.5-million sheep are merinos and the Eastern Cape has the highest number of sheep. Upington in the Northern Cape is the main centre for karakul sheep farming. South Africa produces about 15-million tons of wool annually, with a quarter of that production emanating from the Eastern Cape. The Free State, Western Cape and Northern Cape are the other major producers.

Forestry and paper The forest-product export sector in South Africa is made up of paper (45.2%), solid wood (23.3%) and pulp (28.9%). Imports, weighted towards paper products, cost the country R9.8-billion annually, clearly indicating scope for increased domestic production. The sector employs approximately 462 000 people with some two million dependents. Mpumalanga has South Africa’s biggest sawmill and its largest panel and board plant, together with the biggest integrated pulp and paper mill in Africa. There are sophisticated plants at several locations around the country: the country’s largest hardboard plant is at Estcourt.

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Oil and gas Most of the oil that feeds the country’s four crude-oil refineries is imported, but a good deal of South Africa’s fuel is generated by a natural-gas conversion plant on the coast and a coal-to-fuel facility near the country’s industrial heartland.

n addition to South Africa’s crude-oil refineries, natural-gas conversion plant, coal-to-fuel and gas-to-liquid crude-oil refineries, Sasol produces fuel from coal at its Secunda facility and PetroSA has the country’s only gas-to-liquid (GTL) facility at Mossel Bay.

The South African government’s decision to allow fracturing (‘fracking’) to go ahead in the country’s interior has caused a great deal of controversy. Environmentalists want the process stopped. Full-scale studies of the extent of the resource have not yet been done, but a US Energy Information Administration document sets it at 485-trillion cubic feet of gas. South Africa’s national oil company is the Petroleum Oil and Gas Corporation of South Africa, PetroSA. The company sells petrochemical products and runs the gas-to-liquid refinery at Mossel Bay, the third-largest in the world. The Petroleum Agency South Africa (PASA) supports exploration for onshore and offshore oil and gas resources and regulates exploration and production activities. Companies wanting to exploit resources have to get permits from PASA. The Sasol Group is a diversified resources SOUTH AFRICAN BUSINESS 2016

and energy company. Sasol Oil, Sasol Gas and Sasol Synfuels provide a good proportion of South Africa’s fuel. The Fischer-Tropsch process of converting coal to usable fuel (coal to liquids) has been refined and perfected by Sasol over several decades. Sasol also converts gas to liquids. The group has two major complexes in South Africa: at Secunda in Mpumalanga, nine reactors create solvents, ethylene, propylene and olefins; at Sasolburg in the Free State, natural gas is converted to syngas which is then made into hydrocarbons and paraffins. Sasol is listed on the JSE in South Africa and on the New York Stock Exchange. The group has operations in 30 countries, employing about 34 000 people. Sasol New Energy is building a new power plant to increase the amount of electricity available to the integrated energy and chemical group. Natural gas will be the feedstock for the 140-megawatt facility and it will allow Sasol to reduce its carbon emissions by about a million tons per year. In addition to decreasing the amount of carbon emmisions, There are a number of advantages to gas that make it an attractive option to close

OVERVIEW South Africa’s looming energy gap, highlights PetroSA has indicated an intention to build Christine Wu and Fransje van der Marel in a re- a crude oil refinery in the Coega Industrial cent press release, Natural Gas: Powering South Development Zone just outside Port Elizabeth, Africa’s Future. but this mega-project will probably have to wait Natural gas plants need just two to four years for the economic climate to improve. from conception to construction due to their BP has announced it will spend R4.7-billion in modular nature. This is much shorter than either the short-term, with about half of that going into coal or nuclear power. It will be an unusual feat refinery upgrades. to deliver new, fully operational coal and nuclear plants by the mid-2020s. These technologies remain options for longer time frames (nearer 2030). Gas The initial capital expense of building a gas power plant is significantly lower than coal and Today, both coal and nuclear power are cheaper nuclear plants. New combined-cycle gas turbine than gas, but this is changing. Estimates indicate plants produce less than half the carbon emis- new gas plants would cost R1.10 per kilowatt sions of new coal plants. And while nuclear energy hour compared to coal at 73 cents and nuclear technically has the lowest carbon emissions of all, power at 86 cents, says Wu and Marel. But by it is also associated with radioactive waste and 2030, South African domestic coal prices are high disposal costs. expected to rise by 87%. The government is also Gas is better positioned to support an ambi- imposing carbon taxes from 2016 that will affect tious renewables development programme; be- coal prices more than gas. On the other hand, if cause gas can be switched on within an hour, it regional gas options do prove feasible and are is the perfect complementary power source. Coal developed, the price of gas could drop, making and nuclear power plants cannot ramp generation it more competitive.” up and down in the same way. Sasol is the country’s major supplier of gas. Utilising gas for power could allow South Africa The company’s two major synthetic-fuel plants to achieve the scale that would enable gas-based in Mpumalanga have been modified so that they industries to emerge. For this to happen, signifi- are no longer entirely dependent on coal. cant domestic and regional production will have Companies to have shown an interest in lookto be unlocked to allow prices to drop within the ing for shale gas in the Karoo using hydraulic range where this becomes economical, at under fracturing or ‘fracking’ include Falcon Oil & Gas, Shell and a consortium comprising Sasol, Statoil $6 per MMBtu, says the release. Sapref has started a ‘clean-fuels’ project, aim- ASA (Norway) and Chesapeake (the US). ing to reduce sulphur and benzene levels, among The biggest question facing gas power is other things, in fuel products. The modifications where to source gas from. The Southern African to the refinery will bring it into line with the tougher region has many alternatives, but most of these legislation about fuel production in the pipeline. have not yet been proven to be economically viaThe Western Cape region is marketing itself ble. A carefully thought out programme is needed as a support and services hub to Nigeria and to unlock this potential. Most likely, importing the newer oilfields of Angola. Significant amounts LNG to meet the immediate demand, while simulof oil are transported around the Cape of Good taneously completing an appraisal programme Hope every year: 32.2% of West Africa’s and to prove the viability of the regional alternatives, would source gas, says the press release. 23.7% of oil emanating from the Middle East. “Cooperation with new partners in regional Saldanha on the West Coast is the site of the country’s largest oil-storage facility. PetroSA governments and private sector players will be maintains six tanks, each of which has a capacity important in unlocking regional gas, as both government and business have a role to play. of 1.19-million cubic metres.

SOUTH AFRICAN BUSINESS 2016

INTERVIEW

Unconventional Petroleum Resources Sean Johnson (Manager: Unconventional Resource Evaluation, Petroleum Agency SA), is excited about potentially abundant unconventional gas resources that’s waiting to be tapped.

What areas of exploration is your department involved in?

Sean Johnson

BIOGRAPHY Sean Johnson has 18 years’ experience across a range of geoscience disciplines, including engineering, environmental and marine geoscience, minerals exploration and the upstream petroleum industry. Educated at the University of the Western Cape, Johnson is a registered professional natural scientist with the South African Council for Natural Scientiﬁc Professions and leads a team of specialist geoscientists responsible for evaluating and promoting South Africa’s unconventional petroleum resources. SOUTH AFRICAN BUSINESS 2016

The Unconventional Resource Evaluation department is aptly named as its focus is the evaluation and promotion of South Africa’s unconventional petroleum resources. Through continuous research, our knowledge of the subject has grown substantially over the last decade. On the other hand, these are new and exciting areas of exploration about which, in a commercial sense, relatively little is known for South Africa and can therefore truly be considered ‘frontier’ or greenfield exploration. Our evaluation of South Africa’s unconventional petroleum resources is based both on geographic distribution and play-type, with a team of specialist geologists associated with each and naturally, part of the Department’s responsibilities is the assessment of the petroleum potential of the deep and ultra-deep offshore areas. What are the resources you focus on? The resources we focus on includes deep biogenic gas, coal-bed methane, gas hydrates, shale gas and more recently unconventional oil. Our understanding of deep biogenic gas at present is that it is an unconventional natural gas source produced at depth directly by microbes. Coal bed methane (CBM) is a source of natural gas that is generated and stored in coal beds. In South Africa, the presence of methane gas in coal is well known from its occurrence in underground coal mining, where it presents a serious safety risk. Historically, the methane was vented to the atmosphere, but has now become an increasingly important source of natural gas globally. The southern Karoo Basin is considered to be the most prospective area for shale gas, due to the presence of deeply buried, thermally mature black shales. The observation of oil and gas shows across the Karoo indicate an active petroleum system with multi-play potential. Lastly, recent advances in geophysical acquisition and remote sensing techniques have made access to the deep and ultra-deep waters in offshore areas more accessible to exploration. In these regions our focus is gas hydrate.

INTERVIEW How will these resources be developed? fascinating is that these organisms are surviving With a focus on deep biogenic gas, Molopo SA at great depth and subsurface pressure. There holds the first and only production right in the un- are presently many research studies being conventional space onshore South Africa at pre- undertaken in South African universities and sent. There are a number of companies that have new research publications are revealing insightful expressed strong interest in setting up facilities information about this resource. Our own team to capture the gas, but the problem has always in collaboration with South African academics been the existence of a gas market, infrastructure and Australian exploration geologists has made and affordable gas pricing. Various partnerships headway with understanding and evaluation of are on the horizon, for example, Sibanye Gold this unique resource type. and Molopo South Africa. We understand that Molopo SA will supply Sibanye with compressed What are the other valuable by products? gas to power underground locomotives in the As we have observed over the decades, helium mining process. is associated with deep biogenic gas and was produced commercially by Anglo American in How extensive is this gas resource? the Welkom area. Substantial quantities of hydrocarbon gases have been observed within the Witwatersrand Basin What is the potential of these resources? during coal and gold exploration activities. Gas Exploration companies such as Molopo SA have shows were discovered in the Free State and been investigating whether the methane could be Evander goldfields several decades ago, and are turned to commercial advantage. Most recently, the most promising target areas for exploring this a gas Production Right has been granted in the play type at present. The methane encountered Free State, with first proven onshore gas reserves was regarded only as a mine explosion hazard (1P) for the region. Given the unusual nature of and flared in large quantities. Interestingly, gas this unconventional resource, the estimated flow encountered is not generally contained in traps rates for the gas-emitting boreholes in the Free but rather is being continually generated at depth State indicate a sustained gas rate of more than and migrating to surface along natural fracture 1 million standard cubic feet per day. systems, faults and dykes. As mentioned earlier, Without showing any evidence of depletion, published data indicates that much of the pro- this former mining hazard may therefore become duced gas is of microbial origin, generated by a potential renewable future energy source for primitive bacteria that inhabit deep water-bearing South Africa. fissures. It is thought that additional gas may be generated within the carbonaceous shale and coal-bearing Karoo strata at shallower depth. However the source and migration pathway of the gas are unusual and present significant challenges to fully define the ultimate potential of the resources as no known analogues exist for this type of gas production worldwide. What is the quality of this resource? Deep biogenic gas as we know it, is composed predominantly of methane. As the name suggests, the composition of the gas indicates that it is derived from anaerobic or bacterially generated processes in the subsurface. What is

THESE BLOWERS HAVE BEEN EMITTING GAS NON-STOP FOR DECADES AND THERE’S NOW GROWING INTEREST IN TAPPING WHAT IS OBVIOUSLY A POTENTIALLY HUGE NATURAL SOURCE OF ENERGY

SOUTH AFRICAN BUSINESS 2016

FOCUS

South Africa’s Extended Continental Shelf Project Petroleum Agency SA is on the brink of securing a vast new territory for exploraration.

outh Africa is on the verge of claiming a vast new track of territory offshore which if successful, can open up new territory for research and exploration. Under maritime law, coastal states have sovereign right to a number of maritime zones, including the Territorial Sea (up to 22 km from shore), the Contiguous zone (44 km from shore) and the Exclusive Economic Zone (370 km from shore).

Article 76 of the UN Convention on the Law of the Sea 1982 makes provision for states to claim an additional zone, which is called the Extended Continental Shelf. In South Africa’s case, this extended area could amount to far more than our country’s existing landmass, offering vast new exploration opportunities for local and international companies. Petroleum Agency SA has been driving the application for our extended continental shelf, and naturally they will also be charged with regulating exploration and production activity in the area should it be opened for petroleum exploration and production. “One of the Mozambique

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provisions of Article 76 suggest, that if a coastal state can demonstrate that the landmass naturally extends beyond 200 NM, the coastal state has an entitlement to delineate an extended continental shelf,” says Sean Johnson, Manager: Unconventional Resource Evaluation, Petroleum Agency SA. “However, in terms of sovereignty over resources, you only have entitlement to what is on the seabed and what is underneath – you don’t get the fish stocks and living resources within the water column!” South Africa made two submissions to the United Nations in May 2009. The first concerning the continental shelf surrounding the South African mainland, while the second for the region of the Prince Edwards islands, both of which would add extensive additional territorial sea areas.

45,000 1,075,000

UNCLOS 82 is a remarkable inte r n atio n a l ag re e m e nt encompassing all aspects of governance of the world’s oceans. A country’s continental shelf can include submarine plateaus and ridges that extend from the continental margins of coastal states beyond their

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exclusive economic zone limits. Each coastal state is responsible for managing their zones according to the provisions of international law, with the remaining unclaimed areas being managed by the United Nations International Seabed Authority. South Africa’s claims amount to 1.94 million km2, making theirs one of the 10 largest claims in the world. Once these have been endorsed by the UN, it will more than double South Africa’s maritime territory. The potential of this opportunity was initially recognised as being of national importance in the 1980s. The SA Navy Hydrographic Office (with the assistance of the Institute for Maritime Technology) carried out the initial investigations and lobbied for the establishment of a dedicated national project, leading Cabinet to allocate responsibility to the Minister of the then Department of Minerals and Energy, who directed the Petroleum Agency to manage the project. The project officially started in April 2003 and the technical study took six years to complete. Initial phases included the search for and acquisition of existing and new data. This

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was followed by the application of the scientific and legal principles prescribed by Article 76 of UNCLOS and the compilation of the submission documents and appendices. Finally, these were lodged with the United Nations in May 2009. Agulhas

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Many benefits beyond the acquisition of the extra territory were realised during this process. These included, inter alia, the identification and accessing of vast tracts of existing geophysical and hydrographic data for the benefit of the State; the acquisition of new survey data; the building of international contacts and the close cooperation with France which led to the agreement to lodge a joint claim around the South African Prince Edward and French Crozet Islands. The benefi ts include the potential for resources including oil and gas, manganese nodules and crusts enriched with precious metals. And, in the vicinity of the Prince Edward Islands, the possibility exists of discovering gold-bearing hydrothermal deposits and of exploiting the pharmaceutical and medical benefi ts of microbes associated with the inhospitable ultradeep ocean floor and toxic hot water geysers. Many of these benefits are not immediately quantifiable or exploitable with Southand current knowledge but through this project westechnology, t Indiaassured for coming generations future access to these has been n Ridge of South Africans.

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Figure 35. White outlined areas shown above, illustrate South Africa’s Extended C

SOUTH AFRICAN BUSINESS 2016

INTERVIEW

TPL celebrates 50 years Sharla Chetty, Chief Executive of Transnet Pipelines, recalls some of the highlights of the past half a century. Transnet Pipelines celebrates their 50th anniversary in 2015. What have been some of the company’s highlights?

Sharla Chetty, CE

On 1 November 1965, Transnet Pipelines (then SA Pipelines) injected the first slug of premium petrol into the new 500km Durban to Johannesburg pipeline. The pipeline was built to alleviate the heavy burden placed on the rail system which transported 12-million gallons (45.4-million litres) of petrol using 2 000 rail tank cars. Since then the network has expanded and today Transnet Pipelines has 3 800km of petroleum and gas pipelines. We transport around 17 billion litres of petroleum products and over 490 cubic metres of gas. The company has grown immensely – in the last 20 years revenue increased from R442.7-million to R3 246billion, even though our headcount remained fairly consistent around the 650 mark. Over the years we’ve established a good track record within the industry and our customers, and we’re especially proud of our safety record, with no Pipeline employee fatalities for over 35 years. This safety mindset has helped us to achieve a NOSA 5 Star Rating and ISO14001 accreditation. Future growth plans for the organisation

BIOGRAPHY Sharla Chetty is the Chief Executive of Transnet Pipelines. She attended the University of KwaZulu-Natal in Pietermaritzburg for her undergraduate and honours degrees in Accounting. She served her articles with Deloitte in Durban and this experience included a stint in the Houston office of the firm in the US. Sharla joined Transnet in 2003 in the corporate finance office of Transnet Port Terminals as an accountant. Since then she has held several senior positions within the two large Transnet divisions that operate in Durban. SOUTH AFRICAN BUSINESS 2016

We will constantly ensure that we have sufficient capacity to keep up with demand and fulfill our strategic role in the supply chain. We’re currently working closely with Transnet Freight Rail to ensure we provide an integrated, seamless service to customers and would like to expand this further into the value chain by operating and maintaining depots not owned by TPL. We would also like to share our extensive skills, knowledge and expertise beyond South Africa’s borders. The School of Pipelines is well positioned to offer various courses in pipeline maintenance and operations to other companies and countries. To what do you attribute the success of TPL? Taking the vision of our pioneers and the excellent foundation they gave us to build the company from strength to strength. This has been achieved with the excellent support from various stakeholders and leaders. We’ve also been fortunate to have a dedicated workforce where every team member realises the role they play in the organisation’s success. Add to that the respect of our clients and suppliers and you have our success story. On a personal note, I believe we will remain successful by providing a platform for continuous growth.

OVERVIEW

NEED PIC

Mining The South African economy is literally built on mining, but the once disproportionate predominance of this extractive economic sector has been dwindling in recent years.

adly, the Marikana massacre of 2012 has symbolised for many the disjunct between labour expectations and the profit targets of the mining bosses, and the vicious circle created by unprecedented demands on the part of workers dependent on the existence of mines for their livelihoods.

financial year. Labour remains the biggest cost component in the local mining industry. The share of labour costs decreased marginally from 47% to 45% in the current year. The 2014 period saw record According to a recent PwC report, the 2015 financial year was a veritable annus horribilis for the South African mining sector. Local levels of impairment charges cost pressures, labour action, and a continuing downswing in being recorded within the mincommodity prices have led to shrinking margins and impairment ing industry. In 2015, the indusprovisions. As mining companies grapple to improve productivity try saw impairment charges to compete in the demanding global and local mining environ- as a percentage of capital ment, the spectre of labour unrest continues to predominate. expenditure reduced to 40%, Four gold mining companies were locked in a three-month wage which is still above the 35% ‘stalemate’ with unions this year. Market capitalisation has been four-year average. on a downward trend and the 2015 financial year was no excepNet profit dropped 75% to tion, with market capitalisation for the top 35 companies falling to R2-billion despite a R26-billion R414-billion as at 30 June 2015 from R675-billion as at 30 June reduction in impairment pro2014. As at 30 September 2015 market capitalisation stood at visions. The earnings before R304-billion, yielding an aggregate decline of R371-billion from interest, taxes, depreciation, and amortization (EBITDA) 30 June 2014. Iron ore and coal prices were worst affected. Platinum and gold margin is 22% in the current are at their lowest real prices in ten years, and price recovery is far year, down 7%. The focus of mining studfrom certain. Coal is still the highest earning commodity in South Africa. Production has increased marginally in the last few years. ies is likely to change, as signs Gold production has been on a long decline due to such factors indicate a shift from labour-inas was ever-increasing mine depths, technical difficulties with tensive mining to highly mechastart-up operations, and a continually growing base. Platinum nised deep-level mining calling production has been plagued by industrial action since 2012 in a for workers with specialised low-price environment. Production levels are unlikely to increase skills.According to Dr Declan Vogt from the Wits School unless prices rise significantly. In 2015 the mining sector had its worst cash flow since the of Mining Engineering, this financial crisis in 2008. This reflects existing margin pressures and would entail a shift from culliquidity concerns. Revenue increased by only 4% or R12-billion, ture of compliance to a culture while operating expenses rose by 14%, up from 13% the previous of learning. One mechanised SOUTH AFRICAN BUSINESS 2016

OVERVIEW

operator will produce a significant portion of the mine’s total production, demanding skill and flexibility tremendously more complex than that of the traditional gold miner. Implementing this requires a new way of thinking, possibly incorporating the Lean principles of teamwork, collective problem solving and meaningful work.

Mineral resources South Africa is the world’s number one producer of platinum and chrome, and produces about 40% of the world’s vanadium and vermiculite. The country has large reserves of ilmenite, palladium, rutile and zirconium and 80% of the world’s known manganese reserves are located in the Northern Cape Province. Coal and platinum group metals (PGMs) have overtaken gold as the minerals generating the biggest sales volumes. South Africa is the secondlargest exporter of steam coal in the world. South Africa is the number one producer of andalusite in the world.

Mpumalanga accounts for 83% of the country’s coal production and is the third-largest coal-exporting region in the world. With mines in Mpumalanga reaching the end of their lives, the coal reserves of the Waterberg region in Limpopo are attracting attention. Among the companies either actively mining or prospecting are Sasol, Exxaro Resources, Coal of Africa, Eskom and Anglo Coal. Copper mines in Aggeneys in Namaqualand are responsible for approximately 93% of South Africa’s lead production and 12% of all world lead exports. There are 20 chromite mines in North West Province located along a reef running from Brits to Rustenburg and serviced by several ferrochrome smelters. South Africa produces about 70% of the world’s chrome and 40% of the world’s ferrochrome. Effective 1 July 2015, Pan African Resources successfully concluded a gold wage agreement at its Barberton and Evander gold mining operations and entered multi-year agreements with unions. Barberton Mines concluded a two-year agreement with the National Union of Mineworkers (NUM) and the United Association of South Africa (UASA) on wages and other conditions of employment. The average Barberton Mines salary and wage bill will therefore increase for the two financial years ending 30 June 2016 and 2017 by about 9% a year, effective from 1 July 2015. With the Chinese economy slowing down, the demand for the main component of steel is uncertain. There are a number of iron-ore expansion projects underway, most significantly the multi-billion-rand schemes at Kolomela (Kumba) and Khumani (Assmang). A new iron-ore sampling plant at Saldanha, a joint venture between Kumba and Transnet, allows exporters to certify the quality of their product before the ore is loaded on to ships for export. The Northern Cape produces more than 84% of South Africa’s iron ore. China is spending billions of dollars every year on importing the major component of steel production. The Kalahari Basin contains 80% of the world’s manganese reserve, but only 15% of global production comes from this area so there is enormous scope for development. Several new blackowned manganese projects are underway. South Africa has 80% of the world’s platinum reserves and it is the number-one producer and exporter. It is also number one in rhodium, and only Russia produces more palladium. Chinese investors are also putting money into the Wesizwe Platinum project in the North West Province. Production will begin in 2018, after which annual production of 350 000 ounces is expected. Every year Cape Town hosts the Investing in African Mining Indaba, the world’s largest gathering of the most influential stakeholders in the African mining industry. More than 7 000 leading financers, investors, mining professionals and government officials meet at the Indaba to network and broker deals.

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Mineral beneficiation The successful beneficiation of our mining assets is integral to growing the economy

ineral beneficiation manganese sinter plant. The plant will produce 2.4 million tons has been identi- of sinter-product. Of this, 700 000 tons will make its way to the fied by the ruling Coega IDZ in the Eastern Cape where a new smelter is to be built. African National South Africa plans to exploit its rare metals and plans to deCongress party as being key velop a beneficiation complex at the West Coast port of Saldanha. to transforming South Africa’s Titanium sands are currently exported at a value of about R2 690 economic structure away from per ton but with beneficiation this could rise to R6 000. Steel production is under severe threat as a result of cheap a colonialist framework to one that adds value to the lives of imports. Steelmaking contributes more than 1.1% directly to South Africa’s gross domestic product (GDP), and a further 0.4% all citizens. indirectly. South Africa’s biggest steel producer is Arcelor Mittal which The idea behind the Mineral and Petroleum Resources has four large plants located at: Newcastle in KwaZulu-Natal, Development Act is to boost Vereeniging in Gauteng (long steel production), Vanderbijlpark the minerals beneficiation sec- in Gauteng and Saldanha in the Western Cape (flat steel). tor, expected to increase em- Vanderbijlpark makes about four-million tons of liquid steel, serployment levels and stimulate vicing about 78% of South Africa’s demand. There is also a coke economic growth. and chemicals facility in Pretoria. The first ‘pilot commodity valBHP Billiton has two large aluminium smelters, Bayside and ue chain’ has been developed Hillside, with the former apparently being considered for closure. by the National Department of Tata Steel is the anchor client of the Richards Bay Industrial Mineral Resources and applies Development Zone (RBIDZ), with installed capacity to produce to the iron and steel industry. 150 000 tons of ferrochrome, mainly for markets in Europe and Japan. Hulamin is a leader in the sophisticated aluminium finishedFuture value chain strategies will be developed for energy product sector. (coal, uranium), catalytic conSECTOR INSIGHT verters, jewellery and pigment production. • Steel production is under severe threat from imports Kalagadi Manganese is • Mineral beneficiation is expected to transform the economy building the world’s biggest SOUTH AFRICAN BUSINESS 2016

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PROFILE

The Council for Geoscience Providing Geoscience solutions in South Africa and beyond The Council for Geoscience (CGS) has been mandated to be the custodians of geotechnical information, to be a national advisory authority in respect of geohazards related to infrastructure and development, and to undertake reconnaissance operations, prospecting research, and then to provide for matters connected therewith.

(particularly the geological, geophysical, geochemical and engineering-geological data in the form of maps and documents). They also conduct basic geoscience research into the nature and origin of rocks, ores, minerals, formations, the history and evolution of life and the formation of the earth, with a view to understanding the geological processes of both the past and present and to compile and publish such research findings nationally and internationally to contribute to the understanding of the earth, its evolution and its resources. Specific areas of scientific services include Geophysics, Seismology, Geochemistry, Minerals Development, Information and Collections Management, Spatial Data Management, as well as Engineering, Water, Environmental and Marine Geoscience. CGS manage a number of national geoscience facilities on behalf of the country, and render contract geoscience services and products to national and international clients. CGS’s regional offices perform various services, including regional geological mapping at various scales, applied geosciences, mineral assessment and development, metallogenic mapping and sedimentology of estuarine and coastal environments. They are also responsible for the collection and curation of all geoscience data and knowledge on South Africa in the National Geoscience Repository.

Mission and values The Council for Geoscience provides geoscience solutions in South Africa and for international organisations, with the intention of contributing towards creating a prosperous society enabled by geoscience solutions.

Key activities • Understand and align the CGS plans with the market and key client value propositions and opportunities and their associated growth revenue plans. • Define and promote a market-tailored service catalogue with go-to-market propositions. • Align and prioritise the delivery of solutions with the service catalogue. • Gather and beneficiate CGS data and knowledge on a national basis. • Maintain best practises that enable excellence in project execution. • Deliver prioritised projects through managed and integrated implementation. • Manage project resources.

CONTACT INFO

Scientiﬁc and Information Services

Email: info@geoscience.org.za Tel: +27 (0)12 841-1911 Fax: +27 (0)12 841-1221 Physical address: 280 Pretoria Street, Silverton, Pretoria. Postal address: Private Bag X112, Pretoria 0184 Website: www.geoscience.org.za

Included in the Council’s work is the systematic reconnaissance and documentation of the geology of the earth’s surface and continental crust (including all offshore areas within the territorial boundaries of South Africa), as well as the compilation of all geoscience data and information

SOUTH AFRICAN BUSINESS 2016

COUNCIL FOR GEOSCIENCE

Geophysics

Laboratory Services

Seismological Observation

National Geoscience Museum

Sampling/ Drilling

Field Mapping School

WHAT WE DO National Core Library

Geological, Geotechnical, Geochemical, Metallogenic and Marine mapping

Minerals Development

Geoscience Museum

Construction Materials and Agricultural Minerals

National Geoscience Library

Water-Resource Assessment and Protection

Information Databases

Environmental Geoscience

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Engineering Geology and Physical Geohazards

Geophysics

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280 Pretoria Street, Silverton, Pretoria I Tel: +27 (0)12 841-1911 I

Private Bag X112, Pretoria, 0184

Fax: +27 (0)12 841-1221 I

www.geoscience.org.za

OVERVIEW

Energy The South African energy landscape is incredibly diverse, ranging from coal to solar, wind, nuclear and bio. Renewables are increasingly under the spotlight, although coal fires most of South Africa’s power stations.

he Department of Energy (DoE) has updated the country’s plan for electricity — the Integrated Resource Plan (IRP2010). It is a 20-year projection of electricity supply and demand — about 42% of electricity generated in South Africa has to come from renewable resources.

The National Development Plan (NDP) envisages that by 2030 South Africa will have an adequate supply of electricity and liquid fuels to ensure that economic activity and welfare are not disrupted, and that at least 95% of the population will have access to grid or off-grid electricity. The plan proposes that gas and other renewable resources like wind, solar and hydro-electricity will supply at least 20 000 MW of the additional 29 000 MW of electricity. Other recommendations include diversifying power sources and ownership in the electricity sector, supporting cleaner coal technologies, and investing in human and physical capital in the 12 largest electricity distributors. South Africa has a number of large energy role-players. Stateowned company Eskom generates, transmits and distributes electricity to industrial, mining, commercial, agricultural and residential customers and redistributors. In 23 August 2014, for the first time since construction began eight years ago, the Medupi Power Station in Limpopo is began pumping power. The first unit of Medupi, unit six, was handed over to its operating division. Unit six will feed 794 megawatts (MW) of power into the national grid. SOUTH AFRICAN BUSINESS 2016

Sasol is an international integrated energy and chemical company with more than 34 000 people working in 37 countries. The company develops and commercialises technologies, and builds and operates world-scale facilities to produce a range of product streams, including liquid fuels, high-value chemicals and lowcarbon electricity. In South Africa, Sasol refines imported crude oil and retail liquid fuels through its network of some 400 service stations and supply gas to industrial customers. It also supplies fuels to other licensed wholesalers in the region. South Africa is part of the Southern African Power Pool (SAPP), created to supply consumers from SAPP member states with reliable and

OVERVIEW economical electricity. The SAPP allows the free trading of electricity between SADC members, providing South Africa with access to the vast hydropower potential in the countries to the north, notably the significant potential in the Congo River (Inga Falls). South Africa is a coal-rich country, and 13 of its 21 power stations are coal-fired. The Koeberg nuclear power statio, near Cape Town, generates 6% of South Africa’s electricity. Sites for new nuclear plants are being investigated. South Africa’s installed electricitygeneration capacity of around 44 000MW places it well ahead of any other African country, but with the demand around 37 000MW, the reserve margin is very small. The country has plans to add 50GW to the grid by 2030 to help drive economic growth. A lot of attention is being paid to the renewable energy sector, and government blueprints for the future of power generation in South Africa allocate specific targets for each sector. A figure of 17 000MW in renewable energy by 2030 has been set, with a three-year target of 3 750MW. The Industrial Development Corporation (IDC) plans to spend R25-billion on green projects by 2017. Its green efficiency fund is putting up R5.2-billion to finance 12 independent power-producer projects: six photovoltaic, four wind and two concentrated solar power (CSP). Established mining and construction houses

in South Africa are increasingly looking to create their own power. Construction giant Group Five, is setting up a 150MW solar plant in the Northern Cape, with the possibility that the plant could be upgraded to 450MW capacity. The Northern Cape is home to several large iron ore and manganese mines that need lots of electricity. South African energy manufacturers are also building a reputation for exporting their machinery and services. Cummins South Africa supplied and installed generators that provided 7MW of capacity to the Madagascar government to prevent blackouts during the overlap of their harvest time and the Christmas period at the end of 2014. International renewables companies are looking for South African partners. In March 2014, government gave the go-ahead for shale gas exploration in the southern Karoo and elsewhere. South Africa has very limited oil reserves. About 60% of its crude oil requirements are met by imports from the Middle East and Africa. The country produces about 5% of its fuel needs from gas, about 35% from coal and about 50% from local crude oil refineries. About 10% is imported from refineries elsewhere in the world. Biofuels are expected to reduce the country’s reliance on imported fuel. The biofuels industry in South Africa, the continent’s biggest agricultural producer, has been held back by an inadequate regulatory regime and concerns that biofuels would hurt food security and affect food prices. Spanish company Abengoa, in partnership with IDC and community trusts in Upington and Pofadder, is building Khi Solar One, a 50 MW solar tower plant near Upington, and KaXu Solar One, a 100 MW parabolic trough solar plant near Pofadder. The two power stations are expected to leverage investment of over R10 billion and generate almost 500 GWh clean solar electricity a year. The two plants will reduce South Africa’s carbon-dioxide emissions by about 498 000 tons a year, and create from 1 400 to 2 000 construction jobs and about 70 permanent operation jobs, as well as numerous indirect jobs. DCD Wind Towers, the COEGA IDZ wind turbine manufacturing facility, is well on its way to being completed. The project, expected to boost South Africa’s wind power competitivity immeasurably, is a joint initiative between the DCD Group, the IDC and the Coega Development Corporation.

SECTOR INSIGHT Large companies are taking an interest in cleaner energy. • DCD Wind Towers is nearing completion • Shale gas exploration is on the horizon • South Africa is looking for a nuclear power partner

SOUTH AFRICAN BUSINESS 2016

INTERVIEW

Cummins South Africa Cummins South Africa distribute power generation systems, components and services covering standby, prime and auxillary power. What does the future hold for energy and power? The opportunities are extremely good in terms of standby emergency power. These scheduled downtimes will add to the strain on the grid, especially when you factor the fact that the demand for power will increase, even though the GDP growth of South Africa (which is currently around 1.3%) remains low.

Schuyla Goodson Bell

What are the main challenges faced locally? Planned maintenance and upgrades to distributed power and transmissions remains a challenge for us socially and economically. This will pose a problem for the foreseeable future for consumers who rely on generated power, both for local government and at municipal level. The opportunities presented will be in the form of solar power and solar / hybrid diesel power. The latter has shown an increase in demand over the last seven years. These projects exist both mining, commercial and large domestic applications. How has industry reacted to the crisis? The demand for diesel-powered generator plants for industry giants has increased greatly in the light of our recent loadshedding problems. This is going to continue as businesses plan ahead for future periods of loadshedding, in particular during winter. There is great potential for solar, solar / diesel hybrids, wind power as well as a diesel generator back-up power for industry (all segments), including large- and small-scale solutions.

BIOGRAPHY Schuyla Goodson Bell is the Managing Director of Cummins Southern Africa. A lawyer by vocation, Schuyla has spent several years both in the US and in South Africa practicing law. A shift-change came in 2010 when Goodson Bell left a huge multi-national, where she headed up the Legal Counsel, to take up a position in Cummins Africa. SOUTH AFRICAN BUSINESS 2016

How exportable are your services and generators? We are very proud of the execution and quick turn-around time we achieved on several key projects. In December 2014 we also achieved a quick turnaround time on a cross-border project in Madagascar, where the government had feared possible blackouts due to the overlap of harvest time with Christmas holidays. We supplied them with six C1250 D2R PowerBox generator sets, totaling 7 megawatts (MW) of continuous power operating at sea level. This was an incredibly tricky logistical exercise, including tough weather conditions, modifications and a shortened timeline. The generators also needed to travel by air so, to reduce the risk of leakage or sparks during the flight, we had to drain the fluids, disconnect the batteries and pack these 16-ton generator sets in special containers.

www.cummins.com

OVERVIEW

Manufacturing Increasing manufacturing capacity is a national priority.

outh Africa has a sophisticated and varied manufacturing sector. Growth since 1994 has been led by the automotive sector, followed by resource-based manufacturing (Quantec). The latter sector includes steel, aluminium, petrochemicals, paper and pulp and non-metallic minerals.

on percentage change figures when compared with the most recent month. A base effect for output in the metals and machinery industry was also evident in July Among other important sectors are metals beneficiation (more 2015 due to industrial action than 50% of the world’s ferrochrome is produced in South Africa), by NUMSA in 2014. Output coke and refined petroleum products, paper and paper products, slumped in July 2014, with a and information and communication technology. Steel and pe- production index of 87.0, the troleum collectively make up about 45% of South Africa’s total lowest monthly production manufacturing production capacity. level on record (series starting According to Stats SA, manufacturing production increased by in January 1998). 5.6% year-on-year in July 2015, driven mostly by a 39.6% yearThe manufacturing sector on-year production rise in the automotive industry and a 17.4% accounts for approximately year-on-year rise in the metals and machinery industry. These 15% of GDP. The sector emincreases do not necessarily indicate high levels of production, ploys the third most people, but are largely a result of what economists term the “base effect”. about 1.7-million, after financial The base effect describes the impact that abnormally high or low services and retail. Three of South Africa’s most levels (in this case, levels of production) in a base month have

SOUTH AFRICAN BUSINESS 2016

OVERVIEW important manufacturing sec- in existing manufacturing sectors is coupled to the growth of tors (automotive, food and wholly new areas such as alternative energy, biofuels and digital beverages and chemicals) are television. dealt with in separate sections A key government initiative in this regard is the Industrial Policy of this book. Action Plan (IPAP) 2015/2016. Launched in May 2015, IPAP rests The latest component of on the following pillars: national government’s masInfrastructure-driven industrialisation to “ensure that the very ter plan to attract investors to substantial build programme supports local industrial developSouth Africa was unveiled in ment”, said Minister of Trade and Industry Rob Davies at the 2012 when the Department launch. He added that resource-driven industrialisation “aimed of Trade and Industry (dti) at leveraging the mineral resources endowment to support higher launched the Competitiveness levels of downstream beneficiation and value addition, whilst systematically building up both the demand and competitive Enhancement Programme. This programme targets advantages South Africa enjoys in the upstream mining, transmedium-sized manufacturers port and capital goods sectors. Advanced manufacturing-driven and includes a cost-sharing industrialisation in order to build an integrated system of industrial grant of between 30% and financing, incentives and export support—with a special focus 50% for investments up to on lead and dynamic companies that can compete effectively in R50-million and up to 80% on export markets—encompasses a strong commitment to support emerging black industrial entrepreneurs.” specific projects. Procurement, focused “on strengthening the localisation of South Africa aims to diversify its economy away from an public procurement, building on the lessons learnt through the imover-reliance on the primary plementation of various policy instruments over the past few years” Regional economic integration centred “on maximising the sector (mining and agriculture) towards a more varied econo- opportunities presented to the domestic economy by a growing my in which increased capacity market on the African continent, driven by high growth in the region, strong consumer demand, infrastructure development and resource exploitation.” IPAP 2015 designates 16 sectors, subsectors and products for local procurement, with the following added this year: transformers, power-line hardware and structures, steel conveyance pipes, mining and construction vehicles and building and construction. The Support Programme for Industrial Innovation (SPII), run by the Industrial Development Corporation (IDC) on behalf of the dti, promotes technology development in South African industry. SPII comprises three programmes: the Product Process Development, Matching schemes and Partnership schemes. The type of funding made available depends on the project size. In August 2014, The Department of Trade and Industry (the dti) launched the Black Industrialists Programme with the aim of creating 100 black industrialists over the next 3 years. The programme aims to support increased productive capacity, broaden black participation, achieve greater economic growth and employment in the manufacturing sector as espoused by the National Industrial Policy Framework (NIPF) utilising amongst others, Local (and Preferential) Procurement as a key lever to drive inclusive industrialisation.

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Automotive International investors are eyeing the South African automotive industry.

recent PwC global automotive survey revealed that South Africa’s automotive CEOs are faced with similar issues to their global counterparts. Most see Government response to the fiscal deficit and debt burden, social instability and high employment as impeding business growth.

the localisation of components,” concludes Minie.

Foreign investment

Automotive CEOs know they need to keep up pace with technology. Chinese automotive manufacThis year they are placing particular emphasis on data mining and turer First Automotive Works analysis (83%), mobile technologies for engaging with customers (FAW), recently launched its (77%) and tools for boosting cybersecurity (77%). They are also at- R600m assembly plant in Zone taching more importance to new battery and power technologies 2 of the Coega Development than CEOs in other sectors (68% versus 47%.) Corporation’s (CDC) Industrial What is more, automotive CEOs are actively exploring the po- Development Zone (IDZ.) It is one tential of robotics (53% versus 37%.) At the same time, the pace of of the biggest manufacturing intechnological change is increasing cause for concern: 55% are now vestments by a Chinese entity in worried about keeping abreast of new technologies, as opposed the country to date, with tangible spin-offs. to 49% last year. Speaking at the launch, The South African vehicle and automotive component manufacturing industry, including exports, constituted 30.2% of total President Zuma said, “The investmanufacturing output and 7.2% of GDP in 2014. “South Africa is ment of R600m into the economy a production hub for the global automotive industry and therefore will create much needed jobs and trade relations are important,” says Kobus Minie, PwC Automotive promote an improvement in the lives of many people in this area. Industry Leader for Southern Africa. “This investment also augurs South Africa’s most important automotive trading partners are the EU, North American and certain African countries. Total South well for South Africa’s position African vehicle and component exports are worth about R115.7bn within the global automotive manufacturing network and to 148 countries in 2014. In 2015, local sales have been limited by interest hike rates, sub- proves once again that we have dued consumer confidence, decelerating economic growth, house- an attractive operating environhold income under pressure and the weakening Rand. As consumer ment to host global multinational buying power declines, so new vehicle sales are likely to slow. companies.” The converse is an increase in the popularity of vehicle leasing: In particular, it has created consumers’ spending remains constrained by the difficult economic the The implications are important: the creation of Chinese climate and high debt levels, making leasing a definite option. Several well-known premium and volume automotive manufactur- investor confidence in South ers with a significant manufacturing base in South Africa produce Africa has inspired further vehicles for the local market and the rest of the world. These OEMs Chinese investments in the are capable of producing more than 800 000 light and commercial country. Chinese manufacturers vehicles annually. Powerway Engineering (R127m) Opportunities about for giant automakers and suppliers who and Powerway Photo Voltaic have already started making inroads in Africa. “There is definitely (R666.6m) have confirmed their a huge opportunity for South African manufacturers to increase investments in the IDZ , bringing SOUTH AFRICAN BUSINESS 2016

OVERVIEW the total sum of Chinese invest- “Ongoing investment in new technologies and products will ensure ment in the IDZ to R1.394bn. that Volkswagen is positioned to continue to be the dominant The Volkswagen Group South player in the South African passenger market‚” Schaefer said. Africa recently announced plans The $344-million Volkswagen investment will comprise $229-milto invest more than 4.5-billion lion in production facilities‚ $114.7-million in local supplier capacity and rand ($344-million) to build new an estimated $1.68-million in employee training and development, models in South Africa for local TimesLive reports. “South Africa is not a logical production location for the motor inand export markets as part of its next phase of investments, as dustry as only 0.6 percent of the world’s vehicle production is situated here‚” Schaefer said. reported by TimesLive. “However due to the strategic location and the potential of Africa Imperial Holdings, whose business has been hit hard by de- as a future market for exports‚ as well as the security that the APDP teriorating rand values, is mulling (Automotive Production and Development Programme) provides for the establishment of a Hyundai investors‚ ongoing investments in our vehicle manufacturing base passenger car manufacturing makes sense. Hence the decision by our parent company to allow plant in South Africa, according us to embark on such a major new investment.” to IndependentOnline. South Africa’s Automotive Production and Development “Exports will again play a key Programme aims to stimulate growth in the South African auto role in our strategy going forward,” vehicle production industry, according to the Global Alliance of said VWSA managing director SMEs. Thomas Schaefer at a South African press conference. SECTOR INSIGHT Volkswagen South Africa continues to dominate the pas• FAW invests in R600m assembly plant senger market in 2015 with a • VWSA to invest more than R4.5 bn year-to-date market share of 21.4 • Imperial Holdings is considering building new plant percent.

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Automotive components Incubation parks are promoting start-ups in the components sector.

everal provinces are making an effort to support existing businesses and promote new ventures in the automotive-components sector.

The provincial government of North West and the Automotive Industry Development Cluster (AIDC) combined to help wireharness manufacturer Pasdec Automotive Technologies open a new assembly line in Brits. Other big companies in the North West are Bosch, Bridgestone and Giflo Engineering. In Gauteng, the AIDC teamed up with government agencies and Ford and Nissan to establish incubation parks to encourage more black businesses to enter the sector. Automotive parts made in South Africa are exported to more than 70 countries including Japan, Australia, the UK, the US, Algeria, Zimbabwe and Nigeria. The large number of vehicle models produced is a complicating factor for the components sector: low volumes often mean high prices. Two Port Elizabeth companies were highlighted. Schaeffler SA exports much of its production to its international parent so that it can achieve higher volumes. Shatterprufe supplies the majority of windscreens to the South African marketbut there are 12 model ranges to serve. The success of South African catalytic converters has been spectacular. From a start-up industry in the mid-1990s, the sector now supplies 14% of the world market and is worth at least R18-billion.

SOUTH AFRICAN BUSINESS 2016

Economic transformation The Automotive Incubation Centre, launched on 25 March 2015 at Nissan in the Tshwane suburb of Rosslyn, is expected to radically transform the economy. The centre, the second in South Africa, is aimed at establishing and nurturing small- and medium-sized enterprises that can supply components to Nissan South Africa’s production line, while they receive training on meeting international standards for automotive parts and components. Only 35% of the components and parts used to make vehicles in South Africa are produced locally; the balance is imported. Gauteng’s car makers spend nearly R8- billion a year on imports for automotive parts, components and accessories. The first Automotive Incubation Centre was launched in 2011 at Ford Motor Company of Southern Africa’s manufacturing plant in Silverton, also in Tshwane. The incubation centre was established by the Automotive Industry Development Centre (AIDC), which is a subsidiary of the Gauteng Growth and Development Agency (GGDA), which itself is a unit of the Gauteng department of economic development.

OVERVIEW

Food and beverages The sector employs nearly a quarter-of-a-million people.

he food and beverages sector is one of the most important components of South Africa’s manufacturing sector. Beverages account for just over 4% of all manufacturing sales while food is responsible for 13.5%. Within the sector, beverages accounts for 24% of sales. According to the FoodBev SETA, the sector is responsible for 17% of gross value added in the manufacturing sector and employs 230 000 people.

South Africa’s production of food and beverages has been rising steadily since 1990. The Centre of Excellence in Advanced Manufacturing at North West University strongly believes that extrusion technology (in which it is an expert) holds the answer to the establishment of small to medium-sized processing plants on farms or in rural areas. One quarter of the 37% of national GDP that is generated by agri-industries derives from agri-processing. Gauteng, the Western Cape and KwaZulu-Natal are the leading provinces with respect to food and beverages manufacturing. About half of the companies operating in the sector are in Gauteng. Capespan and DoleSA are among the biggest exporters of fruit from the Cape. In KwaZulu-Natal, the food subsector makes up the biggest part of the manufacturing sector (84%). Tongaat Hulett makes treacles, caramels and related products for the food, baking and confectionary trade. Granor Passi processes 220 000 tons of fruit, one of Limpopo’s biggest food and beverages enterprises. Limpopo is also home to giant producer, Westfalia, which runs three large processing plants. Enterprise Foods has an emulsions and canning plant in Polokwane. The central and eastern parts of Limpopo, especially around Tzaneen, are well-suited to tea cultivation, and demand for rooibos tea is on the increase. The marula fruit and the mopani worm are synonymous with Limpopo. Frost & Sullivan values the South African retail chocolate market at R5-billion with an expected growth rate of 10% per year for the next five years. Cadbury, Nestlé and Beacon account for 85% of sales. South Africa has mature fast-food and family-restaurant franchise sectors, ranging from indigenous brand Spur and Nandos to international giants such as KFC, McDonald’s and now Burger King. Nando’s, the Portuguese-chicken chain, has done very well internationally, and is a phenomenon in Britain. Wimpy is the second

largest-franchise operation in SA (after KFC). South Africa is a beneficiary of the US African Growth and Opportunity Act (AGOA) and risks losing duty-free access for exports to the U.S. worth as much as $1.7 billion a year. The U.S. is reviewing South Africa’s status as a full beneficiary. AGOA, which eliminates import levies on more than 7000 products ranging from textiles to manufactured items, was renewed in June for another 10 years, benefiting 39 African nations. Now American chicken and cattle farmers want South Africa’s government to remove trade restrictions imposed to protect the local industry from a flood of cheaper imports. While Trade and Industry Minister Rob Davies said on Sept. 29 that South Africa had done all it can to retain access to AGOA, the U.S. government cites major unresolved issues. “South Africa needs to take concrete steps towards eliminating barriers to U.S. trade and investment, a key criterion to be eligible for AGOA trade benefits,” Trevor Kincaid, a spokesman for the office of the U.S. Trade Representative in Washington, said in an e-mailed response to questions posed by The Nation. “Ultimately, South Africa’s AGOA eligibility is in South Africa’s hands.” SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Chemicals and pharmaceuticals Sasol and Aspen are world leaders in their fields.

he coal-to-oil plant at Sasol in the northern Free State was established in the 1960s and its success led to the development of many related chemical and fertiliser production facilities. Sasol One, the Sasolburg plant, now produces chemicals while Sasol’s two other plants in Mpumalanga make fuel. The chemical industry as a whole contributes 5% to national gross domestic product. About 60% of earnings are derived from exports. The newest investment by Sasol in the Free State town will be a new ethylene purification unit at Sasol Polymers plant at a cost of R1.9-billion. At full capacity, the plant will produce 48 000 tons per year. Omnia and Kynoch (fertiliser), Karbochem (rubber and carbochemical), Safripol (plastics) and Afrox are among the other major companies operating out of Sasolburg. Omnia’s R1.4-billion nitric acid plant was inaugurated in May 2012, increasing the group’s capacity in this commodity by 40%. ChemCity is a 100% owned subsidiary of Sasol Chemical Industries. The focus is on fine and specialised-chemical and related sectors of the chemical industry. It acts as an incubator for black empowerment and small business development. Access is provided to infrastructure, utilities and a broad range of professional services. At the Sasol complex in Secunda (Mpumalanga), a range of products for fertilisers, explosives and polymers is manufactured. Sasol Solvents operates 12 plants. The by-products of the sugar and forestry processing plants of KwaZulu-Natal benefit the chemicals sector. Illovo Sugar manufactures downstream products such furfural, furfuryl, alcohol, diacetyl and ethyl alcohol. AECI is one of South Africa’s biggest groups in the sector. The two principal divisions are AEL Mining Services (with a large factory site at Modderfontein near Johannesburg) and Chemical Services, which has 20 separate companies. Sasol Chemical Industries makes about 60% of South Africa’s polypropylene. Safripol, which is also based in Sasolburg, is South Africa’s only other producer. More than half of Sasol’s production of 625 000 tons is exported. Foskor is the country’s only vertically integrated phosphates producer. It has a mining operation in Limpopo province (at Phalaborwa) from which it sends raw materials to its acids division in Richards Bay in KwaZulu-Natal. Sulphuric acid, phosphoric acid and phosphatebased granular fertilisers are manufactured there. SOUTH AFRICAN BUSINESS 2016

The Chemical and Allied Industries Association (CAIA) has 162 member companies. CAIA works to improve efficiency, productivity and competitiveness in the chemical sector. This includes looking at how South Africa can start producing higher-value chemicals and how the country can improve its export profile. Another area of research is how to turn mineral feedstock into useful inorganic chemicals. Pharmaceuticals Pharmaceuticals are manufactured primarily in Gauteng and the Eastern Cape. Although there are more than 200 pharmaceutical firms in the country, large companies tend to dominate the field. Aspen Pharmacare (with about 34% of the market), Adcock Ingram (25%) and Cipla Medpro are among the biggest companies. Aspen SA, Africa’s biggest manufacturer of generic drugs, has manufacturing capacity in the Eastern Cape and Gauteng. The Port Elizabeth facility produces about 10 billion tablets per year. The company has a market capitalisation of R80-billion and successful operations in South America and Australia. British firm GlaxoSmithKline is a 19% shareholder in Aspen. The group headquarters of Aspen are located in La Lucia Ridge, north of Durban.

OVERVIEW

Engineering Transnet’s R300-billion spending plan is boosting the sector.

outh Africa has several companies that offer a wide range of engineering disciplines and are active internationally. National Government’s ambitious infrastructure plans are sure to provide a lot of work in the sector, despite concerns about delays. Transnet is set to spend R300-billion across its several divisions, all of which will call on the skills of Transnet Engineering (TE). By way of example, TE is building 90 new locomotives at its Koedoespoort facility in Pretoria. TE’s new business unit, Port Equipment Maintenance, is a signal of the company’s wider focus. There are 13 000 TE employees at 132 depots and six factories around South Africa. There has been considerable interest in the South African engineering sector from foreign companies. The largest vertically integrated companies are able to cope with large and complex projects. These include Murray & Roberts, WBHO, WSP Group Africa, Group Five, Grinaker-LTA, Basil Read and Stefanutti Stocks. WBHO and Murray & Roberts are among local companies pursuing foreign projects. Business Report announced that Aveng Engineering’s mining subsidiary, Aveng Moolmans, concluded a five-year extension of its contract in the Northern Cape withTshipi Borwa open-pit manganese mine. The second cycle contract extension, which was effective from 1 September 2015, was obtained following an open tender process. Aveng Mining managing director Stuart White, said that Aveng Moolmans was delighted to continue its working relationship at the Tshipi Borwa project. Growth sectors include energy (with two massive new power plants under construction), water (large dams and supply infrastructure) and public housing. Basil Read is building a R1.8-billion housing project north-west of Johannesburg, Malibongwe Ridge. Transnet Pipelines recently completed and operates a 3 800km network of underground, high-pressure petroleum and gas pipelines throughout the eastern parts of South Africa, as well as the infrastructure and property associated with them. This astounding network of underground pipelines includes the refined product network, crude oil, Avtur (jet) and gas. The infrastructure includes five intake points, 13 delivery sta-

tions, workshops, maintenance depots and 23 pump stations, all of which are positioned along the routes. One impressive feature of the network is the tank farm at Tarlton, a storage and distribution facility that has a capacity of approximately 30 million litres. This facility is mainly used for cross-border deliveries in Botswana, but it also features a refractionator which is used to process intermixture in order to optimise operations and adhere to stringent fuel specifications. Petroleum products are transported for a number of major clients inlcuding BP, Chevron, Engen, Sasol, Shell and Total. Transnet Pipelines also facilitates new entrants into the pipeline network, including Vuyo, PetroSA, Afric Oil and Khulaco. In addition, methane rich gas produced by Sasol is also transported from Secunda in Mpumalanga to KwaZulu-Natal, where it is used by industries as an alternative energy source.

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Healthcare South Africa’s healthcare industry has a colourful history, with firsts ranging from the first heart transplant to the first successful penile transplant. Groote Schuur Hospital, located on the slopes of Table Mountain, is recognised as one of the best teaching hospitals.

outh Africa offers a full range of health care from the most basic primary health care through to highly specialised, hi-tech health services available in both the public and private sector. The state contributes about 40% of all expenditure on health but the public health sector has to deliver services to about 80% of the population.

• • •

Strengthening co-ordination between the public and private sectors. Allocating ‘health teams’ to communities and schools. Regulating costs to make health care universally affordable

Expenditure

The private sector is highly commercial and serves middle- and high-income earners who are usually The bulk of health-sector funding comes from on medical schemes. Within this inequitable and South Africa’s National Treasury. The health largely inaccessible two-tier system, public sector budget for 2014/2015 was R144.6-billion, mostly institutions in the public sector have suffered poor to improve hospitals and strengthen public health. management, underfunding and deteriorating According to the National Treasury’s Fiscal infrastructure. Access may have improved but Review for 2015, the Medium Term Expenditure the quality of health care has fallen. Public health Framework (MTEF) supports a long and healthy challenges include dealing with diseases such as life for all South Africans. Considerable progress HIV and tuberculosis (TB) together with a short- has been made in this area in recent years, with declining infant mortality rates and rising life age of key medical personnel. In response, the South African government expectancy at birth. The consolidated health budget is projected has developed a far-reaching reform plan to revitalise and restructure the South African health to grow by 7.1% over the MTEF period, reaching nearly R178-billion by 2017/18. care system, including: • Fast-tracking a National Health Insurance In the 2014 Budget, government allocated scheme for all South Africans. R200-million per year for the human papilloma • Reinforcing the struggle against HIV and virus vaccination programme. Targets in this proTB, non-communicable diseases, as well gramme, which aims to reduce the incidence as injury and violence. of cervical cancer, have been exceeded: 82% • Improving human-resource management of eligible Grade 4 schoolgirls were vaccinated at state hospitals. against a first-year target of 80%. SOUTH AFRICAN BUSINESS 2016

OVERVIEW R1.2-billion has been added to the HIV and AIDS conditional grant in 2017/18 to expand access to the antiretroviral medication programme. Efforts to prevent mother-to-child transmission of HIV continue to yield success, with the transmission rate having declined to only 2% in 2013/14 from 20% in 2003. In 2015/16, the Office of Health Standards Compliance will be listed as a public entity responsible for inspecting and accrediting all public and private health facilities. An amount of R85.2-million has been reprioritised from the national health grant: health facility revitalisation component, to strengthen the capacity of the office, which conducted inspections at 583 public establishments, 15 per cent of the total number, in 2013/14. In line with the National Health Amendment Act (2013), government is shifting R380.4-million from provinces to the national Department of Health to centralise management of disease control at South African ports. A new funding model for National Health Laboratory Service will be instituted in 2015/16. The National Institute of Communicable Diseases, the National Institute for Occupational Health, and the teaching and research functions will henceforth be funded directly through a transfer from the national department. Currently they are cross-subsidised by the laboratory test fees paid by provinces to the National Health Laboratory Service. Streamlining of operations will reduce forensic testing backlogs. National health insurance (NHI) programme spending has been lower than anticipated over the past two years, partly due to difficulties in contracting general practitioners. Over the three-year spending period, the focus of the indirect national health grant NHI component will expand to include piloting the contracting of allied and other health care professionals. Hundreds of NGOs make an essential contribution to HIV, Aids and TB, mental health, cancer, disability and the development of public health systems. South Africa has some 4 200 public health facilities in South Africa, 13 718 people per clinic. Since 1994, more than 1 600 clinics have been built or upgraded. Free health care for children under six and for pregnant or breastfeeding mothers was introduced in the mid-1990s. The National Health Laboratory Service is the largest pathology service in South Africa. It has 265 laboratories, serving 80% of South Africans. The labs provide diagnostic services as well as health-related research. In 2015, 41 132 qualified health practitioners in both public and private sectors were registered with the Health Professions Council of South Africa. The doctor-to-population ratio is estimated to be 0.77 per 1 000. Most GPs – 73% – work in the private sector, so there is just one practising doctor for every 4 219 people. An estimated 80% of South Africans consult traditional healers alongside general medical practitioners. The Medical Research Council

(MRC) founded a traditional medicines research unit in 1997 to introduce modern research methodologies around the use of traditional medicines and develop a series of patents for promising new entities derived from medicinal plants. The historically determined ownership pattern of the private healthcare system is undergoing transformation, with more and more previously disadvantaged players coming onstream. A prime example is Phodiso Holdings Limited, a leading black investment company steering the African healthcare industry in Africa. The second largest shareholder in the Medi-Clinic Group with a R3-billion investment, the company was established by a group of 68 healthcare professionals and business people, with a joint vision and passion to bring healthcare to the people. Phodiso strive to remain abreast of the latest technology, proven business models and secured strategic partners and alliances to grow and maintain their enviable reputation. The company is now also expanding into Africa. In South Africa, the Phodiso Group has acquired Presta (100%) as well as Orthomed (90%). Presta is a manufacturer and supplier of disability products and wheelchairs, while Orthomed is a producer and supplier of Orthotic and Prosthetic products. Orthomed offers a strategic market advantage as they are the only such manufacturer in South Africa. SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Water Severe water restrictions are a possibility for the future.

015 has been the hottest, driest year in decades, with the situation only projected to worsen. Consequently water has to treated as a precious resource and effective water management policies are absolutely essential government, private enterprise and citizens alike. In 2012, water expert Dr Anthony Turton quoted the following sobering statistics: “There are three numbers that we need to think about: 48-billion cubic metres, which is the total rainfall for the country every year, 38-billion cubic metres, which is the total amount of water available in our dams 63-billion cubic metres which is what our water demand will be by 2035. To solve this the country would have to recycle all its water 1.6 times.” In the 1950s, the Orange River Project delivered water from the Orange River to citrus farmers in the far-away Eastern Cape. In a water-scarce country such as South Africa, this kind of transfer scheme is the norm. The country has several good river systems but they are not in exactly the right places. So 80% of Gauteng Province’s water is imported, mostly from the Vaal River, which is supplemented by complex transfers from the Thukela River and the Lesotho Highlands Water Project. The Vaal basin, which serves the most populated and industrialised part of the country including Johannesburg, receives water from seven inter-basin transfer schemes. The second phase of the giant Lesotho Highlands Water Project is scheduled to start delivering water in 2019. SOUTH AFRICAN BUSINESS 2016

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Purification, desalination, water-leakage management and waste-water treatment are some of the issues facing South Africans, and experienced international companies are showing an interest in the country. American companies with a presence in South Africa are the Hach Corporation, Harvard Corporation, Nalco and the Adel Wiggins Group. The National Department of Water Affairs says South Africa needs to spend R573-billion on water infrastructure and demand management in the years to 2022. “Water will definitely be at a premium over the next few months,” said Sputnik Ratau, a spokesperson for the Department of Water Affairs. “The balance of probability suggests that we can anticipate a severe drought in the near future,” Turton said in an email.

OVERVIEW country, covering about 44 000 hectares with a variety of crops. The Vaal Dam and the Bloemhof Dam are important sources of controlled water from the Vaal River. In the south of the province, the Welbedacht Dam delivers water to the main metropolitan area of Mangaung, including Bloemfontein, while a system of canals connects the Vanderkloof Dam on the Orange River with the Riet and Modder river systems. The Vanderkloof Dam controls water flow and allows for better farming along the banks of the river, and the Gariep Dam has hydroelectric capacity. An inter-basin transfer scheme takes 40-million cubic metres per annum from the Caledon River basin and sends it to the Modder River basin for industrial and domestic use.

New schemes

“Water restrictions are likely to be imposed. South Africa is a water-scarce country and we encourage people to conserve water as much as possible,” Ratau said. “The less prudent we are with water, the higher the risk of shortages this year.”

Existing systems South Africa’s most central province, the Free State, is bound on all sides by water, the Vaal River to the north and west, the Orange River to the south and the mountainous, river-rich kingdom of Lesotho to the east. The Gariep Dam on the southern edge of the province is South Africa’s biggest dam. The agricultural sector benefits through irrigation from the flow of the Vaal River. The VaalHarts irrigation system is one of the most productive in the

Recent transfer projects include the Western Aqueduct project (valued at R864-million) and the associated Northern Aqueduct Augmentation Project, (Durban, Umgeni Water) and the Mokolo Crocodile Augmentation Project, which is designed to supply water to Medupi, the new power station at Lephalale in Limpopo Province. A pump station and a 45km pipeline between the site of the power station and the Mokolo Dam is being built by the Trans-Caledon Tunnel Authority, the body mandated by the National Department of Water Affairs to fund and implement bulk water infrastructure. The TCTA has also overseen progress on the Komati Water Supply Augmentation Project, the raising of the wall of the Clanwilliam Dam and the Groot Letaba River Water Development Project. The Mooi-Mgeni Transfer Scheme will provide an extra 60-million m? per year in KwaZulu-Natal. The Eastern Cape’s R20-billion Uzimvubu Dam project will provide much-needed water and hydroelectric power. The country has recently invested in three major water projects. The Berg River Water Project supplies water to the Cape metropole. Inaugurated in March 2009, the project took 14 years from conception to completion. The latest mega-project is the Olifants River Water Resources Development Project (ORWRDP) which will supply water to more than a million people living on the Nebo Plateau and Mokopane, Polokwane and Lebowakgomo. The construction of the De Hoop Dam is a major component of the masterplan. The total cost of the project is estimated at R20-billion. The De Hoop Dam wall will be 85 metres high and contain around 1.1-million m2 of concrete that will be compacted down to 700 000m2. Cement for the project is being supplied by PPC from its facilities in Limpopo (Dwaalboom) and Pretoria.

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OVERVIEW Improving quality The introduction by the National Department of Water Affairs and the Water Institute of South Africa (WISA) of the Blue and Green Drop Awards has been very successful. Now it is possible to track how well the nation’s municipalities are doing in terms of clean water provision. In order to win a Drop Award (Blue for water quality, Green for waste treatment), water systems have to score 95% or higher. Many municipalities use water boards such as Umgeni Water, Rand Water or Sedibeng Water. In 2012, a total of 931 water systems in 153 municipalities were audited. Standards are improving every year. The DWA has allocated R4.3-billion to helping municipalities deliver water. The Interim Water Supply Programme will concentrate on 23 district municipalities. The awards are run by WISA with the help of consulting engineering group Aecom SA. Aecom, which was previously BKS Group, assists municipalities in preparing for the audit and has a wide range of capabilities within the water-treatment sector, including bulk and reticulation water and sewage pipelines. Aecom SA is also involved in another major issue that is affecting South African water quality—acid mine drainage. Old mines around Johannesburg and in Mpumalanga are leaking acidic water and engineers are working on solutions. The Rhodes University Institute for Water Research is one of several institutions in the country that conducts research into water quality. A lot of the institute’s funding comes with projectrelated grants from the national Water Research Commission, some students receive funding from the Carnegie Foundation and Unilever sponsors the Unilever Centre for Environmental Water Quality, a unit within the institute. The Water Institute of South Africa has 1 800 members from a variety of types of organisations active in the water environment. WISA does research and keeps its members up-to-date on the latest developments in water technology. It also runs conferences such as the Sustainable Utilization of Water Resources in Developing Countries Conference, held in 2013 in Cape Town. As in most areas of life in South Africa, environmental standards are set and maintained by the South African Bureau of Standards (SABS). The SABS develops and promotes South African National Standards (SANS) which can be downloaded from the SABS website. The Water Chemistry Laboratory of the Council for Scientific and Industrial Research (CSIR) tests water samples according to the relevant SANS. Water storage is becoming an increasingly important issue in South Africa, with many private homes and businesses investing in water tanks. The Nedbank Group is inSOUTH AFRICAN BUSINESS 2016

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vesting R9-million in the Water Balance Programme, designed to upgrade the functioning of water-catchment areas. Some 3.3-million kilolitres of water is trapped by alien species in the country, which is the equivalent of 7% of the country’s water run-off. The programme is an initiative of the World Wildlife Foundation SA. The National Cleaner Production Centre SA is a CSIR project dedicated to improving industrial efficiency, including reducing water wastage. The unit looks for ways to improve its services through flow limiters, polypropylene water piping, ground tanks and semipressure water-service levels, urine-diversion toilets and anaerobic baffled reactors, first introduced locally by eThekwini. The unit has been involved in the Industrial Energy Efficiency (IEE) Project through several initiatives, including a pumpsystems optimisation assessment and energy assessments at three of its depots in Durban. Umbilo Wastewater Treatment Works was chosen as the demonstration facility for the implementation of an environmental management system (EnMS). In 2014 and 2015 an EnMS was implemented at a capital investment of less than R1 000. This resulted in a total monetary saving of R280 000 and an energy saving of 287 620kWh per annum. GHG emissions were reduced by 275 tonnes of CO2. The total payback period for the investment was less than 1 month.

PROFILE

BGCMA

ituated in the southwestern corner of South Africa, the Breede-Gouritz Catchment Management Agency (BGCMA) plays a pivotal role in protecting, developing, conserving, managing and controlling water resources. Formerly known as the Breede-Overberg Catchment Management Agency, the Gouritz region was recently incorporated within the mandate.

The merger came after the former Minister of Water Affairs, Edna Molelwa, approved the expansion of the boundary and area of operation of Breede-Overberg CMA in terms of Section 78(4) of the National Water Act, 1998 (Act No 36 of 1998). The area of operation of the BreedeGouritz Catchment Management Agency includes the previous Breede-Overberg Water Management Area and the Gouritz Catchment. “The strategic focus of the agency incorporates water resource planning, water use management, institutional development, water resource protection and water allocation reform,” says CEO Phakamani Buthelezi. “The vision of the BGCMA, ‘quality water for all, forever’, was developed around the question of how the BGCMA can make a positive contribution and engender meaningful change within a broader social context.” The main elements of the vision are inclusion SOUTH AFRICAN BUSINESS 2016

and participation of all stakeholders, mediation between competing environmental and human priorities, ensuring availability of good quality water and a responsibility to assist in eradicating poverty. Buthelezi explains that the BGCMA works closely with local governments on water management and water-related services to ensure synergy between the priorities of the Catchment Management Agency and the local and district municipalities. “The BGCMA is the operating arm of the DWS and its aim is to bring water resource services in an efficient manner to the inhabitants of the Breede-Gouritz Water Management Area,” explains Buthelezi. “Furthermore, the BGCMA works closely with other government departments to ensure compliance in all water use practices. The BGCMA provides comments on rezoning and consolidations to relevant municipalities, and on environmental impact studies and basic assessment reports in conjunction with the Department of Environmental Affairs.” The BGCMA is currently busy with the validation and verification process where all water users will be evaluated for legal compliance. This process will assist with the management of water allocations in the Breede-Gouritz Water Management Area (WMA).

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Our Vision Vision is is Our

“Quality water water for for all, all, forever” forever” “Quality Our Our Mission Mission isis to to manage manage our our water water resources resources responsibly through stakeholder engagement responsibly through stakeholder engagement and and to to devolve devolve decision decision making making to to the the lowest lowest level for the benefi t of all water users level for the benefit of all water users in in the the Breede-Gouritz area. Breede-Gouritz area. Breede-Gouritz CMA is responsible for: CMA is responsible for: •Breede-Gouritz Water Resource Planning Water Allocation Resource Planning •• Water Reform • Water Allocation Reform • Water Use Management Water Use Management •• Institutional Management Institutional Management •• Resource Protection • Resource Protection For more information, contact us on: Breede-Gouritz CMA (BGCMA) For more information, contact us on: 51 Baring Street Breede-Gouritz CMA (BGCMA) Worcester, 6850 51 Baring Street 101 York Street Worcester, 6850(New Office) George, 6529 101 York Street (New Office) Breede-Gouritz George, 6529 CMA Private Bag X 3055 Breede-Gouritz Worcester, 6849CMA Private Bag X 3055 Ms Malehlohonolo Mlabateki Worcester, 6849 Public Relations and Marketing Officer Tel: Tel: (023) (023) 346 346 8000 8000 Fax: Fax: (023) (023) 347 347 2012 2012 E-mail: mmlabateki@breedegouritzcma.co.za www.breedegouritzcma.co.za www.breedegouritzcma.co.za

OVERVIEW

Transport South Africa is spending heavily on transport infrastructure.

conomic Development Minister Ebrahim Patel has an- At the National Assembly nounced 17 major Strategic Infrastructure Projects in a Committee address in March variety of sectors. Transport is among the most important of this year, the Department of these. of Transport & Passenger Rail Agency of South Africa adTransnet is the state-owned transport and logistics company re- dressed challenges related to sponsible for most of South Africa’s rail network, rail freight, ports, the rail & road netowrk systems. port terminals and South Africa’s fuel and gas pipelines. It will Lucky Montana, CEO of spend R300-billion across its five divisions in the period to 2019. PRASA, said PRASA focused In terms of the national Public Transport Strategy, priority rail on public transport and the corridors and bus rapid transit (BRT) systems are being intro- National Development Plan duced in all of the country’s major cities. (NDP). It was the implementing The Maputo Development Corridor is Africa’s most advanced arm of the National Department spatial development initiative. Run by the Maputo Development of Transport, providing transCorridor Logistics Initiative (MCLI), the corridor runs from just port via road and railway. As a government entity, the initiaoutside Pretoria in Gauteng, to Maputo in Mozambique. The Harrismith Logistics Hub (HLH) on the N3 is intended as tives for PRASA were driven by an inland port that can handle cargo containers and shift cargo policies and transport strategy. from road to rail, reducing congestion and costs. The volume of The rail sector took up 80% of cargo passing through Harrismith is expected to increase by 25% the business of PRASA, mainly through Metrorail. They had per annum for the next seven years. South Africa’s ports are covered in the maritime section of a few bus services, including Translux and City to City. They this publication. also had a property division. He provided statistics highRail lighting the work of PRASA. It had 22 300km of rail network, Grain tonnages carried by Transnet Freight Rail (TFR) will almost 4 638 metro coaches, 550 million trips a year for Metrorail double in the years to 2019. The assets of TFR’s new Container and Automotive Business passengers, 16 500 employ(CAB) unit have been ring-fenced. The CAB has been created ees, 589 stations, and assets of R36 billion. The biggest chalbecause of the importance of the Johannesburg-Durban line. TFR has a 20 953km network – about 80% of African infra- lenges for PRASA were its old structure – with the potential to transport huge volumes. Transnet and dilapidated railway infraFreight Rail intends to increase the amount of freight it carries structure, long queues, overcrowding and unreliable trains. from 200-million tons to 300-million tons. A new line to carry coal from the inland to the coast through People could lose their bread and butter if they were late for Swaziland is being investigated. Some private companies such as Rail Road Logistics Grindrod job opportunities because of and Sheltam operate rail systems in the gold-producing areas of late trains. Line, train and signal capacity were limited. Most of the Free State and Gauteng. SOUTH AFRICAN BUSINESS 2016

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OVERVIEW the stations were isolated and did not run in conjunction with other forms of transport, like taxis and buses. The average age of the fleet was 40 years. This frustration led to vandalism and acts of outrage. The new programme had three phases: • 2007-2010 – Stabilize commuter rail by bringing all the different passenger railway networks into one; • 2011-2014 – Focus away from refurbishment to replacement; • 2015-2018 – Growth and expansion.

Road National government has spent ever-increasing amounts of money on road allocations over the last five years, increasing at a rate of 16% every year. The South African National Roads Agency Limited (Sanral) has successfully raised billions of rands through bonds and capital markets in order to finance, manage and maintain the national road network of 16 750km. However, plans to pay for the Gauteng Freeway Improvement Project through tolling have run into political obstacles. At its inception, SANRAL only had about 7 000 kilometres under its jurisdiction, and has since grown by threefold. The portfolio comprises of a 15% toll-road and 85% non toll-road split. “The vast majority of the portfolio concerns non-toll-roads. The non-toll-road funding comes directly from National Treasury as for any other department. The significance of the national road network is that it carries 80% of the freight that moves on the surface of South Africa,” said Sanral CEO Nazir Alli. Currently the largest challenge facing our roads at the moment is funding. He explains that looking at the country’s entire road network of 750 000 kilometres, it is the 10th largest network in the world, of which only less than 1% are tolls. “On the entire network of South Africa we have a backlog on maintenance of R197-billion,” explains Alli. “Our challenge is figuring out how to catch up on this backlog, how to fund it, and how do we make sure that we service the areas and parts of the country which are under-serviced? “While at the same time, how does the South African government, with its constrained budget and limited resources also meet its challenges in terms of the social wage that we pay to people—how do we tackle that problem?” Asked whether the proposed e-tolls, that have been the subject of a heated civil debate, would be established to assist with funding, Alli explains that e-tolling would solely be a method of collection and that one must not confuse it with the principal and policy of tolling. SOUTH AFRICAN BUSINESS 2016

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“The principle has been well established in South Africa and affirmed in two different places. In 1996, in the White Paper on Transport, we said that tolling is an instrument that the government will use where it is necessary, as it is believed that it can assist in terms of meeting the challenges of the budget. Additionally, it is clearly stated in the National Development Plan that this is an instrument that we will use when needed,” says Alli. South Africa has 325 019 heavy-load vehicles and the road freight industry employs 65 000 drivers.

Air Airports Company South Africa (Acsa) owns and operates the country’s 10 biggest airports. The company also manages

OVERVIEW

airports in India and Brazil. Transporting minerals A 10-year spending plan announced in 2013 allocated R50-billion to expansion and Transnet Freight Rail is beefing up the commodity corridors that ferry raw materials. Amounts include: R20-billion to maintenance. R26-billion on improving the manganese line to Port Elizabeth OR Tambo International in Johannesburg caters for from the Northern Cape. Transnet aims to deliver 11.7-million tons more than 17-million pas- of manganese by 2018, substantially increased from the 4.8-milsengers every year, receives lion tons delivered in 2011. more than 105 000 arriving airR29-billion to upgrade the iron-ore line that links Sishen (also in traffic movements and employs the Northern Cape) with the Port of Saldanha in the Western Cape. 18 000 people. As much as R50-billion could be spent on the connection The Cape Town International between existing coal fields in Mpumalanga (and new ones in Airport has been expanded western Limpopo) with the Richards Bay Coal Terminal. and improved. The South African Ministry of Transport has several agencies King Shaka International and businesses reporting to it: Air Traffic and Navigation Services Airport (KSIA) opened north of Company, Airports Company of South Africa (Acsa), National Durban in 2010. Emirates is the Transport Information System, Road Accident Fund, South African international carrier to KSIA. Civil Aviation Authority, South African Maritime Safety Authority Several airports have been (SAMSA) and the South African National Roads Agency Limited mooted as possible regional (Sanral). freight nodes: Wonderboom SECTOR INSIGHT Airport in Pretoria, Polokwane Airpor t in Limpopo and • The Harrismith Logistics Hub will become an inland port. Mafikeng Airport in North West • Acsa is operating in India and Brazil. Province.

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OVERVIEW

Phakisa to power marine economy The maritime sector holds great promise as, through Operation Phakisa, national government aims to implemement its policies and programmes better, faster and more effectively.

peration Phakisa – in the words of Priority sectors President Jacob Zuma – “has been designed to answer fundamental To tap into the ocean economy, government implementation questions and find has identified four priority sectors, on which solutions, as the country tries to address pov- Operation Phakisa will focus. These are marine erty, inequality and unemployment, among transport and manufacturing activities, such as other challenges, as stipulated in the National coastal shipping, trans-shipment, boat building, Development Plan (NDP) 2030. The first phase repair and refurbishment; offshore oil and gas of the implementation will focus on unlocking exploration; aquaculture and marine protection the economic potential of South Africa’s oceans.” services and ocean governance. Government will explore the country’s natural The simple fact is that South Africa is not gaining advantage in maritime transport and manufacas much as it should from the maritime sector. turing by capturing the benefits of growing volOne example is the absence of a merchant fleet umes of cargo handling, sea and coastal shipand another is the scarcity of ship-repair facili- ping and supporting transport activities such as ties. With oil and gas finds growing in volume storage and warehousing. exponentially off the west coast of Africa and Operation Phakisa looks at further enhancing off Mozambique, there is a huge opportunity the enabling environment for exploration of oil for South Africans to grow big businesses in and gas wells, resulting in an increased number the rig-repair and service industry. The ocean of exploration wells drilled, while simultaneously could contribute up to R177-billion to the Gross maximising the value captured for South Africa. Domestic Product (GDP), and add between eight The need to continuously balance the hundred and one million direct jobs. economic opportunities which the ocean space SOUTH AFRICAN BUSINESS 2016

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OVERVIEW affords, while maintaining its environmental integrity has been recognised, as well as sustainable but commercial practices such as aquaculture. A relatively underdeveloped area and small in size, aquaculture in South Africa has shown strong growth of 6.5 percent per annum, being an increasingly important contribution to food security globally.

Ports and terminals

South Africa’s port system is controlled by Transnet National Ports Authority. The ports of Richards Bay, Ngqura and East London are in Industrial Development Zones (IDZs). The other commercial ports are Durban, Port Elizabeth, Mossel Bay, Cape Town and Saldanha. The deepest natural port in Southern Africa, the port of Saldahna can accommodate vessels A coordinated effort up to a draft of 21.5 metres, exporting most of South Africa’s iron ore. Western Cape MEC for Economic Development Port Elizabeth has automotive-handling caand Tourism Alan Winde argues that all of the pacity, a container terminal and a break-bulk terports of South Africa should cooperate in trying minal. The port currently handles large quantities to attract the business of the 130 rigs that pass of manganese but this is due to move to Ngqura. The Port of Mossel Bay services the fishthe country’s ports. The chief executive of the South African Oil ing and petroleum industries. Huge amounts of and Gas Alliance (SAOGA), Warwick Blyth, told money are being spent on ports and terminals. Reuters that South Africa is starting to realise its Container terminals alone will receive R9.8-billion in additional funding in the period to 2019 and potential in this market. Cape Town and Saldanha’s facilities were ‘ex- all of the country’s ports are receiving upgrades ceptionally busy’, according to Blyth, who noted that are increasing their capacity. that each of the three or four repair jobs being done simultaneously was worth about R200-million. DCD Marine operates Cape Town’s rig-repair facility, the largest ship-repair yard in Africa. There are supplementary yards in Simon’s Town and Saldanha. Large logistics operators like Bertling already run sophisticated operations at South Africa’s major ports. JSE-listed Grindrod runs prominent businesses such as Unicorn Shipping and Grindrod Freight Services. Training for the maritime sector is provided by five marine academies in KwaZulu-Natal and the Western Cape. Simon’s Town’s Lawhill Maritime Centre has won awards. Transnet runs a School of Port Operations. SAMSA says there are 341 maritime careers, ranging from marine surveyor to oceanographer.

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OVERVIEW

Tourism The South African tourism industry is on an upward trend, despite setbacks and controversies such as onerous amendments to visa regulations.

ccording to the latest figures from the Department of ket, reported 14% growth even Tourism, international tourist arrivals grew by 4.7% in with their challenged economy 2014, reaching a record 1 138-million arrivals, accord- in recession. ing to the UNWTO World Tourism Barometer. Despite Tourist arrivals to South global economic challenges, international tourism results were Africa grew by 6.6% (587 671) in well above expectations, with an additional 51-million international 2014 to reach 9 549 236 tourists. This performance is above tourists travelling the world in 2014. the global average which saw a Africa attracted 1.3-million additional arrivals (+2.3%), reaching 4.7% increase in tourist arrivals. In the last 10 years, South a new record of 56-million, driven by Sub-Saharan destinations (+3.3%). Results in the Middle East turned in 2014 after two years Africa’s Brand Equity improved significantly across of negative growth (4.4% at 50.3-million). Outbound tourism grew by 4.3% in 2014 over 2013. Over most portfolio markets. The the past four years Germany and the USA remained the top improvement within core two source markets in the world. In 2014, Russia was the only markets was more significant, market in the top 10 to have declined from previous year (down compared to investment and 17%). Among the ten most important source markets in the world, watch-list markets. Amongst Russia and China continue to be the only emerging markets. the core markets, South Africa China, which became the largest outbound revenue market in witnessed a healthy improve2012 with an expenditure of US$105-billion, saw an increase in ment in its brand presence expenditure of 27% in 2014. Russia, the 5th largest outbound mar- across all the overseas marSOUTH AFRICAN BUSINESS 2016

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OVERVIEW

kets, except Australia. In Africa, South Africa’s brand equity improved considerably during 2008–2014, with relatively more improvement observed in Nigeria, as compared to Kenya. Out of all the 16 markets tracked, South Africa’s conversion curve has improved in 13 markets (with nine markets showing a considerable improvement and four moderate improvement). Among the two African markets, the improvement in conversion curve was more significant in Nigeria than Kenya. Overall, South Africa performed well in 2014, with 9.5-million tourist arrivals, an increase of 6.6% over 2013.

Compared to other destinations, South Africa is ranked 33 in terms of tourist arrivals in 2014 and is down from its previous rank of 30. In Africa, South Africa is the 3rd most visited country, after Morocco and Egypt. From a brand building perspective, South Africa maintained its performance on many parameters of the Conversion Curve, though the performance of ‘Consideration’ and ‘Recently Visited’ attributes marginally declined. Analysing South Africa’s performance relative to our competitors, South Africa’s performance on all parameters remained almost similar to 2013, while key competitors Australia and Thailand are still ahead of South Africa on most parameters. From a closure ratio perspective, all competitors witnessed a worsening performance between 2013 and 2014 with the exception of Thailand. Heritage plays a vital role in South African tourism. Generally heritage resources or sites in South Africa serve both conservation and tourism purposes. The 8 UNESCO Proclaimed World Heritage Sites (WHS) in South Africa are most popular because of their Outstanding Universal Values These World Heritage Sites are: Robben Island Museum, Cradle of Humankind, Mapungubwe Cultural Landscape, iSimangaliso Wetland Park, uKhahlamba Drakensberg (newly named Maloti Drakensberg Transfrontier Park WHS), Richtersveld WHS, Cape Floral Kingdom WHS and Vredefort Dome WHS. In addition, sites such as the Nelson Mandela Museum, Mandela House (Soweto), Hector Petersen Memorial (Soweto), Apartheid Museum, Freedom Park, Voortrekker Monument, Constitution Hill, District Six Museum, BoKaap Museum and many others are popular tourist attractions. All these sites are open to public access and commercialisation through tourism activities as well as enterprise development. There are a number of opportunities to further develop the full potential of tourism in heritage sites. Responsible and sustainable tourism is crucial in this context. The Department of Arts and Culture is responsible for the promotion of Heritage Month, including Heritage Day, in South Africa. Globally halaal tourism is a growth industry and South Africa is well placed to benefit from this trend. The South African tourism industry is very well segmented. Large hotel groups such as Tsogo Sun, Sun International, Protea Hotels and City Lodge Hotels run several brands across market segments. The distribution channel is dominated by four major groups, each of which runs several companies in different parts of the value chain. According to Wesgro, the Western Cape’s investment promotion agency, the biggest groups are: • Imperial Holdings: companies include Europcar and Tempest Car Hire, Springbok Atlas and Grosvenor Tours

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OVERVIEW Bidvest Travel and Aviation: Rennies Foreign Exchange, cruise-ship terminals in order to BidTravel, Harvey World Travel, Budget Car Rental, HRG capture somewhat more than Rennies Travel and BidAir Services 0.5% of the world market that • Cullinan Holdings: Thompsons, Hylton Ross Tours, Pentravel. South Africa currently does. • Tourvest: The group has companies dealing with many as- More than 15-million passenpects of the tourist experience: tour operators and confer- gers travel on cruise ships globence organisers, foreign exchange, retail (gift shops and ally every year. duty-free shops) and hotels (African Hotels and Adventures) • The principal airline operators in South Africa are SAA, the alliance of British Airways, Comair, and Kulula, a low-cost Hotels airline. SAA has ties with SA Express and owns low-cost carrier Mango. SA Express and SA Airlink fly to smaller des- There is international interest tinations in South Africa and Southern Africa. in South Africa’s hotel industry but the sector is well developed with several large local groups Key sectors operating in multiple locations. Radisson Blu and Hilton are Casinos are a popular part of many entertainment and accom- among the international commodation complexes around the country, although relatively few panies to have invested. A new licences are in operation. brand is set to launch in 2016: Private game reserves and golf resorts has been one of the Radisson Red, aimed at the fastest-growing markets in recent years. Millenial market. The Garden Route and the KwaZulu-Natal coastline are arHilton International has reeas rich in golfing venues. St Francis Links is located between cently acquired the Coral Hotel Plettenberg Bay and Port Elizabeth. With a spectacular course in Cape Town’s CBD. It also designed by Jack Nicklaus and wonderful views over the bay and runs the Double Tree by Hilton nearby mountains, St Francis Links is routinely featured among in the same city and has hotels Compleat Golfer’s Five Star Experience Awards. in Johannesburg and Durban. South Africa has been named as Golf Destination of the In 2012, Southern Sun reYear (Africa, Indian Ocean and Gulf States) by the International launched itself as Tsogo Sun, the result of a merger with Gold Association of Golf Tour Operators. Wine tourism is said to contribute indirectly more than R4.5- Reef Resorts. Southern Sun rebillion to the South African tourism sector (South African Wine mains as a brand for premier hotels in the group, which has Industry Information and Systems, SAWIS). According to Wine Tourism South Africa, a website and pub- a total 95 hotels and 15 casilishing concern that provides information about the wine industry, nos across Africa, the Middle 43% of visitors to South Africa visit the Cape Winelands. East and the Seychelles. The The Industrial Development Corporation has committed to new Southern Sun Elangeni & investing R2-billion in local resorts (and in the African hotel market). Maharani complex will boast There are a number of unused or under-used facilities in South 734 rooms and nine restauAfrica that could be fixed up to cater to the many South Africans rants when Tsogo Sun comwho currently don’t take holidays. An audit of possible properties pletes the R220-million project is underway. One suggestion is that former military bases could to amalgamate two previously separate hotels on Durban’s be converted into low-fee resorts. Other niche areas that are being explored include astrology and Golden Mile. The new group’s latest adventure tourism. The cruise-ship market has massive potential. Both Durban and Cape Town are considering building dedicated acquisition is The Grace in •

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OVERVIEW Rosebank, Johannesburg, Relais & Châteaux has 10 properties in South Africa including renamed ‘54 on Bath’. The Londolozi Private Game Reserve, within Sabi Sands, and the Beverly Hills in KwaZulu-Natal Gorah Elephant Camp inside the Addo Elephant Park. is the group’s other ultra-luxury Forever Resorts offers a range of accommodation options for hotel property. every pocket. The group has 12 hotels and lodges together with Other Tsogo Sun hotel many self-catering, camping and caravanning destinations, mostly brands include Sun Square, located in the north of the country but also located at Gariep Dam Garden Court and StayEasy. and Plettenberg Bay in the Southern Cape. In May 2013, Tsogo Sun reported an annual turnover of R9.9-billion, a 10% increase Nature over the previous year. Protea Hotels is South South Africa has a great reputation for beaches, landscapes, Africa’s other large group. With superb wildlife and a rich cultural history. South African National Parks and the South African National a presence in eight African countries, Protea has a total Biodiversity Institute (SANBI) are outstanding national organisaof more than 130 properties tions that oversee a range of important, but easily accessible sites. across three brands: Fire and The Kruger National Park is about the size of Belgium and attracts Ice, Protea; Protea Hotels and almost a million visitors every year. Kruger covers nearly 20 000 African Pride Hotels, the pre- square kilometres, it has six ecosystems, 1 982 species of plants, mier brand. In South Africa, 517 species of birds and 147 species of mammals – including there are 90 Protea properties. the ‘Big Five’: lion, leopard, African elephant, African buffalo and Several local compa- rhinoceros. The area adjacent to Kruger is rich in private game nies have partnerships with reserves, some of which are regarded as among the finest luxury international brands. Sun tourist offerings in the world. The Sabi Sands Game Reserve International’s Table Bay Hotel has several accommodation options within its 65 000 hectares, and Lost City at Sun City are ranging from the luxurious to the ultra-luxurious. also members of the Leading The Addo Elephant National Park in the Eastern Cape is a 164 Hotels of the World group. 000-hectare facility that attracts more visitors than East Africa’s Sun International runs 17 ho- Serengeti National Park. Addo Park uniquely offers the Big Seven: tels and 20 casinos through- with more than 450 elephants and significant numbers of the rest out Southern Africa. Locations of the Big Five, the park includes a marine section where great include Botswana, Namibia, white sharks and whales can be sighted. Swaziland and Zimbabwe. The brief of the South African National Biodiversity Institute Orient-E xpress Hotels is to run nine national botanical gardens. The 7 500 hectares of has two five-star hotels: The conserved gardens represent an astonishing biodiversity, rangWestcliff in Johannesburg and ing from the fynbos of Harold Porter to the harsh beauty of the the iconic Mount Nelson Hotel Karoo Desert garden. in Cape Town. Within the luxury segment, SECTOR INSIGHT companies like The Mantis Collection aim to cater to cli• SA tourism arrivals rose 6.6% outperforming the global averents anywhere in the country; age. for instance, it has a small hotel • SA’s Brand Equity has performed very well in Port Elizabeth where clients • Heritage is set to boost the SA tourism brand stay before transferring to the • SA is well positioned to benefit from halaal tourism game lodge at Shamwari.

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OVERVIEW

Events and conferences Bookings in the years to 2017 promise an injection of R1.6-billion.

outh Africa has more than 1 000 events and conference venues ranging from wine farms and bush lodges to huge halls and exhibition centres. The meetings, incentive, conference and exhibition (MICE) sector is well equipped to grow.

bid documents and is on hand to assist in supplying relevant information in key areas such as telecommunications and IT services and the securing of visas for delegates. The three biggest centres for conferences, exhibitions and events The Sandton Convention are Johannesburg, Cape Town and Durban, with each city hav- Centre is surrounded by a ing invested heavily in large venues. But many resorts and game range of hotels and is well loreserves have facilities for conferences, and smaller towns are cated for delegates who want to shop in their free time. Eskom’s attractive to some conference planners. KwaZulu-Natal has a good reputation for hosting major events, Megawatt Park Conference conferences and exhibitions, and is set host the 22nd edition of Centre and the Absa Convention the Commonwealth Games. Durban 2022 will host all 71 member Centre in Tshwane are some of the larger venues outside territories from the Commonwealth of Nations. The provincial capital is the focus of the sector, but all of the Johannesburg. In the Ekurhuleni province’s big towns have good facilities and the Garden Route metropole, the Airport Grand and several wine routes are well suited to a combination of busi- Hotel and Conference Centre is ness and pleasure. particularly well situated in relaThe Cape Town International Convention Centre (CTICC) plans tion to the main airport. Two of the region’s biggest to double in size, a R4.5-billion project that will create 8 000 jobs venues are in the centrally locatannually by 2018. Johannesburg Tourism Company has a dedicated unit, the ed town of Midrand: Gallagher Johannesburg Convention Bureau (JCB), which works to attract Estate and Kyalami Events and new business to the city. The JCB assists companies in preparing Exhibition Venue. A premier venue in Pretoria is the CSIR International Convention Centre. A new addition to the Pretoria skyline is the OR Tambo Building, a conference centre designed specifically to cater for the needs of South Africa’s National Department of International Relations and Cooperation. Regular meetings of the African Union and South African National Development Community (SADC) will be held in the R1.2-billion building, which also houses 2 500 departmental officials.

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OVERVIEW

Trade with Africa Improved infrastructure will boost intra-African trade.

outh Africa aims to diversify its economy away from an over-reliance on the primary sector (mining and agriculture) towards a more varied economy in which increased capacity in existing manufacturing sectors is coupled to the growth of wholly new areas such as alternative energy, biofuels and digital television.

Trade policies and anti-competitive legislation are being aligned with the imperatives of industrial policy, ensuring that tariff agreements with trading partners do not undercut strategic targets. South Africa, with an annual total trade volume of R2.3trillion, benefits from preferential trade agreements with the US and EU and its membership

of the Southern Africa Development Community (SADC). The acceptance of South Africa into the BRICS group of nations (Brazil, Russian, India, China, South Africa) holds great potential for increased exports. Iron ore and coal are among the biggest export items to India and China, while the EU and US are strong markets for agricultural products like fruit. In the seven years before the global economic meltdown of 2008, sub-Saharan exports to the US grew to $86-billion, four times more than at the beginning of that period (AT Kearney). A key factor in intra-African trade is the development of improved infrastructure. The establishment of regional corridors is intended to boost this trade, with the North-South Corridor the most significant for the Southern African region as it runs through 26 countries and ends in Durban. Ten corridors are being developed to ease trading and improve access to ports. More than half of South Africa’s trade is with other countries in Africa, but the cost of trade in terms of tariffs, permits and delays at border posts can be very high. Shoprite spends about R200 000 a week in permits to keep its shops supplied throughout the continent. The South African Revenue Service (SARS) has initiated an automated custom system that is reducing costs and improving efficiency. It has been introduced at the Port of Durban, the country’s busiest port.

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OVERVIEW

Information and communications technology ICT spend is on the increase nationwide.

overnment is leading the charge in ICT spending. According to a new Frost & Sullivan report‚ titled ‘ICT Spend in South Africa: Public Sector’‚ the public sector saw an ICT spend of $615.9m in 2014 and they estimates this will reach $707.6m in 2019. Managed services and fixed and non-cellular connectivity accounted for 73.1% of these investments.

•

Limited Internet reach and citizen access to online content‚ preventing twoway interaction with the government.

About two-thirds of South According to Frost & Sullivan ICT Industry Analyst Naila Govan- Africa’s ICT companies are loVassen, the development and uptake of eGovernment services will cated in Gauteng Province. The be driven by South Africa’s National Development Plan‚ the National ICT sector has about 200 000 Integrated ICT Policy Green Paper‚ and the Broadband Policy are employees working for 6 500 companies and contributes expected to drive. “ICT spend will centre around updating IT hardware and data 6.4% to national GDP (Wesgro). centres and on supporting systems integration‚ especially with- The sector contains a diverse in the health‚ education and administrative departments,” said range of hardware manufacturing, software design and various Govan-Vassen. Current expenditure at present is limited to day-to-day ICT require- service offerings such as softments across national and provincial departments. Creating a fully ware management, systems digital government is challenged by: programming and technical • Legacy systems necessitating upgrades. support. South Africa is highly • Limited infrastructure to connect all public sector buildings. regarded as a centre of software • Lack of a coordinated plan to enforce ICT standards and ensure development and offers attractive inward investment opportuinteroperability within national and provincial departments. • Security concerns surrounding shared and cloud computing. nities, especially in: • Shortage of skilled resources. • Automotive electronic systems • Access control and security • Financial sector • Silicon processing for fibre optics • Integrated circuits and solar cells The combined ICT market in South Africa is estimated to be in the region of R60-billion. Spending on ICT is predicted to rise to R120-billion by 2016. (Continued on page 120) SOUTH AFRICAN BUSINESS 2016

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FOCUS

MTN plugs R1.2-billion into KZN network MTN is spending billions of rands in upgrading its network and infrastructure.

TN, the second-largest mobile operator in South Africa, is targeting an extensive fibre rollout that will stretch

Alpheus Mangale

to more than 1100km and which will service in excess of 36 000 houses within 1 080 residential estates and suburbs. It will also encompass more than 300 shopping centres, malls and business parks. The fibre rollout and multi-tiered service offering applies equally to enterprise end-users as it does to home and SMME users, providing access to high-speed Internet Access and value-added or over the top services that traditional medium such as DSL struggle to deliver. The rollout started in 2015 and MTN anticipates that it will be completed in 2017. Rolling out fibre-to-the-home (FTTH) is seen as a vital step in building a world-class infrastructure to enable local businesses to operate on a world-class level, especially considering the national government’s drive to support SMMEs, entrepreneurs and local innovators. FTTH is capable of delivering speeds of up to 100 Mbps and, in support of the government’s drive, MTN have already rolled out FTTH to the Western Cape, which represents the first expansion of its high-speed network outside of the country’s economic hub, Gauteng. Many in the industry view fibre as the new frontier, and it is an area that the leading players in the industry all see as important to invest in. MTN has stated that their initial FTTH rollout will focus on “high-density urban areas, such as high-end gated communities, boomed-off suburbs, and high-rise buildings”. The scenic La Lucia suburb in KwaZulu-Natal is one of the first in the region that will receive the service, with Umhlanga, Kloof, Berea West and Durban North also slated for FTTH. The civil works are well underway report MTN, whose South African subscriber base alone is just under 30 000. The company has already committed a total of R10-billion rand for increasing its coverage and capacity for its 2G and 3G clients, in addition to improving its long-term evolution technologies. MTN Business SA chief enterprise officer Alpheus Mangale has assured local residents as well as subscribers that the telecoms giant is “working tirelessly to resolve all outstanding issues to the satisfaction of all concerned”.

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OVERVIEW Chief Enterprise Business Officer at MTN Business, says this soluInternational giants like Microsoft, Hewlett-Packard, IBM, ICL, tion is informed by the strategic Cisco and Unisys have a strong presence in South Africa. decision the business has taken International companies sometimes partner with local concerns, to give impetus to open access as in the case of Bharat Sync Technologies of India, who are networks. “While MTN will continue to rolling out mobile email push and calendar services with South provide the high end, dedicated Africa’s Milestone Connexions. Local manufacturing and assembly is increasing with companies fibre network services complete such as Sahara Computers and Mecer. Since 2009, a number of new with enterprise-grade service undersea cables have landed in South Africa, significantly boosting level agreements, smaller businesses will also benefit from competition and making ADSL possible. Traditional technologies for broadband connection (dial-up and MTN’s investment in its fibre VSAT) are declining in popularity in South Africa as more sophisti- infrastructure,” says Mangale. cated mobile technology becomes available. This includes WiMax, Hatfield says the market and HSDPA and HSPA+. Growth in the sector is expected to be driven timing is ripe for South Africa’s by mobile broadband and services that add value in the data field. fibre infrastructure to graduate to Dube TradePort (DTP) has spent more than R100-million on the next phase that will be underICT infrastructure that includes two data centres. Working with pinned by shared services and Dimension Data and Business Connexion, DTP sells voice and data infrastructure that will support greater affordability and choice. services at a cheaper rate to its tenants. Mobile technology is beWorld Wide Worx reports that 46% of large South African firms ing used in innovative ways by are using cloud computing in one form or another. The Gauteng Provincial Government is developing a Smart City South Africa’s banking sector to gain new customers. Products at Nasrec south of Johannesburg, which will comprise: • Electronics assembly and manufacturing include Absa’s PayPebble, • ICT research and development centre Nedbank’s Approve-it, Standard • ICT connectivity and transaction switching centre Bank’s community banking and • Call-centre facility with 5 000-seat capacity FNB’s eWallet application. • ICT knowledge centre in partnership with international compaMobile phone penetration in nies such as ITE Education Services (Singapore) and MIT (US) South Africa currently stands at 138% (total connections) and Innovation in the sector will be encouraged by the mLab, a cen- 66% (individual subscribers) tre designed to support entrepreneurs in the mobile technology (Businesstech). These figures field. The CSIR in Pretoria hosts the facility together with The are expected to reach 171% Innovation Hub. and 79% by 2017. Public transport systems are moving to cashless ticketing supported by ICT. Digicore and Absa Bank have combined in Cape SECTOR INSIGHT Town to roll out the system for minibus users driving between the • ICT spending is outpacing city and the V&A Waterfront. With Vodacom spending in the region real GDP growth. of R6-billion per year on its 3G and 4G long-term evolution network • Government ICT spend is (LTE), the capacity of South Africa’s telecommunications network set to reach $707.6m in is growing fast. MTN and 8ta are also investing in LTE. 2019. MTN Business has given further weight to its intentions of sup• Two-thirds of SA’s ICT porting open access fibre networks by announcing a multi-tier model companies are located in that leverages off MTN’s fibre infrastructure and applies equally to Gauteng. enterprise end-users, households, and SME users. Alpheus Mangale, (Continued from page 118)

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MTN rolls out ﬁbre infrastructure MTN Business now offers wholesale multi-tiered service offering to all.

TN Business has given further weight to its intentions of supporting open access fibre networks by announcing a multi-tier model that leverages off MTN’s fibre infrastructure and applies equally to enterprise end-users, households, and SME users.

MTN’s multi-tier model gives MTN the ability to cater to the individual needs of each customer segment. This service is a step up from traditional offering where other service providers are able to piggy-back off MTN’s fibre infrastructure. The next level up from this is the reseller service that smaller IT service providers or residential property managers can offer as a value-added service. Alpheus Mangale, Chief Enterprise Business Officer at MTN Business, says this solution is informed by the strategic decision the business has taken to give impetus to open access networks. This strategy aims to speed up the rollout of fibre infrastructure, and thereby introduce

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economies of scale and choice for home and business customers. “While MTN will continue to provide the high end, dedicated fibre network services complete with enterprise-grade service level agreements, smaller businesses will also benefit from MTN’s investment in its fibre infrastructure,” says Mangale. Mangale says the market and timing is ripe for South Africa’s fibre infrastructure to graduate to the next phase that will be underpinned by shared services and infrastructure that will support greater affordability and choice. “By accelerating our rollout, we will allow competitors and customers to leverage off that infrastructure. In order to be attractive to the widest range of customers we have created distinct offerings that we believe will further accelerate broadband fibre adoption rates.” “Choice is important in this equation and we fully support the notion of open access networks that aim to meet customer needs rather than entrenched exclusivity and proprietary systems,” Mangale concludes. SOUTH AFRICAN BUSINESS 2016

OVERVIEW

ICT development in South Africa South Africa has the opportunity to realise great benefits by increasing its investments in the information and communications technologies (ICTs) infrastructure, which will ultimately drive the country’s social and economic transformation.

ccording to the latest World Economic Forum’s Global Information Technology Report 2015 (GITR), sponsored by Cisco, which measures the relative capacity of 143 economies to leverage ICTs for growth and economic and social transformation, South Africa dropped five places to 75th in terms of the report’s Networked Readiness assessment. Networked readiness is a crucial indicator of a country’s ability to implement and take full advantage of ICTs.

Cathy Smith, General Manager for Cisco South Africa, says South Africa can make massive strides in connecting more citizens and bringing about positive social and economic change by improving its Networked Readiness. “With political will and commitment from the private sector, progress can be made in bringing the benefit of ICTs to all South Africans. As we face the next wave of the Internet – the Internet of Everything (IoE) –South Africa needs to prioritise ICT development if it is to benefit from the new experiences and efficiencies that the IoE will bring. “At Cisco, we have learned that technology helps people find innovative solutions to address societal problems. We believe there has never been a better time to combine human ingenuity and technological innovation to improve the lives of all South Africans. Technology is at an inflection point and the South African economy needs to prioritise ICT adoption to take full advantage of the benefits that embracing digital transformation strategies will offer,” says Smith. Drawing from the various discussions that were held at the recent SAP Urban Matters event in Cape Town, we find a surprisingly enthusiastic new assortment of government officials willing to engage critically and in an innovative way with the issues that have arisen over the past few decades. On the topic of ICT integration in an African context, Nirvesh Sooful from African Ideas elaborated on the importance of including these strategies in local government practices to enhance their efficiency. “With the challenges that we have, we need efficient and cost-effective government, as all available resources need to be spent on dealing with our massive infrastructure backlogs. One of the challenges facing South Africa, is the burgeoning cost of government administration, without the necessary investment in infrastructure. This is a very dangerous position. Technology can help. SOUTH AFRICAN BUSINESS 2016

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In fact, it is the only real answer. We need to increase our investment in effective technology so that we can reduce the running costs,” Sooful said. Innovative governance and leadership practices were also important topics covered at the event and looked at best practices from cities within our country, as well as case studies presented on best practices from cities abroad. Sean O’Brien, vice president (global) of SAP Urban Matters & Public Security, discussed the broader theme of improving the lives of citizens by integrating innovative governance and leadership practices through transforming government and driving prosperity. He proposed that five government pillars be put in place: good governance, user empowerment, urban resilience, service innovation, and

OVERVIEW

community engagement. The five SAP strategy pillars that seek to integrate technology with the aforementioned are analytics, applications, mobile and cloud technology and databases. Looking at case studies, local examples of best practices and proposed strategies were discussed in an attempt to highlight solutions that can be implemented to address the issues governments face with regard to urbanisation. City of Cape Town CIO, Andre Stelzner elaborated on the topic of promoting social and economic value in modern urban environments. When speaking on the issues the city has experienced, he focussed on transformation as a central point that needs to be addressed. He highlighted some of the technical difficulties the city has

faced in this regard: “The lack of standardised policies and procedures, old order IT systems, out-dated back office systems that are functionally inadequate and not properly integrated—these systems hinder the ability of municipalities to improve governance, be responsive to changing citizen needs and render services.” Looking at urbanisation in another South African city, the City of Johannesburg’s Department of Social Development’s Jak Koseff spoke on a variety of issues that are being looked at in their municipality, including youth unemployment and the way it links to education. He says according to a 2011 City of Johannesburg report: “Only a small number of those without post high-school qualifications make it into formal employment, and those with qualifications are far more likely to be part of the labour force than those who do not. For example, across all age groups, 56% of those with matric or equivalent qualifications are employed, compared to 31% of those who left school in Standard 8. At the other end of the scale, 88% of those with honours degrees are employed, as compared to 78% of those who hold bachelor degrees.” Koseff suggested approaches to this problem by synthesizing the National Development Plan and World Bank data. On the supply side of the labour market, the city can connect the dots between the private sector, the key educational institutions and the basic education system such that schooling and skills training are expressly linked to market need. He concluded by saying that the city can act as a social change agent with technology as an enabler.

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PROFILE

VeriFi VeriFi is the leader in the business of verification and certification for BBBEE recognition. South Africa requires an economy that can meet the needs of all its economic citizens – its people and their enterprises – in a sustainable manner. Government’s objective is to achieve this vision of an adaptive economy characterised by growth, employment and equity. Achieving authentic BEE has required a reassessment of traditional business models and corporate cultures. The Bill, code and strategy document rely upon two core policy instruments that have been designed to bring about BEE. Both of these instruments are essentially measurement tools that will permit the public and private sectors to evaluate the BEE status of a particular enterprise. Failure to adapt to the new paradigm will have significant consequences. A real commitment to BEE is now an economic imperative.

Description of services • • • • •

Assess and certify BBBEE rating Provide insight into BBBEE challenges facing various organisations Provide insight and guidance on the actions required to elevate BBBEE status Verification of supplier BBBEE status To assist small, medium and large enterprises in acquiring a certified BBBEE verification, and to clarify the codes of good practice, BBBEE Act and guide and advise where necessary, thus ensuring a suitable level of recognition.

Target markets Small, medium and large enterprises achieving an annual turnover of below R5-million, between R10-million and R35-million, and over R50-million respectively (including all charter sectors). SOUTH AFRICAN BUSINESS 2016

Pricing Pricing for BEE Consultancy Services is based on the client’s requirements and can be structured on an hourly or monthly basis.

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PROFILE For BEE Verification and issue of a BEE Compliance Certificate, please contact the office for the current rates.

BBBEE explained Government BBBEE legislation consists of: The Strategy for Broad-Based Black Economic Empowerment • The Broad-Based Black Economic Empowerment Act, No 53 of 2003 • The Codes of Good Practice for Black Economic Empowerment • Various sectoral BEE Charters or Codes •

ment, performance and initiatives as a control system. Criteria against which companies are measured are provided by government, and like an audit, verification must be performed annually. A BEE certificate from VeriFi is advantageous for: Proposals for new business with government • The licensing of regulated activities which include mining, liquor sales and the granting of credit • Leasing of premises from government or private businesses • The creation or continuance of business relations with clients seeking assurance of a company’s BEE compliance •

In terms of these Codes of Good Practice, businesses are divided into three categories: • Where turnover is less than R10-million a year, or when in the first year of incorpora- Once a verification and certified rating through tion, a business is categorised as an Exempt VeriFi is accomplished, a company can perform Micro Enterprise (EME). However, it is nec- business in confidence when engaging with othessary to confirm this status by providing er organisations, as its commitment to equality, proof of annual income. nation-building and unique South African busi• Businesses with a turnover of between R10- ness processes will be recognised. million and R50-million a year are categorised as Qualifying Small Enterprises (QSEs). These organisations must comply with any four of the seven elements that comprise Year established: 2005 the BEE Scorecard set out in the Codes of No of staff: 15 Good Practice. The criteria for each of these Major clients: BP, Ford Motor Company of South elements are less onerous for QSEs than Africa Limited, Scaw Metals, Hertz Car Rental for companies with turnovers exceeding R35-million per annum. • Where annual turnover exceeds R50-million, businesses are evaluated against all seven elements of the scorecard.

Key facts and ﬁgures

The value of veriﬁcation With BBBEE recognised as an imperative by companies committed to building an equitable South Africa, verification is an essential requirement that confirms a company’s participation and contribution. Verification is performed in a manner similar to that of a financial audit: it provides an independent assessment of invest-

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CONTACT INFO Tel: +27 86 175 3233 Email: info@verifibee.co.za Website: www.verifibee.co.za

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Banking and financial services South Africa’s biggest economic sector has seen significant adjustments in the banking landscape,

he finance, real estate and business-services sector is South Africa’s biggest, comprising 21.1% of South Africa’s gross domestic product (GDP). The South African banking and financial-services sector is highly regarded internationally because of a strong regulatory and legal framework. The sector provides a full range of services including commercial, retail and merchant banking, mortgage lending, insurance, auditing and investment.

17 African countries outside South Africa, is Africa’s largest corporation. Banks such as the Development Bank of Southern Africa and the Land and Agricultural Development Bank of South Africa focus their loans on support for infrastructure and developmental projects.

A small number of firms handle most of the country’s biggest auditing accounts. The big four are Deloitte, Ernst & Young, PwC and KPMG, with SekelaXabiso also in the running thanks to the award by Institutions Transnet of a R1.3-billion account. The financial sector has consistently added to the country’s total real annual growth, even in years The South African Reserve when the total has declined. Bank (SARB) is the central bank South Africa is an ideal stepping stone into Africa and several inter- and falls under the National national concerns have set up head offices, primarily in Johannesburg. Department of Finance. It sets These include Bank of China, Bank of Taiwan, Citibank, Deutsche monetary policy and decides on Bank AG and HSBC Bank. domestic interest rates. Standard, which operates as Standard Bank or Stanbic in The SARB oversees the banking-services sector, while the Financial Services Board (FSB) governs the non-banking financial-services industry. The Banking Association of South Africa represents all registered banks, local and interna-

THE MOBILE ECONOMY IS INCREASINGLY IMPORTANT FOR BANKING SOUTH AFRICAN BUSINESS 2016

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OVERVIEW attracting and retaining clients. In its latest annual report, FNB noted a 15% increase in online banking transactions, and a massive 7% jump in banking through its app, and a further jump of 25% in mobile transactions.

Retail banking Retail banking has for many years been dominated by the big four – Standard Bank, Nedbank, Absa/Barclays and First National Bank–but there has been one significant new entrant into the market. Capitec has made remarkably quick progress in gaining a share of the retail market – and not only among the previously unbanked. According to the latest banking customer data, there has been a shift between Nedbank and FNB, with Nedbank replacing FNB in third place, while Absa has had to repay millions of rands in miscalculated credit card interest. In its full year report to June 2015, FirstRand’s full year report to June 2015 reported a drop in total FNB banking customers to tional. Major sub-committees 7.1 million, on the heels of a slide to 7.3 million customers in 2014 oversee capital supervision, from 7.6 million in 2013. The drop is due to the bank reorganizing credit risk, consumer affairs its customer data, in which process over 300 000 accounts in and the SA Securities Lending 2015 were reclassified as dormant. In 2014 the bank lost a big Association. portion of mass-market customers when it lost the government’s South Africa’s principal fi- social grant tender. nancial-service markets include Nedbank’s interim results to June 2015 reported an 8% in the national stock exchange, main banked clients over the period, with total clients up 6% to the JSE Ltd, the Alternative 7.3 million. Exchange (AltX) and the SA Miscalculated credit card interest rates have cost Barclays Futures Exchange. Africa Group’s Absa Bank millions of rand in repayments to cusT h e J S E S e c u r i t i e s tomers in arrears . This is the second time the bank has made Exchange is the largest stock an error in interest rate calculations. Customers are advised to exchange in Africa and consist- scrutinise their statements. Thousands of customers have been ently ranks in the world’s top 20 affected. derivatives exchanges by number of contracts traded. South African banking customers at June 2015 The AltX is a division of the 2014 2015 JSE and attracts a diverse Bank Change customers customers range of small and mediumsized high-growth companies. Standard Bank 11.1 million – –

Mobile-friendly The mobile economy has become increasingly important in

Absa Bank

9.2 million

Nedbank

7.1 million

7.3 million

+2.8

FNB

7.3 million

7.1 million

-2.7%

Capitec

6.2 million

6.7 million

+8.1%

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0.0%

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Development finance and SMME support Entrepreneurs can get help from a variety of sources.

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mall business is taken very seriously by government, as reflected in Minister of finance Nhlanhla Nene’s 2015 budget, which firmly responded to the call to encourage and promote entrepreneurship and the small business sector in South Africa, according to Sipho Zikode, the acting Chief Executive Officer of the Small Business Development Agency (Seda), an agency of the Ministry of Small Business Development. Zikode further commented that tax exemption for a small business with an annual turnover below R335 000 is a win-win for tax authorities and the small business sector and welcomed the R3 billion allocated to the Department of Small Business Development for mentoring and training. The funds are expected to go a long way in supporting and improving the “township-economy” as well as helping develop a much broader support network by the Department of Small Business Development’s agencies to be more visible and accessible to more beneficiaries of small enterprise support services.

One of Seda’s main contribution to the small business sector is helping small businesses with debt collection from government departments. Seda runs a hotline through which small businesses can request assistance in securing payment from government departments for services rendered. Seda has 42 incubation centres in South Africa. The National Department of Trade and Industry (dti) intends setting up 250 incubators for small business by 2016. Towards this end, the dti’s Manufacturing Competitiveness Enhancement provides a cash grant to companies planning to upgrade machinery or buildings, or invest in training. Programme has paid out R1.6-billion in order to protect and create jobs in the sector. Indeed, this programme has proven incredibly popular among companies seeking to improve their competitivity. “Over the last three years the number of applications has skyrocketed. We have a massive backlog,” dti director-general Lionel October was quoted as saying. Launched in 2012-13, the programme will have had a total of R7.4bn allocated to it by 2017-2018, when it concludes. The clothing industry, in particular, has benefited substantially from this assistance. In the three years to the end of January, By end January 2015, the programme had paid out R1.6-billion, with R307-million claims awaiting processing. Seda assists SMEs in getting financial help, as well as providing advice in the drafting of business plans, marketing strategies and in skills training. The agency runs several incubators around the country under its Seda Technology Programme (STP). An example is the Zenzele Technology Demonstration Centre, a project that helps small-scale miners and mineral-processors to create viable businesses.

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OVERVIEW According to research done by Absa, SMMEs were supporting enterprises, particularly in the 60% of the country’s employable population in 2011, against a manufacturing sector. In 2011/12, the DEDTfigure of just 18% in 1998. National government has created a new agency to spur the supported Bed Factory had 65 development of small, medium and micro enterprises (SMMEs). employees and had started disThe Small Enterprise Finance Agency (Sefa) will do the work tributing its products to other previously done by three separate bodies, and aim to get loans provinces. The launch in 2011 of out to small businesses as quickly as possible. Sefa will have access to R1.4-billion for disbursement over three years to 2015. the Enterprise Development The SMME sector is seen as the most likely to create new jobs Fund (EDF) by the National Empowerment Fund (NEF) was efficiently and cheaply. The new agency is under the control of the Industrial Development a positive step in providing more funding for start-up businesses. Corporation, which is itself a funder of many projects. Through the IDC’s Transformation and Entrepreneurial Scheme, The NEF’s Strategic Projects a black economic empowerment project is under way at Kakamas Fund has a five-year pipeline in the Northern Cape, where emerging farmers are planting citrus. of R30-billion. The focus of this fund is large projects, but small Vaal Community Citrus should create 1 330 jobs. Provincial governments and municipalities are obliged to enterprises will benefit from repromote procurement policies that support small business- lated contracts. es. Regional bodies such as the Eastern Cape Development Private companies also Corporation also play a major role in this regard. support entrepreneurship. A The Northern Cape Department of Finance, Economic new SMME Business Park Development and Tourism (DEDT) has a unit devoted to prod- was opened in Rustenburg in uct development and it channels funds into promising small 2011. One of the area’s biggest businesses, Xstrata Alloys, put R2.4-million into the Zinniaville facility which now hosts North West Craft and Design Institute, Sivumo Safety and Keba Shades among other enterprises. Anglo America’s Zimele fund has hub managers at various locations around the country based on the resource mined by the Anglo subsidiary. The Thermal Coal Hub and the Platinum Hub are two examples. The Mondi Zimele Hub in Piet Retief supports businesses in the supply chain and forestry. Zimele is supporting a bottled water business that employs seven people at the eMalahleni water reclamation plant. In order to stimulate job creation, in 2014, Business Partners Limited launched its SOUTH AFRICAN BUSINESS 2016

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OVERVIEW Franchise Fund—an innova- These 76 implementing projects have to-date created 37 239 tive platform backed by the permanent new jobs. These projects have also created 11 092 Development Bank of Southern short terms jobs while 86 301 individuals have received training. Africa (DBSA)—aimed at alThe Jobs Fund has also partnered with Century Property lowing young and previously Developments to build the Riversands Incubation Hub in Diepsloot, disadvantaged entrepreneurs, Gauteng. The project will potentially create 1,440 permanent jobs with limited assets and ac- and places the SMME Incubation Hub in one precinct with large cess to capital, to qualify as industry. For example, Sello Makhamate, a metalworker from franchisees. Diepsloot, ran his business from his house. Due to the space The total Franchise Fund constraints he was not able to expand his business or diversify amounts to R107.03-million is product. Now based in the Riversands Incubation Hub, he has and consists of R48.65m larger formal business premises available where he can invite from National Treasury’s Jobs clients from more affluent markets. “This gives me access to a Fund (R38.92m for financing more customers especially from the new housing developments and R9.73m for technical as- taking place in the area” says Sello. “At the Hub I have many sistance), as well as R58.38- specialists from the steel industry to learn new techniques that million from Business Partners can grow my business.” Limited. According to Jenny Retief, Acting CEO Riversands Incubation According to Christo Botes, Hub,“The Jobs Fund has played a crucial role in helping micro Executive Director at Business and small businesses from the Diepsloot area overcome the Partners Limited, a specialist barriers that obstruct them from growing into the formal market. risk finance company for formal This creates desperately needed jobs and work opportunities.” small and medium enterprises All of the major retail banks have SMME offerings. Absa Bank’s (SMEs) in South Africa, the SME Fund is driven by its Small Business Division and SMMEs Franchise Fund aims to create make up more than 75% of Absa’s new business client list. There jobs through entrepreneur- are also Enterprise Development Centres located all over South ship via franchised business- Africa, sponsored by Absa. The bank hosts a procurement portal es. “Purchasing a franchise in which has more than 11 000 SMMEs and 1 000 buyers registered. South Africa can be quite onStandard Bank runs a Community Investment Fund. erous given that the franchisor Nedbank offers an enterprise development product for businormally requests a 50% own nesses with turnovers up to R35-million. Small Business Friday contribution. This fund will pro- is a joint venture of the National Small Business Chamber and vide affordable franchising op- Nedbank. portunities to those who would The commercial division of FNB has sections that deal with otherwise not have had the op- Start-up Funding and BEE Funding. The bank is a sponsor of an portunity to acquire a business.” SMME training centre in Soweto and runs an advice bureau for The Development Bank of small business called BizNetwork. Southern Africa is responsible for administering the national SECTOR INSIGHT Jobs Fund. As at February • The Small Enterprise Finance Agency has a R1.4-billion war2015, it had 76 projects in chest. full implementation. The Jobs • On Small Business Friday, entrepreneurs attend seminars. Fund has disbursed R1.966 • Absa hosts a procurement portal for SMMEs. million in grant funding to the 76 • The SMME Opportunity Roadshow is a eventing platform implementing projects, which aimed at mentoring SMMEs in Johannesburg, Durban, Port has leveraged a further R2.344 Elizabeth and Cape Town billion from project partners.

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Education and training Education and training is possibly the most critical factor in achieving a sustainable future. South Africa is investing heavily in education to empower future generations, with South African universities winning increased recognition in several global surveys. Higher education South Africa has 23 public higher education institutions: 11 universities, six comprehensive universities and six universities of technology. There are also 87 registered and 27 provisionally registered private higher education institutions. The University of Cape Town has 40% of South Africa’s A-rated researchers (32) and a strong international reputation. QS World University Rankings put UCT among the world’s top 100 universities for the quality of its teaching in eight subjects: education, history and archaeology, geography, English, politics, psychology, earth and marine sciences, and law. The university gained a top200 ranking for 19 other subjects UCT is rated as Africa’s top university and is ranked in joint 120th position in the world according to The Times Higher Education World University Rankings 2015-2016, which list the best global universities and are the only international university performance tables to judge world class universities across all of their core missions - teaching, research, knowledge transfer and international outlook. The University of Pretoria and the University of the Witwatersrand (Wits) are also highly regarded as research institutions. Wits has been ranked in the top 1% of world institutions in seven fields of research. The university offers studies in more than 40 schools in five faculties. South African universities also feature highly on the Quacquarelli SOUTH AFRICAN BUSINESS 2016

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Symonds University Rankings, which placed eight of South Africa’s universities in the top 100 universities in BRICS, with the highest placed institutions being UCT (14) Wits (28), Stellenbosch (34) and Pretoria (49). There are six comprehensive universities in South Africa, offering diplomas and degrees with a mix of vocational and academic programmes. These institutions grew out of mergers between universities and colleges. The University of South Africa (UNISA) offers correspondence courses. Its headquarters are in Pretoria but it has sites throughout South Africa. UNISA has a staff of more than 4 000 and 300 000 registered students in South Africa and Africa. Universities of technology have a specific focus on

OVERVIEW educating young people in fields Schools that will enhance the country’s economic p e r f o r m a n c e . South Africa has 26 000 public schools. The Education Technology is at the core of the Department’s 2007 statistical review gave a figure of 12 048 821 pupils in all public schools with a further 352 396 in independent learning experience. Most institutions have mul- (private) schools. The overall budget allocation for 2015/16 for tiple campuses. Plans are in the Department of Basic Education is R21.511-billion. Last year, place for universities to be the budget allocation was R19.699-billion. This is an increase of established in the only prov- R1.821 billion, which is equivalent to 9.24%. inces that currently do not have A new Conditional Grant, namely the Mathematics, Science one, the Northern Cape and and Technology (MST) Grant, intended to promote the teaching Mpumalanga. The Northern and learning of Mathematics, Science and Technology. This Cape has two FET colleges, Grant, an amalgamation of the Technical Schools Recapitalisation Mpumalanga has three. Grant and the Dinaledi Schools Grant, has been allocated a According to the National total of R1.1 billion over the 2015/16 to 2017/18 MTEF period. Student Financial Aid Scheme, The Department’s 2015/2016 budget allocates infrastructure funding for bursaries to sup- delivery funding through the Education Infrastructure Grant (EIG) port students at tertiary level in- at R29.622 billion for the MTEF period; and the Accelerated creased to R8.2 billion in 2013, . Schools Infrastructure Delivery Initiative (ASIDI) funded to the tune of R7.042 billion. Advtech is a JSE-listed company that runs several schools Business schools including Abbotts College and Varsity College with an enrolment of some 35 000 students. Curro Holdings is also listed on the JSE Gauteng has three of South and, in the first six months of 2012, grew its national school portfoAfrica’s top five business lio from 12 to 22. A funding agreement with Old Mutual Investment schools: the Wits Business Group SA (OMIGSA) and the Public Investment Corporation (PIC) School, the University of South will see Curro roll out 11 low-fee independent schools in the peAfrica’s (Unisa’s) Graduate riod to 2019. These will be called Meridian Independent Schools. The LEAP Science and Maths School model is far from the JSE School of Business Leadership and the Gordon Institute of company model: these schools have low fees and have to raise funds to survive but they offer excellent teaching, particularly in Business Science. The Graduate School of mathematics, science and English. There are six schools in South Business (UCT) is accredited Africa and they are enabling children from black townships to do by the European Foundation well enough at school to go on to study engineering at university. for Management Development LEAP also has a teacher-training programme for its own graduates. The Mpumalanga Regional Training Trust (MRTT) provides while Stellenbosch’s Business School has a specialist unit quality customised training interventions, practical workplace called the Centre for Project training, placement and after-care via technical and mobile training and The MRTT hospitality and tourism academy. Learners at the Management Intelligence. The University of KwaZulu- training centres have access to three or four classrooms at each Natal’s Graduate School of centre where they receive theoretical instruction. Classrooms Business is a founder member vary in size and from centre to centre, but can accommodate of the Association of BRICS between 20 to 50 learners each. Most of the training is provided Business Schools. Rhodes on campus, but the MRTT can provide off-site training through University’s Business School its mobile workshops which travel to remote areas and enable has a strong focus on environ- members of local communities to access skills development mental management. interventions close to their homes.

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Waste recycling The monetisation of South Africa’s waste is proving to be a key area for job creation.

world without waste does not simply have to be an unreachable imagined dream; instead it can be a guarantee for future generations with the right action today. While waste management is one of the most significant challenges that we face today, it is one that provides countless methods to overcome the environmental, social and economic problems that society faces.

organic waste such as lawn clippings, leaves, and kitchen scraps keeps them out of a landfill, but the benefits are even greater. The carbon, nitrogen, and other nutrients inherent in organic waste enriches the soil, encouraging beneficial Waste recycling legislation in South Africa is centered on The organisms and reducing the National Environmental Management: Waste Act No. 59 of 2008. need for artificial fertilizers or Its purpose–to reform the law regulating waste management in other soil amendments. There are many companies order to protect health and the environment by providing reasonable measures for the prevention of pollution and ecological at the forefront of evolving degredation, promoting conservation, and securing ecological needs and trends commuted to sustainable development and natural resources, while promoting the principles of sustainability justifiable economic and social development. in business and the promotion When we start to recycle we reduce the amount of waste going and education of the different to our landfill site thus prolonging the lifespan of our landfill sites. types of recycling. We need to look further than just the financial gain of recycling to the environmental impact. Recycling saves energy. Using recycled material when making Recycling tyres plastics and paper uses less energy than producing them from Since its inception in 2012, new materials. Recycling reduces the amount of waste put into landfills. Landfills are potentially hazardous due to the concentra- The Recycling and economic tion of non-biodegradable items that slowly leach toxic chemicals development Initiative of South into the surrounding garbage in the landfill. Africa’s (REDISA) governmentRecycling improves the soil. Composting or simply mulching backed national Waste tyre SOUTH AFRICAN BUSINESS 2016

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OVERVIEW Management Plan has diverted more than 125 000 tonnes of used tyres from landfill into new supply chains by subsidising the collection and recycling process. The initiative is supporting 190 SMMEs and says it has created 2 505 new jobs across South Africa – mainly for individuals and small entrepreneurs. “Before REDISA existed, South Africa had a [waste tyre] recycling rate of 4%. We have been able to increase that to 19% by the end of 2014 and are well on our way to increase that [further] by the end of 2015,” says Erdmann. But the real success story has been the scheme’s ability to economically empower poorer South Africans. According to company statistics, 98% of the 2 505 jobs created by REDISA have benefited previously disadvantaged individuals. In addition, 41% of workers are 18-35 year olds and 37% are women. “We have been able to put 80% of revenue collected from the waste management fee back into local communities by creating a market for the handling of waste,” says Erdmann.

Recycling e-waste The e-Waste Association of South Africa (eWASA) was established in 2008 to manage the establishment of a sustainable environmentally sound ewaste management system for the country.

E-waste (electronic & electrical waste) includes computers, entertainment electronics, mobile phones, household appliances and less obvious items such as spent fluorescent tubes, batteries and battery-operated toys that have been discarded by their original users. E-waste makes up to 5% to 8% of municipal solid waste in South Africa. Recycling SA’s electronic waste (e-waste) will be a source of new business, job creation and will develop the country’s economy, says Environmental Affairs Minister Edna Molewa, SA has an unemployment rate of 25%, and Molewa says government recognises the potential of the e-waste sector in helping drive job creation and is committed to working with the sector. “There are opportunities for job creation and poverty alleviation, and entrepreneurial opportunities from a well-planned, strategically resourced, well regulated, managed and controlled e-waste system,” said Molewa. The minister says her department has identified recycling as a way to regulate waste management in the country, and not only protects citizens’ health and the environment, but create jobs at the same time. “Most of the components of e-waste are recyclable. The department has put systems in place for the collection, transportation, sorting and recycling of e-waste,” added Molewa.

Plastics During 2014 a total of 1 084 400 tons of plastic waste was sent to South African landfills. This is according to the latest plastic recycling statistics released by Plastics|SA. Plastics|SA commissions research into the status quo of the plastic recycling industry each year. The information is gathered by interviewing recyclers from around the country and intends to provide valuable data for the industry, government and other stakeholders. Anton Hanekom, Executive Director of Plastics SA explains the need for this research: “It gives us a clear indication of the flow of plastics products in South Africa, the state of the plastics recycling industry and the recycling markets. It is therefore a valuable tool for promotion, knowledge of the industry, forward planning and policy development.” According to the statistics, 47 420 people are employed by the industry’s informal sector, and 6 037 people by the formal sector. Overall, job creation in the industry increased by 11.4% in 2014 compared to the previous year. There are 221 recycling companies in South Africa and an estimated 1 800 converters in the industry, most of which are Small Medium and Micro Enterprises (SMMEs).

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Waste compliance Although South Africa has made some great strides in addressing key issues experienced in waste management over the past 20 years, the industry remains problematic, unsustainable and unable to achieve legislative goals and targets in its current state.

ccording to 2012 statistics released by the Department • E x te n d e d Producer of Environmental Affairs, an approximate total of 108-milResponsibility. lion-tonnes of waste is generated nationwide. General • Priority Waste. waste accounts for around 59-million-tonnes, unclassi- • Economic Instruments. fied waste 48-million-tonnes, and hazardous waste the remaining one-million-tonnes. Of all this waste, only ten percent is recycled– The Waste Classification and the rest is landfilled. Management System provides a methodology for the classifiWaste generated in South Africa is expected to double to ap- cation of waste and provides proximately 216-million-tonnes by 2025. “Our current lack of standards for the assessrecycling facilities and great dependency on landfills–most of ment and disposal of waste which are not compliant–means that we are rapidly running out of for landfill disposal. To this efspace to contain our waste,” says I-CAT Environmental Services fect, the Waste Classification and Management Regulations manager Rachelle Stofberg. Additional challenges include; increased complexities of waste came into effect in August 2013. Under the Regulations, all streams, historical backlogs of waste services and a limited understanding of waste flows and SA’s national waste balance. Under- waste generators are required pricing is a major issue in local waste management, and there to classify each waste stream are also few compliant hazardous waste management facilities. according to the SANS 10234 In response to these challenges, the National Waste Globally Harmonised System Management Strategy (NWMS) was developed and subsequently of Classification and Labelling implemented by government in 2012. It is a legislative requirement of Chemicals. of the National Environmental Waste Act (NEMWA) of 2008, in SANS 10234 establishes order to achieve the following objectives: criteria for the classification • Promote waste minimisation, re-use, recycling and recovery. and labelling of hazardous • Ensure the effective and efficient delivery of waste services. substances and mixtures, in• Grow the waste sector contribution to the green economy. cluding waste, to ensure safe • Ensure awareness of the impact of waste on people’s health, transport and disposal. Under wellbeing and the environment. SANS 10234, it must be es• Achieve integrated waste management planning. tablished whether the waste • Ensure sound budgeting and financial management for services. is hazardous based on physi• Provide measures to remediate contaminated land. cal, health and environmental • Establish effective compliance with an enforcement of the Act. hazardous properties (hazard classes), and the degree or A variety of tools have been developed to assist in achieving the severity of the hazard posed goals set out in the NWMS. These tools include inter alia: (hazard categories). • Waste Classification and Management System. Stofberg indicates that most • Norms and Standards. of the timeframes for achieving • Licencing. goals set out in NWMS have • Industry Waste Management Plans. not been met. She adds that SOUTH AFRICAN BUSINESS 2016

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OVERVIEW hazardous waste is also not limited compliance enforcement from the regulating authorities.” being classified in accordance Certain compliance, such as the NEMWA Waste Classification with SANS 10234 nor classi- and Management Regulations, must be complied with within three fied within 180 days of genera- years of promulgation. tion. “General, hazardous and This means that mandatory compliance is little more than a recyclable waste are still being year away. I-CAT offers a comprehensive range of services to mixed. Unfortunately, this dem- assist its clients in complying with the new Waste Classification onstrates little commitment to and Management Regulations. These include: • Waste licencing applications. compliance.” Stofberg attributes this lack • Integrated waste management plans. of compliance from industry to • SANS 10234-accredited waste classification & management. a variety of factors, including; • Integrated waste and water management plan. a lack of understanding of the • Waste assessment for landfill disposal. new regulations and the incor- • Industry waste management plans. rect interpretation of roles, re- • Waste inventory management in accordance with the sponsibilities and compliance National Waste Information System. timeframes associated with regulations. “This is further “I-CAT Environmental Solutions adds measurable value in assisting compounded by financial costs various operations in the industrial and mining sectors, by offerassociated with new waste ing specialist services in waste classification and management, management infrastructure, re- environmental compliance monitoring (water, dust, noise), envicord keeping, and SANS 10234 ronmental authorisation processes, and comprehensive annual classifications, together with audits and reviews,” Stofberg concludes.

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The importance of responsible e-cycling Ulze van Wyk is leading the call for an increased awareness for the importance of responsible recycling e-waste… but she is also excited by the employment and entrepreneurial opportunities that the industry has to offer. What does your company do?

Ulze van Wyk

Africa e-Waste specialises in refurbishing and dismantling of electronic equipment. By refurbishing the equipment we can resell it into the second-hand market locally as well as into Africa. This strategy ensures an increased return on the equipment, as well as helping to keep the equipment away from landfills. What are the major trends in e-cycling?

BIOGRAPHY Ulze van Wyk is the Managing Director of Africa e-Waste, a recycling company that was founded in February 2011. Ulze has 7 years’ experience in ewaste management services and is currently serving on the board of directors of EWASA. This has afforded Ulze an incredible opportunity to gain ﬁrst-hand information in terms of electronic recycling as well as the local and international laws and trends relating to the industry.

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Electronic recycling still needs a lot of awareness, but the biggest challenge for people today is figuring out where to take their e-waste. People only seem to want to take TVs, fridges, cellphones, PCs (any product that operates with batteries or electricity) to try and fix them and get them to work again. This slows the flow of electronic products that waste collectors can collect. Sadly, when a discarded product can’t be fixed people usually just take the metals out - such as the copper - and dump what’s left of the product. Our concern is that this can lead to hazardous gases and leakages from these products being released into the environment. What’s been your highlight of serving on EWASA’s board? EWASA was heavily involved in getting the Waste Act changed in January 2009. They were in front and campaigned heavily and were working hard to get things done. I was a director there so I know that, in the last few years, they have been very active with the Department of Environmental Affairs (DEA). The DEA called a meeting with the industry and asked for a formal e-Waste Management Plan for South Africa. The DEA assisted with forming a Steercom to put the plan together and I was privileged to be part of the Steercom. What is the basis of the Steercom’s plan? In the plan we submitted we proposed four tiers of operators, with the biggest and fully licensed being the Tier 1 operators, who would all be fully licenced and have all the ISO certification and other criteria needed to operate at Tier 1 level. They would not have a limit on size or weight criteria, but it would cost a lot to set

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INTERVIEW yourself up as a Tier 1 operator. Tier 2 would have a smaller weight quota, while Tier 3 won’t need all the licences. These would be like buy back centres, with certain criteria such as needing to sell to the top two tiers. Tier 4s will be informal recyclers who can take what they collect to any tier of operator. Logistics is a major part of recycling e-waste and is by far the most expensive cost, so this is going to be subsidised from the levy. There are seven companies who could adhere

Importing e-waste Importing e-waste from Africa is seen as an interesting growth opportunity by many people as we have better recycling facilities and systems than anywhere else in Africa but, with the Basel convention rules to import need to be followed. We want to import e-waste and assist Africa as well as our economy and job creating, but we want to do it legal and environmentally friendly and human healthy! While it is true that we can recycle carefully, some ministers and government officials are against this. E-waste contains a lot of hazardous materials and the last thing we want is to be seen as the dumping ground for Africa’s e-waste. A lot of education and awareness is required to guard against that. Recycling cellphones

The population in South Africa is currently around the 50-million mark, and at least 50% of our citizens have at least one cellphone. However, think about how many cellphones many people actually have. Most people I know have a second cellphone or even a third lying around due to advances in technology, as phones don’t last long and people are quick to upgrade, so in the next two years another 35 million cellphones are potential going to come into the waste stream – and that is just cellphones. Then add in all the teenagers and young adults who reach ‘cellto the Tier 1s level operational, but only around phone age’ and get a cellphone. The waste 25% of current e-waste is actively being recycled, stream of e-waste is the highest growth waste so we urgently want to increase that figure. Our stream in the world. Most appliances are now target is a 30% increase per year for the next five electronic and most kids toys are also battery years. The current companies who could adhere operated. Instead of keeping on mining minerals to the Tier 1s level are currently operation but it is going to become increasingly important to they won’t be able to handle the total volume, rather reuse that which has been mined already. so we want to work towards having up to 15 Tier 1s operating, and these would each require What are the hazards of e-waste? a staff complement of between 50 to 70 people. We are busy working on an awareness camThe benefits of this will filter down to Tiers 2 to 4, paign for e-waste, as it was a long held belief that which should result in a large boost in job creation. everything surrounding e-waste is hazardous, Tier 4s would be seen as entrepreneurs and in- but in fact it is ONLY hazardous if not recycled formal workers who won’t draw a salary but will correctly. When a computer manufacturer drops earn as they work and should be able to earn a off laptops at a corporate office they don’t need reasonable living from their work. a hazardous truck to take it there as it is not

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INTERVIEW deemed as an e-waste product at that point. However, when I want to fetch those same laptops for recycling then they want me to collect them in a vehicle that can handle hazardous material. The problem is that once these products are placed in the storeroom then the Act wants to label them as hazardous, but they are not. Fortunately the Act has now changed, but it is an interesting point that needs to be clarified - when does a product become hazardous?

for as long as possible by taking it out of the waste stream. A third benefit of e-waste recycling is that it gives technology on the recycling side time to catch up with other technological advances and ideas for how to recycle. We want to keep products out of the recycling loop for as long as possible so that we can get the most value out of the resource. What is a problem in the industry? Companies that are not licenced! If you operate legitimately you have to take hazardous components to legal sites, but this all comes at a great cost to us. Competition is a great thing, but we all need to be playing by the same rules.

THE AVERAGE PERSON PRODUCES MORE THAN 12KG OF E-WASTE ANNUALLY AND WE ONLY RECYCLE 10 – 15%

What are the opportunities for entrepreneurs to enter the industry?

How to operate as an e-waste recycler To get a licence to operate as an e-waste recycled you need the permission of your surrounding neighbours. At Africa E-Waste we refurbish and manually take products apart, but all we are doing is manually dismantling products. No shredding or chemical or heating or processing is done at our site. Many people see all e-waste as hazardous. What is hazardous is if you leave that laptop or TV on the dumpsite or on the side of road and then you expose that to the sun and environment and wind and rain, this starts the decomposing of the unit and it starts oozing chemicals. Cellphone batteries goes fatter and fatter the hotter it gets, and when you add water that mixes with the chemicals as they start to be released then it can become very dangerous.

Locally there will be new opportunities for other companies or individuals in Tiers 1, 2 and 3 and there will be full-on government backing to support these companies and that is because of the environment benefits but also it’s a fantastic way to setup sustainable businesses for South Africans. Africa E-Waste offers franchise opportunities and we already have strong interest in Port Elizabeth, Limpopo and in the Northern Cape. I believe franchising will be great for the industry in South Africa, but there’s also great potential to add value across Africa. What do you know about e-waste ‘police’, The Green Scorpions?

The lifecycle of a cellphone If people look after their cellphones with care then they can really have a much longer life span. We have refurbished cellphone stock that is 10 years old but that still works perfectly. Our motto is to try and rescue and reuse electronic products SOUTH AFRICAN BUSINESS 2016

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I have heard about them and from what I hear they are doing a great job. They monitor all waste streams and have a big area to cover. They are really good at what they are doing – when they get hold of you they really get hold of you. Our e-waste plan, rules and regulations will make it easier for them to enforce. I’m very positive and happy with the way government is handling this waste stream right now as they have a big drive underway and they have assigned a lot of resources from their side to help to plan and push us forward, as well as by offering their resources. It largely boils down to awareness, but government are addressing this in a major way.

OVERVIEW

Renewable energy South Africa’s renewable energy industry holds enormous potential for further development.

enewable energy holds the promise for a brighter future The ten preferred bidders, as not only in South Africa, but Africa as a whole. In this announced by the Minister, are context South Africa is well positioned to lead the con- Adams Solar PV Project (Pty) tinent forward, thanks to its internationally acclaimed Ltd, Bellatrix Solar PV Project, Renewable Energy Independent Power Producer Procument Du Plessis Solar PV4, Steynsrus (REIPPP) framework, under which “bidding windows” offer renew- PV2, Heuningspruit PV1, able energy power suppliers the opportunity to bid for projects Steynsrus PV1, Klawer Wind that, once complete, feed into the national grid and contribute Farm, Hopefield Community to South Africa’s energy security. REIPP has recently closed its Wind Farm, George Small Scale fourth bidding window, testimony to the high repute in which the Biomass to Energy and Busby process is held. The fact is that the framework offers investors Renewables (Biomass). the reassurance of a robust business-friendly model, ensuring the sustainability of the sector as a whole.

The 13 preferred bidders in the renewable energy independent power producer procurement programme’s Bid Window 4 were announced in June. The 13 projects are tipped to supply an additional 1084MW of electricity to the national grid. To date, more than 6 000MW of electricity has been procured from 37 renewable energy independent power producers. Of course, South Africa’s renewable programme is not only about electricity but, also broader empowerment. The contribution of REIPPP projects to the broader national development objectives, including economic development, social upliftment, job creation, broad based economic empowerment and development of small and women owned vendors, is a hallmark of the programme. In addition to REIPP there is the Department of Energy’s Small Projects Renewable Energy Independent Power Producers (IPPs) Programme. Ten winners were announced this year at the South African International Renewable Energy Conference (SAIREC) 2015. The programme is targeted at independent power producers that can roll-out projects with the capacity to produce between one and five Megawatts of energy. This amounts to creating opportunities for small and medium sized entrepreneurs in the renewable energy programme. The intention of the programme is to assist small developers to gain assistance in project development as well as in raising the necessary funding projects of this nature. SOUTH AFRICAN BUSINESS 2016

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OVERVIEW Africa could up its generation of renewable energy from 5% to 22% by 2030, according to Mr Adnan Amin, the DirectorGeneral of the International Renewable Energy Agency (IRENA). As the demand for electricity is projected to grow by 2030, renewable energy will contribute towards the electrifying of households across the continent. Africa’s electricity demand has increased by 80% over the past 15 years. Africa is rising but needs secure and

affordable energy to power its future growth. Africa has bountiful and buried renewable energy resources, including excellent solar across the continent, hydro in many countries, strong wind resources and powerful geothermal in East Africa’s rift valley. Renewable energy deployment in Africa can reach 310 GW by 2030 on the basis of the technology and the business case that the world has today. More than 600-million people in Africa remain without electricity – the biggest unelectrified population in the world. This is expected to grow to 700-million by 2030, based on current trends. Renewable energy will be critical to lift these citizens from energy poverty. Access to electricity fulfils basic energy needs and can lead to a more accessible and reliable water supply, the extension of basic rural health care services and outreach of telecommunication services in rural areas. It is a means of stimulating economy wide development and a pathway to poverty eradication.

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Plenty of scope for solar Annelize van der Merwe, the Director of the Green Economy for Trade and Investment South Africa, a division of the dti, discusses the potential for investment into solar energy in South Africa.

n terms of solar power, there is definitely still scope for more investment into the glass industry, perhaps through partnerships with our local manufacturers. South Africa’s sand has a very high iron content which means that the sand is less suitable to use in the manufacturing process for PV glass. Our glass manufacturers would therefore need to invest in the technology to extract the iron from the sand before they can manufacture it into glass specifically for the solar industry–and that requires a significant capital investment. We are encouraging companies to look at partnerships and I think there is still scope for module manufacturers, especially given that sub-Saharan Africa is now waking up to the potential of solar energy and there are all these opportunities for off-grid solutions in many African countries. There are tremendous opportunities in terms of infrastructure, but the commercial and industrial rooftop market actually also provides many opportunities for module manufacturers — especially in light of the fact that the dti is in the process of designating PV panels for local content for public procurement. We also see opportunities for the glass industry in other areas such as coating the glass for the heliosats for the CSP (concentrating solar power) industry. When it comes to parabolic trough technology where the glass must be slightly bent, that is quite an expensive process and there is a need for investment there. One of the challenges the industry faces with manufacturing for the CSP industry and especially the parabolic trough technology is policy certainty in terms of the rollout of solar projects. Companies need to be certain of market (which translates into a certain amount of MWs) SOUTH AFRICAN BUSINESS 2016

to be able to justify large capital investments into component manufacturing. We want the public and business to know that we can do unblocking, that we have funding and incentives available. We want to know if companies are facing problems or if there is anything that is hampering a company’s ability to grow because a large portion of investment comes from domestic investors wishing to expand their loal production. Incentivising investments Our dti incentives are generally quite well known, because it’s a cash grant, but our tax incentives are less well-known. The majority of our investments are in medium to large companies, but increasingly SMMEs are getting involved in innovative areas–you have small companies perhaps providing solutions or making something more energy efficient as well as the guys who would install PV solutions on rooftops. In my sector, which is renewable energy, I have not dealt with that many projects that have wanted to accept any extra funding. The type of projects we get involved in would normally be funded by the IDC–often they would take equity in the company and then help them to arrange further finance. A lot of the projects we deal with are companies that already have their own corporate finance and they have a good balance sheet, but the problem with smaller companies is that many times these smaller entitites have no finance available–they have a project but it’s not bankable. That’s what we find with a lot of companies, especially BEE companies who don’t have funding, and that can sink a project because you have someone who is prepared to take some

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INTERVIEW equity but you also have to have something of your own or you need to bring some available funding from your side. Also very often companies need money for operational costs and our incentives don’t stretch to that so we will give funding for the assets but companies need to bring their own funding to the deal as well. In terms of wind energy, in talking to some international companies we have realised that our key enablers (something that would enable us to attract more investment into component manufacturing for the renewable energy sector)

cross-over between the wind industry and the automotive industry and this could count in our favour going forward. On the waste side there are still opportunities in tyre recycling, so we are looking for companies that can recycle tyres effectively. REDISA will endorse a project, but often those projects need financing or other investors involved in order to make it happen. REDISA will then refer some of those companies to us to take those projects further. We are getting in a huge amount of interest from companies as well as for waste-to-energy

is policy certainty. However, you also have to appreciate that with the roll-out going forward, companies need long-term sustainability before they decide to setup a R300-million factory. They need orders first as blade manufacturing represents a huge capital outlay. It is very expensive and requires a massive facility. We are talking to some blade manufacturers and then there are some smaller components that go into the motors, the nacelles and the gearboxes and such,but those need even a bigger market to justify setting up manufacturing facilities in SA. There is some scope for a

type of projects, especially companies using industrial waste. We have companies in the paper industry, fxor example, who want to take the pulp that they produce as a byproduct and convert it into steam. Projects like that are becoming increasingly interesting. In the agriculture industry all the packhouses and cooling facilities want to install PV in order to supplement their energy supply and to provide a backup during load shedding, so that is creating interesting opportunities, but we can’t keep up with the amount of companies looking to upgrade or invest in their area.

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South African business organisations A guide to South African business organisations.

Eastern Cape Border-Kei Chamber of Business

Gauteng Business Unity South Africa (BUSA)

Physical address: 4 Stuart Star Crescent, East London 5205 Postal address: PO Box 11179, Southernwood 5214 Tel: +27 43 743 8438 Fax: +27 43 743 2249 Email: info@bkcob.co.za Website: www.bkcob.co.za

Physical address: Bentley Office Park, Block 9, 67 Wessels Road, Rivonia 2191 Postal address: PO Box 652807, Benmore 2010 Tel: +27 11 784 8000 Fax: 086 609 8248 Email: busa@busa.org.za Website: www.busa.org.za

Nelson Mandela Bay Business Chamber

Chamber of Commerce & Industry – Johannesburg (JCCI)

Physical address: KPMG House, Norvic Drive, Greenacres, Port Elizabeth 6045 Postal address: PO Box 63866, Greenacres 6057 Tel: +27 41 373 1122 Fax: +27 41 373 1142 Email: nicki@nmbusinesschamber.co.za Website: www.nmbusinesschamber.co.za

Physical address: 6th Floor, JCC House, 27 Owl Street Cnr Empire Rd, Milpark Postal address: Private Bag 34, Auckland Park 2006 Tel: +27 11 726 5300 Fax: +27 11 482 2000 Email: info@jcci.co.za Website: www.jcci.co.za

Free State Manguang Chamber of Commerce & Industry

South African Chamber of Commerce & Industry (SACCI)

Physical address: 32 President Street, Westdene, Bloemfontein 9301 Postal address: PO Box 87, Bloemfontein 9300 Tel: +27 51 447 3368 Fax: +27 51 447 5064 Email: bcci@intekom.co.za Website: www.bcci.co.za

Physical address: Chamber House, 24 Sturdee Ave, Rosebank 2196 Postal address: PO Box 213, Saxonwold 2132 Tel: +27 11 446 3800 Fax: +27 11 446 3850 Email: info@sacci.org.za Website: www.sacci.org.za

Kroonstad Chamber of Business & Tourism

Tshwane Chamber of Commerce & Industry

Physical address: Old Town Hall, Cross Street, Kroonstad 9500 Postal address: PO Box 425, Kroonstad 9500 Tel: +27 56 212 3611 Fax: 086 542 2356 Email: kroonstad@act.co.za Website: www.kroonstad.org

Physical address: Kingston Howe, 852 Park Street, Arcadia, Pretoria 0083 Postal address: PO Box 40653, Arcadia 0007 Tel: +27 12 342 3236/7 Fax: +27 12 342 1486 Email: info.tcci@mweb.co.za Website: www.tcci.co.za

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LISTINGS Mpumalanga Middelburg Chamber of Commerce & Industry

KwaZulu-Natal Durban Chamber of Commerce & Industry Physical address: 892 Umgeni Road, Durban 4001 Postal address: PO Box 1506, Durban 4000 Tel: +27 31 335 1000 Fax: +27 31 303 1149 Email: chamber@durbanchamber.co.za Website: www.durbanchamber.co.za Zululand Chamber of Commerce and Industry Physical address: Buscom Centre, ZCBF Community Park, Alton, Richards Bay 3900 Postal address: PO Box 649, Richards Bay 3900 Tel: +27 35 797 1800 Fax: +27 35 797 3134 Email: info@zcci.co.za Website: www.zcci.co.za Pietermaritzburg Chamber of Business Physical address: Chamber House, Royal Showgrounds, Pietermaritzburg 3201 Postal address: PO Box 11734, Dorpspruit 3206 Tel: +27 33 345 2747 Fax: +27 33 394 4151 Email: pcb@pcb.org.za Website: www.pcb.org.za Limpopo Polokwane Chamber of Business Physical address: No. 47, 19th Industrial Street, Polokwane 0699 Postal address: PO Box 53, Polokwane 0700 Tel: +27 15 297 8057 Fax: 086 513 2644 Email: admin@pcob.co.za Website: www.pcob.co.za

Physical address: 292 Walter Sisulu Street, Clubville, Middelburg 1050 Postal address: PO Box 1152, Middelburg 1035 Tel: +27 13 243 2253 Email: secretary@middelburginfo.com Website: www.middelburginfo.com Barberton Chamber of Business Physical address: 19 Judge Street, Barberton 1300 Postal address: PO Box 221, Barberton 1300 Tel: +27 13 712 6490 Fax: 086 720 6290 Email: nico@mountainlands.co.za Website: www.barbertonchamber.co.za Northern Cape Northern Cape Chamber of Commerce & Industry (NOCCI) - Kimberley Physical address: Bizznizz Centre Shop 10, 14 Long Street, Kimberley 8301 Postal address: PO Box 350, Kimberley 8300 Tel: +27 53 831 1081 Fax: +27 53 831 1082 Website: www.nocci.co.za Western Cape Cape Town Regional Chamber of Commerce & Industry Physical address: 4th Floor, 33 Hammerschlag Way, Foreshore, Cape Town 8001 Postal address: PO Box 204, Cape Town 8000 Tel: +27 21 402 4300 Fax: +27 21 402 4302 Email: info@capechamber.co.za Website: www.capetownchamber.co.za George Business Chamber Physical address: Nedbank Centre, 111 York Str, George 6529 Postal address: PO Box 24, George 6530 Tel: +27 44 874 3349 Fax: 086 544 6998 Email: info@georgechamber.co.za Website: www.georgechamber.co.za

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South African National Government An overview of South Africa’s national government departments. President Mr Jacob Gedleyihlekisa Zuma Physical address: Union Buildings, Government Avenue, Arcadia, Pretoria 0001 Postal address: Private Bag X1000, Pretoria 0001 Tel: +27 12 300 5200 Fax: 012 323 8246 Website: www.thepresidency.gov.za

Deputy President Mr Matamela Cyril Ramaphosa Physical address: Union Buildings, Government Avenue, East Wing, 1st Floor, Arcadia, Pretoria 0001 Postal address: Private Bag X1000, Pretoria 0001 Tel: +27 12 300 5200 Fax: 012 323 8246 Website: www.thepresidency.gov.za

Minister in the Presidency Minister: Jeff Radebe Physical address: Union Buildings, Government Avenue, East Wing, 1st Floor, Arcadia, Pretoria 0001 Postal address: Private Bag X1000, Pretoria 0001 Tel: +27 12 300 5200 Fax: 012 300 5795 Website: www.thepresidency.gov.za

Department of Finance Minister: Nhlanhla Nene Physical address: 40 WF Nkomo Street, Old Reserve Bank Building, 2nd Floor, Pretoria Postal address: Private Bag X115, Pretoria 0001 Tel: +27 12 323 8911 Fax: +27 12 323 3262 Website: www.treasury.gov.za

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LISTINGS Ministry in the Presidency responsible for Women (minister of women in the presidency) Minister: Susan Shabangu Physical address: East Wing, Union Buildings, Pretoria 0001 Postal address: Private Bag X931, Pretoria 0001 Tel: +27 12 359 0011 / 0013 Fax: +27 12 326 0473 Website: www.women.gov.za

Minister for Public Service & Administration Minister: Ngoako Ramatlhodi (Adv) Physical address: 123 Poyntons Building, West Block, cnr Schubart and Church streets, Pretoria 0001 Postal address: Private Bag X136, Pretoria 0001 Tel: +27 12 307 2934/2884 Fax: +27 12 323 4111 Website: www.dcs.gov.za

Dept of Agriculture, Forestry and Fisheries Minister: Mr Senzeni Zokwana Physical address: No 20, Agriculture Place, Block DA, 1st Floor, cnr Beatrix Street and Soutpansberg Road, Arcadia, Pretoria Postal address: Private Bag X250, Pretoria Tel: +27 12 319 7319 Fax: +27 12 319 6681 Website: www.daff.gov.za

Department of Arts and Culture Minister: Nathi Mthethwa Physical address: 10th Floor, Kingsley Centre, 481 corner Steve Biko & Stanza Bopape streets, Arcadia, Pretoria 0001 Postal address: Private Bag X899, Pretoria 0001 Tel: +27 012 441 3000 Fax: +27 12 440 4485 Website: www.dac.gov.za

Department of Basic Education Minister: Angelina Motshekga Physical address: Sol Plaatje House, 222 Struben Street, Pretoria 0001 Postal address: Private Bag Private Bag X9034, Cape Town, 8000 Tel: +27 12 357 3000 Fax: +27 12 323 5989 Website: www.education.gov.za

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LISTINGS Department of Communications Minister: Faith Muthambi Physical address: Tshedimosetso House, 1035 Frances Baard (Cnr Festival Street), Hatfield, Pretoria 0001 Postal address: Private Bag X745, Pretoria 0001 Tel: +27 12 473 0000 Fax: +27 12 462 1646 Website: www.doc.gov.za

Department of Cooperative Governance and Traditional Affairs Minister: Pravin Gordhan Physical address: 87 Hamilton Street, Arcadia, Pretoria 0083 Postal address: Private Bag X802, Pretoria 0001 Tel: +27 12 334 0705 Fax: +27 12 326 4478 Website: www.cogta.gov.za

Department of Correctional Services Minister: Sibusiso Ndebele Physical address: 123 Poyntons Building, West Block, cnr Schubart and Church streets, Pretoria 0001 Postal address: Private Bag X136, Pretoria 0001 Tel: +27 12 307 2934/2884 Fax: +27 12 323 4111 Website: www.dcs.gov.za

Department of Defence and Military Veterans Minister: Nosiviwe Mapisa-Nqakula Physical address: cnr Delmas Avenue & Nossob St, Erasmuskloof, Pretoria Postal address: Private Bag X427, Pretoria 0001 Tel: +27 12 355 6101 Fax: +27 12 347 0118 Website: www.dod.mil.za

Department of Economic Development Minister: Ebrahim Patel Physical address: Block A, 3rd Floor, 77 the dti Campus, cnr Meintjies & Esselen streets, Sunnyside, Pretoria Postal address: Private Bag X149, Pretoria 0001 Tel: +27 12 394 1006 Fax: +27 12 394 0255 Website: www.economic.gov.za

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LISTINGS Department of Energy Minister: Tina Joemat-Pettersson Physical address: 192 cnr Visagie and Paul Kruger St, Pretoria 0001 Postal address: Private Bag X96, Pretoria 0001 Tel: +27 12 406 8000 Petroleum Fax: +27 12 319 6681 Website: www.energy.gov.za

Department of Environmental Affairs Minister: Edna Molewa Physical address: Environment House, 473 Steve Biko and Soutpansberg Road, Arcadia, 0083 Postal address: Private Bag X447, Pretoria 001 Tel: +27 12 310 3537 Fax: +27 086 593 6526 Website: www.environment.gov.za

Department of Health Minister: Aaron Motsoaledi Physical address: 20th Floor, Civitas Building, cnr Struben and Andries streets, Pretoria Postal address: Private Bag X399, Pretoria 0001 Tel: +27 12 395 8086/80 Fax: +27 12 395 9165 Website: www.doh.gov.za

Department of Higher Education and Training Minister: Blade Nzimande Physical address: 123 Francis Baard Street, Pretoria Postal address: Private Bag X893, Pretoria 0001 Tel: +27 12 312 5555 Fax: +27 12 323 5618 Website: www.dhet.gov.za

Department of Home Affairs Minister: Malusi Gigaba Physical address: 909 Arcadia Street, Hatfield, 0083 Postal address: Private Bag X114, Pretoria 0001 Tel: +27 12 432 6648 Fax: +27 12 432 6675 Website: www.dha.gov.za

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LISTINGS Department of Human Settlements Minister: Lindiwe Sisulu Physical address: Govan Mbeki House, 240 Justice Mahomed, Sunnyside, Pretoria Postal address: Private Bag X644, Pretoria 0001 Tel: +27 12 421 1310 Fax: +27 12 341 8513 Website: www.dhs.gov.za

Department of International Relations and Cooperation Minister: Maite Nkoana-Mashabane Physical address: OR Tambo Building, 460 Soutpansberg Road, Rietondale, Pretoria Postal address: Private Bag X152, Pretoria 0001 Tel: +27 12 351 1000 Fax: +27 12 329 1000 Website: www.dirco.gov.za

Department of Justice and Correctional Services Minister: Michael Masutha Physical address: Salu Building, 316 cnr Thabo Sehume and Francis Baard Streets, Pretoria 0001 Postal address: Private Bag X276, Pretoria 0001 Tel: +27 12 406 4669 Fax: +27 12 406 4680 Website: www.doj.gov.za

Department of Labour Minister: Mildred Oliphant Physical address: 215 Laboria House, cnr Francis Baard and Paul Kruger Streets, Pretoria Postal address: Private Bag X499, Pretoria 0001 Tel: +27 12 392 9620 Fax: +27 12 320 1942 Website: www.labour.gov.za

Department of Mineral Resources Minister: Dr Ngoako Ramatlhodi Physical address: 4th Floor, Block 2C, Trevenna Campus, cnr Meintjies and Francis Baard Streets, Sunnyside Postal address: Private Bag X59, Pretoria 0001 Tel: +27 12 444 3999 Fax: +27 12 444 3145 Website: www.dmr.gov.za

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LISTINGS Department of Police Minister: Nkosinathi Nhleko Physical address: Wachthuis Building, 7th Floor, 231 Pretorius Street, Pretoria Postal address: Private Bag X463, Pretoria 0001 Tel: +27 12 393 2800 Fax: +27 12 393 2812 Website: www.saps.gov.za

Department of Public Enterprises Minister: Lynne Brown Physical address: Infotech Building, 1090 Arcadia Street, Hatfield, Pretoria Postal address: Private Bag X15, Hatfield 0028 Tel: +27 12 431 1000 Fax: +27 12 431 1039 Website: www.dpe.gov.za

Department of Public Service and Administration Minister: Nathi Mthethwa Physical address: Batho Pele House, 116 Johannes Ramakhoase Street, Pretoria Postal address: Private Bag X884, Pretoria 0001 Tel: +27 12 336 1700 Fax: +27 12 336 1809 Website: www.dpsa.gov.za

Department of Public Works Minister: Thembelani (Thulas) Nxesi Physical address: 7th Floor, CGO Building, cnr Bosman and Madiba St Postal address: Private Bag X65, Pretoria 0001 Tel: +27 12 406 21978 Fax: +27 086 276 8757 Website: www.publicworks.gov.za

Department of Rural Development and Land Reform Minister: Gugile Nkwinti Physical address: 184 Old Building, cnr Jeff Masemola and Paul Kruger Streets, Pretoria Postal address: Private Bag X833, Pretoria 0001 Tel: +27 12 312 9300 Fax: +27 12 323 3306 Website: www.ruraldevelopment.gov.za

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LISTINGS Department of Science and Technology Minister: Naledi Pandor Physical address: DST Building, Building No 53, CSIR South Gate Entrance, Meiring Naude Road, Brummeria, Pretoria Postal address: Private Bag X727, Pretoria 0001 Tel: +27 12 843 6300 Fax: +27 12 349 1041/8 Website: www.dst.gov.za

Department of Small Business Development Minister: Lindiwe Zulu Physical address: The dti, Block A, 3rd Floor, 77 Meintjies Street, Sunnyside, Pretoria Postal address: Private Bag X84, Pretoria 0001 Tel: +27 12 394 1006 Fax: +27 12 394 1006 Website: www.dsbd.gov.za

Department of Social Development Minister: Bathabile Olive Dlamini Physical address: HSRC Building, North Wing, 134 Pretorius Street, Pretoria Postal address: Private Bag X904, Pretoria 0001 Tel: +27 12 312 7479 Fax: +27 086 715 0829 Website: www.dsd.gov.za

Department of State Security Minister: David Mahlobo Physical address: Bogare Building, 2 Atterbury Road, Menlyn, Pretoria Postal address: PO Box 1037, Menlyn 0077 Tel: +27 12 367 0700 Fax: +27 12 367 0749 Website: www.ssa.gov.za

Department of Sport and Recreation South Africa Minister: Fikile Mbalula Physical address: Regent Place, 66 cnr Madiba and Florence Ribeiro Street, Pretoria Postal address: Private Bag X896, Pretoria 0001 Tel: +27 12 304 5000 Fax: +27 12 323 7196 / 086 644 9583 Website: www.srsa.gov.za

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LISTINGS Department of Tourism Minister: Derek Hanekom Physical address: 17 Trevena Street, Tourism House, Sunnyside, Pretoria Postal address: Private Bag X424, Pretoria 0001 Tel: +27 12 444 6780 Fax: +27 12 444 7027 Website: www.tourism.gov.za Department of Trade and Industry Minister: Dr Rob Davies Physical address: The dti, 77 Meintjie Street, Block A, Floor 3, Sunnyside, Pretoria Postal address: Private Bag X274, Pretoria 0001 Tel: +27 12 394 1568 Fax: +27 12 394 0337 Website: www.thedti.gov.za

Department of Transport Minister: Dipuo Peters Physical address: Forum Building, 159 Struben Street, Room 4111, Pretoria Postal address: Private Bag X193, Pretoria 0001 Tel: +27 12 309 3131 Fax: +27 12 328 3194 Website: www.transport.gov.za Telecommunications and Postal Services Minister: Dr Siyabonga Cyprian Cwele Physical address: Iparioli Office Park, 399 Jan Shoba Street, Hatfield, Pretoria Postal address: Private Bag X860, Pretoria 0001 Tel: +27 12 427 8000 Fax: +27 12 427 8016 Website: www.dtps.gov.za

Department of Water and Sanitation Minister: Nomvula Mokonyane Physical address: Sedibang Building, 185 Frances Baard Street, Pretoria 0001 Postal address: Private Bag X313, Pretoria 0001 Tel: +27 12 336 8733 Fax: +27 12 336 8850 Website: www.dwa.gov.za

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OVERVIEW

Regional overview: Eastern Cape

he Eastern Cape, on the south-eastern coast of Africa, supplements have shown a is fast coming to be seen as one of South Africa’s inter- keen interest in the facility. national assets. This status has been enhanced by the The Eastern Cape Provincial allocation of two of South Africa’s five industrial develop- government wants to ensure ment zones (IDZs) to the province. The potential the province of- that that there is enhanced fers is significantly bolstered by the shipping traffic that operates integration in the value chain between Europe and Asia and the Far East. and linkages to the deep-water container Port of Ngqurha for Logistically, the Eastern Cape is well served, with two major handling of global exports airports in Port Elizabeth and East London, and several facilities such as frozen pineapples serving smaller towns such as Mthatha and Bhisho. Many farms from places like Ngqushwa that and private game reserves also have airstrips. Another key are destined for the Japanese logistics factor is recent construction of the large new port at market. Ngqura, within the Coega IDZ, bringing to three the number of In another groundbreaking effective ports operating in the Eastern Cape. developme nt since the establishment of the Eastern Key sectors Cape Rural Development Financial services, real estate and banking are the largest Agency, the province has contributors to the province’s GDP. Absa, Nedbank, Standard launched two rural enterprise Bank and Capitec Bank are among several big finance groups development hubs at Mqanduli who have a strong presence in the Eastern Cape. and Ncorha, to the tune R45Coega Industrial Development Zone (IDZ), an R86-million million each. The hubs already agro-processing multi-user facility, is booming. This facility is have 1 500 and 900 tons of enabling small, micro and medium enterprises to expand their mealies in storage respectively. value addition activities in the Eastern Cape. Prospective investors In the 2015/16 financial year, involved in the processing of coffee, cereals, protein and energy two additional hubs will be established at Ludeke in Mbizana and at Mt. Arthur in Lady Frere. Tourism The Provincial government is working on a sustainable plan to revitalise Magwa and Majola tea estates, given the economic potential of the two entities. During the term it will also focus on diversifying the economic value add of the two estates through tourism promotion initiatives, among others. According to Premier SOUTH AFRICAN BUSINESS 2016

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OVERVIEW GENERAL GOVERNMENT SERVICES 21.2% PERSONAL SERVICES 10.3% FINANCE, REAL ESTATE & BUSINESS SERVICES 22.4% TRANSPORT, STORAGE & COMMUNICATION 8.9% WHOLESALE, RETAIL, MOTOR TRADE, CATERING & ACCOMMODATION 13.8% CONSTRUCTION 2.6% ELECTRICITY, GAS & WATER 1.1% MANUFACTURING 17.5% MINING & QUARRYING 0.1% AGRICULTURE, FORESTRY & FISHING 2.1% Eastern Cape sector contribution.

SOURCE: EASTERN CAPE ECONOMIC DEVELOPMENT, ENVIRONMENTAL AFFAIRS AND TOURISM

Phumulo Masualle, the (ECDC) 7 000, Coega 8 797 and East London IDZ 5 500. In province also intends to target the coming year, jobs will be created in manufacturing, logistics, the improvement of roads to alternative energy, agro-processing and services. tourism establishments in the province, prioritising the roads Economic future to Baviaanskloof, Hole-in- Renewable-energy projects are flourishing throughout South the-Wall, Dwesa-Cwebe and Africa, but the Eastern Cape has many big projects planned. The Coffee Bay. transport of wind turbines from the Port of Ngqura to the Jeffreys “We are rising to the task Bay wind farm began in July 2013, and this is becoming one of the of creating sustainable jobs largest wind farms in South Africa, with in excess of 60 turbines. for our people. A total of 24 Basil Read Matomo also began construction on a R550-million 737 jobs, against a target of wind farm near Port Elizabeth in 2015, while the 27MW MetroWind 13 234, have been created Van Stadens wind farm transported their nine turbines from the through economic agencies Port of Ngqura to their facility that aims to provide 27MW. such as the Eastern Cape The implementation of the Strategic Integrated Projects in the Development Corporation, province is progressing well. The upgrades of the Mthatha Airport the East London IDZ, and runway and apron are complete, with work nearing completion on the Coega Development the Mthatha Airport terminal building. The Mzimvubu Multipurpose Corporation. We are targeting Development Project is another impressive development which 14 investments with the value of is comprised of a multi-purpose dam to supply water for new R2 237-billion in the two IDZs,” irrigation development, hydropower generation and domestic said Masualle. water requirements in the Mzimvubu River Catchment. The following job creation The proclamation of the Wild Coast Special Economic Zone targets were set for the 2015/16 (SEZ) has been identified as a key focus area in the coming financial year: Eastern Cape financial year, with a pre-feasibility study for the Wild Coast SEZ Development Corporation being approved in 2015. EASTERN CAPE www.ecprov.gov.za Capital

Population

Area

Premier

Bisho Languages

6 916 200 (2015) 168 966km Afrikaans, isiXhosa, English 2

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Phumulo Masualle (ANC)

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INTERVIEW

Buﬀalo City on the rise Buffalo City municipality is comprised of two diverse municipalities—East London and King William’s Town— that merged into a powerful innovation and economic hub.

What does the future hold for Buffalo City?

operations that build on the city’s proximity to agricultural xpertise and produce a wide range of dairy and other food

esses that tap into the gateway potential of the ELIDZ and its dal logistics networks located within and around its borders

STRATEGY IS PREMISED ON AREAS ISION IS IN FULL AGREEMENT.

Alfred Mtsi

n so that we maximise the base n our manufacturing and agricultural ull beneﬁt of their presence zens participate to the best of ving their lives, their heir social space o ensure that we provide fective services to our citizens tial of the city as a tourist ateway to other parts of the

ational institutions located usly develop our skills base

There is significant potential for economic growth over the next 15 years and we are actively seeking national and international investment and partnerships. The City has numerous core strengths and competitive advantages, including a large labour force and an abundance of natural resources. Much of the city’s wealth of resources is either undeveloped or under-developed, including arable land, water, hydrocarbons and our coastline. What are Buffalo City’s key attractions economically? We have a young population and a large pool of low, medium as well as highly skilled workseekers. Buffalo City is set to become a key beneficiary of the Eastern Cape Job Strategy, which has set out to create an estimated 150 000 jobs over the next three years.

BUFFALO CITY METROPOLITAN MUNICIPALITY

What opportunities exist in the automotive sector? The Automotive Supplier Park (ASP) is up and running at the East London IDZ, offering attractive opportunities to component manufacturers, particularly those that supply the nearby Mercedes-Benz South Africa operation. There are numerous opportunities for investment into new component manufacture, automotive tooling, parts and components in the automotive component cluster.

RO.GOV.ZA

What support is there for local business?

BIOGRAPHY Alfred Mtsi is the Executive Mayor of Buffalo City Municipality. He has been a member of the Eastern Cape Legislature since May 2014 and has served at various structures of the African National Congress (ANC) and its tripartite alliance partners. Born in Ncerha Village near East London, he is a former Provincial Secretary for Cosatu. SOUTH AFRICAN BUSINESS 2016

The city has consistent engagement with the Border Kei Chamber and has developed a number of strategies to support and drive SMMEs, including a Cooperative Development Strategy and an SMME Strategy. All these strategies have action plans that identify key activities in terms of projects and programmes that need to be implemented. The municipality provides Financial Support for SMMEs who require capital for expansion, particularly in the Agricultural and Manufacturing SMME sector. What is being done to promote women in business? The municipality supports initiatives such as the women-owned Agricultural Cooperatives (beneficiaries of the Mdantsane Tunnels), while the Cooperative Development Fund has assisted in the acquisition of equipment for the BCMM’s Women Cooperative.

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VISION 2030 BUFFALO CITY IS CENTRALLY SITUATED IN SOUTH AFRICA’S EASTERN CAPE PROVINCE AND IS BOUNDED TO THE SOUTH-EAST BY A LONG INDIAN OCEAN COASTLINE. IT IS THE KEY URBAN CENTRE OF THE EASTERN PART OF THE EASTERN CAPE AND CONSISTS OF A CORRIDOR OF URBAN AREAS, STRETCHING FROM THE PORT CITY OF EAST LONDON IN THE EAST THROUGH MDANTSANE TO DIMBAZA IN THE WEST.

EAST LONDON IS THE PRIMARY NODE AND THE KING WILLIAM’S TOWN AREA IS THE SECONDARY NODE. THIS REGION ALSO CONTAINS A WIDE BAND OF RURAL AREAS ON EITHER SIDE OF THE URBAN CORRIDOR.

BCMM Executive Mayor Cllr Alfred Mtsi

Buffalo City consistently works towards meeting the goals of the National Development Plan (NDP) and Provincial Development Plan (PDP) and their Vision 2030 via an anchor project strategy. We are supported in our actions by national and provincial government development initiatives. WE BASE MEETING VISION 2030 ON AN ANCHOR PROJECT STRATEGY THAT SUPPORTS: • Industrial parks • Educational institutions • Manufacturing enterprises • Logistics hubs and gateway systems • Tourism As a city with many public and private schools as well as Further Education and Training colleges and two reputable universities, we are poised to build the skills required to face the future. Our graduates are much sought after for their academic excellence and sporting prowess Fort Hare University - where Nelson Mandela and other struggle icons started their tertiary education - and Walter Sisulu University have well-respected track record in science, fine arts and technology training. The East London Industrial Development Zone (ELIDZ), which is partially owned by the Buffalo City Metropolitan Municipality has a wide range of innovative and new generation projects underway. We will work with the ELIDZ to promote and support economic development projects and programmes in the Metro. The ELIDZ has embarked on a range of initiatives that are firmly within the ethos of Vision 2030, including: • An organic vegetable farm that has been operational for three years • A science and technology park that encourages and supports the development of young talent as well as nurturing of start-up businesses • A variety of ocean economy businesses that tap into the potential for fish farming

(abalone, cob, etc.) • A series of processing operations that build on the city’s proximity to agricultural land and substantial expertise and produce a wide range of dairy and other food products • A set of logistics businesses that tap into the gateway potential of the ELIDZ and its proximity to multi-modal logistics networks located within and around its borders OUR ANCHOR PROJECT STRATEGY IS PREMISED ON AREAS WHERE THE NDP 2030 VISION IS IN FULL AGREEMENT. THESE ARE: • To build our city region so that we maximise the returns from the asset base • To build and improve on our manufacturing base in the auto textile and agricultural sectors to realise the full beneﬁt of their presence • To ensure that our citizens participate to the best of their abilities in improving their lives, their neighbourhoods and their social space • As local government, to ensure that we provide full proper and cost-effective services to our citizens • To maximise the potential of the city as a tourist destination and as a gateway to other parts of the province and country • To work with the educational institutions located METROPOLITAN MUNICIPALITY in the city to continuously develop our skills base

BUFFALO CITY

WWW.BUFFALOCITYMETRO.GOV.ZA

OVERVIEW

Regional overview: Free State

he Free State is one of the nine provinces of South Africa and is centrally located on the flat, boundless plains that dominate the area. It represents 10.6% of the total land area of the country and boasts wide horizons, blue skies, mountains and goldfields. The province covers an area of 129 825 km2. The Free State province borders most of the other provinces, with the exceptions being Limpopo and the Western Cape. To the east, it has an international boundary with Lesotho, nestling in the hollow of its beanlike shape, and the escarpment separates it from the Eastern Cape and KwaZulu-Natal. The Orange and Vaal rivers form the southern, western and most of the northern border and the last section of the north-eastern boundary is formed by the Klip River. This centrally located province uses its position to its advantage. The varied economy currently has 3.2-million hectares of cultivated

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land, although the services sector is the biggest economic contributor. Economy Mining and agriculture were for many decades the bedrock of the Free State economy. The north-western part of the province sits on top of a rich gold-bearing reef more than 400km long, known as the goldfields region. South Africa is the world’s largest gold producer, and the country’s largest gold-mining complex is Free State Consolidated

OVERVIEW PERSONAL & GENERAL GOVERNMENT SERVICES 28% FINANCE, REAL ESTATE & BUSINESS SERVICES 20% TRANSPORT, STORAGE & COMMUNICATION 9% WHOLESALE, RETAIL, MOTOR TRADE, CATERING & ACCOMMODATION 11% CONSTRUCTION 2% ELECTRICITY, GAS & WATER 3% MANUFACTURING 14% MINING & QUARRYING 9% AGRICULTURE, FORESTRY & FISHING 4% Free State sector contribution.

SOURCE: FREE STATE DEPARTMENT OF CO-OPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS.

Goldfields, with an area of 330km2. Agriculture Large percentages of South Africa’s agricultural production, particularly grains, originate in the Free State. More than half the nation’s sorghum, nearly half the sunflower and more than 30% of all wheat, maize, potatoes and groundnuts come from the fertile plains of the western and northern Free State, while the valleys of the east produce almost all of South Africa’s cherries and asparagus. Livestock and flowers are other important agricultural products. Services sector Like the rest of the country, the Free State is experiencing considerable growth in the services sector. BPO and call

centres are flourishing in the province. Bloemfontein, the main city for economic activity, is at the core for Telkom’s switching centres. Various call centres are located in the city and have created many employment opportunities in the process. The geographical position of the province makes it a key factor for being a transport and logistics hub in South Africa. The resources available for use in the Free State has led to growth in other sectors such as agriculture, manufacturing, mining and tourism. This puts the transport sector in a favourable position. Economic future International investors are focused on South Africa as a buzz has been created around the energy sector. Sasolburg, an important petrochemical site in the Free State, recently fired up a new power plant running solely on gas. This power plant is the largest of its kind in Africa. The plant produces 140MW of power for the usage of Sasol’s chemical factory adjacent to the site, and will also be fed into the national grid. Eskom has a few projects lined up that will feed the national grid. The Ingula scheme, bordering KwaZulu-Natal, has begun construction. Two dams will be connected via underground turbines just short of five kilometres long. The project will eventually deliver 1 332MW of hydroelectricity. Eskom has set aside R300-billion for infrastructure development across the country for the next years to 2018. Of that amount, Ingula has used 58% of the allocated R25.9-billion.

FREE STATE www.freestateonline.fs.gov.za Capital

Population

Area

Premier

Bloemfontein Languages

2 817 900 (2015) 129 825 km Afrikaans, English, Sotho, Tswana 2

163

Ace Magashule (ANC)

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Regional overview: Gauteng

auteng is the smallest in area but the largest contributor to the national GDP. As the leader of South Africa’s economy, it is the core of South African business and continues to perform in various other sectors. Manufacturing, wholesale, retail and trade, finance and business services and transport are the main economic sectors responsible for Gauteng’s wealth.

With a gross domestic product (GDP) valued at R811-billion (US$112-billion), Gauteng generates 33.9% of South Africa’s GDP and an astonishing 10% of the total GDP of the entire African continent Key sectors Most of the major banks are positioned around Johannesburg (which is home to Africa’s largest stock exchange, the JSE), and the finance and business services sector is a key focus in the provincial economy. Many international corporates such

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as Citibank, Microsoft and McDonald’s are headquartered in the province, as it is seen as the commerce capital and the gateway to Africa. Media services in Gauteng are extensive. South Africa’s national broadcaster is based there, as are many popular radio stations and large publishing houses. Gauteng has a highly competitive newspaper market which includes local and national publications such as The Sunday Times, The Sowetan, The Star, Rapport and also the Mail & Guardian.

OVERVIEW GENERAL GOVERNMENT SERVICES 19.3% PERSONAL SERVICES 4.4% FINANCE, REAL ESTATE & BUSINESS SERVICES 24.7% TRANSPORT, STORAGE & COMMUNICATION 8.2% WHOLESALE, RETAIL, MOTOR TRADE, CATERING & ACCOMMODATION 15% CONSTRUCTION 4.9% ELECTRICITY, GAS & WATER 2.8% MANUFACTURING 17.1% MINING & QUARRYING 3.2% AGRICULTURE, FORESTRY & FISHING 0.4% Gauteng sector contribution.

SOURCE: GAUTENG GROWTH AND DEVELOPMENT AGENCY

Gauteng has a varied manufacturing sector; from heav y-steel, automotive assembly to the food and beverages industry as well as light commercial and industrial activity. Key food and beverage brands are in operation around Gauteng. Nestlé and Pioneer Foods have spent millions on new developments and improvements. Rainbow, one the country’s leaders in poultry production, has 18 farms and two feed mills in the province. South African Breweries (SAB) has recently constructed a new plant producing malted barley in Alrode to the value of R700million. C o m pa n i e s s u c h a s K i m b e r l y- C l a r k, Pro c to r & Gamble, ArcelorMittal, Transnet Engineering and Aspen all have manufacturing facilities in Gauteng Province.

Economic future Gauteng is the heart of South Africa – all major roads and highways lead to it. Its infrastructure and transport has always been a focus. In line with ‘Gauteng Vision 2055’, there are big plans for infrastructure. Gauteng dominates the South African economy in every major sector except agriculture, mining and quarrying. Ironically, even with 97% of its land urbanised, the province’s agricultural output, beats that of the rural Eastern Cape, which is 10 times its size. An estimated 40.6% of South Africa’s manufacturing is done here, a third of its electricity, gas and water output, 41.9% of the country’s construction, 39.7% of its finance, real estate and business activity, 34.8% of its wholesale, retail, motor trade and accommodation, 32% of transport, storage and communication, and 38.8% of general governments services. The Gauteng economy itself is dominated by tertiary industries. The finance, real estate and business services sector makes up 22.8% of the province’s gross domestic product, with manufacturing contributing 16.5%, government services 16.3%, and the wholesale, retail, motor trade and accommodation sector 12.6%. Gauteng is embarking on major new infrastructure developments that are set to revolutionise the province and play a major role in positioning the province as the economic heart of the African continent.

GAUTENG www.gautengonline.gov.za Capital

Population

Area

Premier

Johannesburg Languages

13 200 300 (2015) 18,178 km Afrikaans, isiZulu, English, Sesotho 2

165

David Makhura (ANC)

SOUTH AFRICAN BUSINESS 2016

FOCUS

A Catalyst for Economic Development Johannesburg’s Urban Development Zone Tax Incentive is driving Gauteng’s development.

he City of Johannesburg’s Inner City has a highly developed economic infrastructure and is the second most productive of Joburg’s Regions, adding about 23% to the City’s economy, a share larger than some of South Africa’s metropolitan economies combined.

It continually demonstrates its economic powerhouse status by the fact that it houses the headquarters of several powerful mining houses, financial services and expanding multi-national corporations. It also boasts several high-rise sectional title apartments and condominiums. However, as has been the trend internationally with large cities, economic factors in the 1980s caused Joburg’s Inner City to experience urban deterioration. These factors threatened the ‘heartbeat’ of the city. “One should not think that such a state of affairs was unique to Johannesburg”, says Lebo Ramoreboli, Deputy Director responsible for the Johannesburg Urban Development Zone (UDZ). She says Cape Town and many other municipalities who experienced similar urban deterioration. In 2004, the South African government, at the cities’ request, introduced the innovative UDZ tax incentive to assist Municipalities to revitalise their derelict CBDs and thus reverse their urban decline. This helped them to create new opportunities for the improvement and development of lo-

Park Station renderings.

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cal Central Business Districts (CBDs). “The UDZ tax incentive has enhanced Joburg’s attractiveness as a preferred destination for property-related investment for new as well as existing investors, and has encouraged corporate and other residents to remain and expand their foothold in the CBD. It has helped to drive our mandate to transform the Inner City into a vibrant and dynamic economic node that will attract everyone, including international investors,” says Ramoreboli. Already more than R13-billion worth of investment has come into the CBD. “This initiative is an important economic tool that has assisted the City to further create

FOCUS an enabling environment for business in the property sector, hence the visible economic revitalisation that is taking place in the Inner City,” says Ruby Mathang, Member of Mayoral Committee (MMC) responsible for Economic Development. “Through this initiative we hope to encourage transformation of property ownership patterns that will involve large and small investors, black investors as well as women and the youth. We are looking forward to a city that is fundamentally different from the past, a city that embraces non-racialism, a city that embraces all cultures and religions, a cosmopolitan city that will attract not only South Africans but people from around the world.” MMC Mathang strongly emphasises the importance of the tax incentives: “The UDZ gives impetus for the other city departments to focus their efforts and spend on the areas such as those where the UDZ has attracted the renewal and developments seen thus far,” says Mathang.

Live, Work and Play in the City Ravi Naidoo, the Executive Director for Economic Development under whom the Urban Development Zone tax incentive resides, expressed appreciation of the innovativeness of investors that has led to the creation of thematic precincts such as University City in Braamfontein (a whole-lifestyle precinct for students and emerging graduates). Other developments, such as those in Newtown, have been revived in the form of a combination of residential and retail spaces. This is in addition to the Zurich Building, Turbine Square precinct that comprises the headquarters of AngloGold Ashanti and The Forum, a unique conference centre. In Marshalltown, Ferreirasdorp, Doornfontein and part of Jeppestown attractive districts and streetscapes have been created such as Maboneng and Arts-on-Main, Fox Street, Ghandi Square and the Main Street precincts. “Expansion of the FNB’s Bank City has created an exemplary precinct comprised of the financial services sector with significant retail and office space. It is one of the most attractive places in our City. It has continued to expand and attract investors into the node,” continues Naidoo. The idea is to rejuvenate the City of Johannesburg as a city where people can live, work and play by supporting the creation of several mixed-use precincts that attract a diverse range of investors, businesses, visitors and residents. Standard Bank continues to expand its Inner City premises, a further confirmation of the

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Future Mandela Park renderings.

Inner City’s status as a financial services’ hub. There is also a new trend that reflects young investors’ appetite to purchase sectional title units. This is in accordance with our desire to lure young black professionals and women to come and invest in property within the various precincts of our Inner City and thus gradually diversify property ownership patterns,” adds Naidoo. The area adjoining the railroad that extends from Park Station to Fordsburg and from Park Station to Doornfontein is another potential area for new kinds of precincts in partnership with the private sector. Fordsburg can become a design centre to enhance activities that currently exist. Newtown is currently a cultural district, but has the potential to better align with academic activities due to its proximity to Wits University. There are also plans in place to commercialise Park Station as the biggest transit node in Africa by developing it to its prospected capacity, which is estimated to be 10 times the current size of Sandton City. “For the first time, and as a result of the Gautrain roll-out, SOUTH AFRICAN BUSINESS 2016

internatio investors to join th of the Ci Inner Cit UDZ tax

FOCUS

UDZ is av investors refurbish located i

business people and tourists can land at OR Tambo International Airport and come straight into the Inner City. This is an opportunity which we can maximise upon and one that we cannot afford to miss,” elaborates Ramoreboli. The City of Johannesburg has been able to use the UDZ as a catalyst for development, stresses Naidoo. “Over the years, we have seen that it is possible to create wall-to-wall thematic precincts by attracting the right kind of investors. In the same vein, we realised that it was foolhardy to develop one building and skip the next, because, in essence, what we would be doing would simply bring down the value of the ones that have been developed. Hence if we are to develop the inner city, then let it be on a wide scale.” “In order for the UDZ to be effective, there needs to be a connection that will make economic sense for the City, while transforming the Inner City at the same time. On that note, Africa’s tallest and the biggest retail complex and commercial node, the Carlton Centre, will soon be undergoing a facelift and reconfiguration which will see the creation of Film District and the resuscitation of the Carlton Hotel,” reveals Ramoreboli. “In this way, it is hoped that the City will become even more dynamic and attractive and add to its new crop of already diversified investors streaming into the Inner City.” Ramoreboli points out that this will augur well for the City’s tourism initiatives as well as its efforts to attract the BRICS Bank into the Inner City – which is already a financial hub in its own right. When measured against other recipients of the UDZ tax incentive, the City of Johannesburg has been able to attract more investment than the rest combined, and this is all thanks to aggressive marketing efforts and the city Council’s’ commitment to improving the investment climate, she continues.

“This incentive enables property owners to increase the value of their properties and improve their earning capacity within the UDZ. Corporate or small investors who own buildings that have degenerated can now restore and renovate them, and recover the money spent. No matter what other sources you may get your income from, one can deduct from their taxable amounts any money spent on building or refurbishing within the UDZ,” adds Naidoo. “It should be government’s role to facilitate equitable solutions with regards to sharing space within the City because there will always be a contestation between the rich and the poor and as government we need to mediate and find solutions,” concludes the MMC, Ruby Mathang.

Restore, Renovate and Recover

Joburg’s UDZ Boundaries

It comes on invest renovatio

There are significant financial benefits that accrue to investors as The Joburg UDZ is about 1 800 part of the city’s UDZ tax incentive scheme. “It does not matter hectares and includes the core of how big or small your property is, because you are eligible for the inner city (from Fordsburg to major tax deductions if it is within the UDZ boundaries. In order to Jeppestown) and from Belleview qualify, the investor has to restore, refurbish or add onto income to the M2 in the south. It also exgenerating property within the UDZ, or demolish old buildings and tebndes to Newtown, Hillbrow, build new structures in their place, or purchase new or refurbished Braamfontein, Yeoville, Troyville, buildings or units,” explains Naidoo. Doornfontein, Ellis Park, Bertrams, An investor will qualify for a 100% tax deduction spread sev- Ferreirasdorp, Selby, Wolhuter, eral years, depending on whether the investor has refurbished Vrededorp, Marshalltown, City an existing structure or constructed a new building, but it is not and Suburban, Fairview and the only benefit. Benrose. SOUTH AFRICAN BUSINESS 2016

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For clarit

Lebo Ra Deputy D Phone: + Email: leb

www.j

Join the 2nd Gold Rush!! The City of Joburg equates the UDZ’s investment resurgence to the 2nd Gold Rush into the “Heart of the City of Gold”. The City therefore invites domestic and international investors; traditional property investors, new entrants, women and the youth to join the “2nd Gold Rush” into the “Heart of the City of Gold” and contribute to Joburg’s Inner City revitalization and benefit from the UDZ tax incentive. UDZ is available to income tax paying property investors who invest in construction or refurbishment of income-earning buildings located in the Inner City of Joburg. It comes in the form of accelerated depreciation on investment made towards construction or renovation of Inner City building. For clarity and technical information, contact: Lebo Ramoreboli Deputy Director: UDZ tax incentive Phone: +27 11 358 3437 Email: lebor@joburg.org.za

www.joburg.org.za/udz

OVERVIEW

Regional overview: KwaZulu-Natal

olden beaches, tropical palms, sugar plantations as far as the eye can see and a balmy climate almost all year round. That, in a nutshell, is KwaZulu-Natal, South Africa’s “Garden Province”.

Growth areas The province has shown considerable growth in the business services, transport and retail sectors. This manufacturing hub makes up almost a third of South Africa’s m Gauteng and KwaZulu-Natal account for 42% of the country’s population with Census 2011 revealing the economic heartland pipped its coastal cousin to the post in claiming the most residents. For the first time, Gauteng is now home to more South Africans than KwaZulu-Natal with 12.3-million people (23.7%) living inland against only 10.3-million people (19.8%) in KwaZulu-Natal. KwaZulu-Natal has made significant strides in implementing the objectives in line with the National Growth and Development Plan. KwaZulu-Natal employment has risen from 2.1-million people in 2010 to 2.4-million currently, despite the sluggish economic environment. It is these statistics that speak to the poverty eradication plan and dove-tail on a microeconomic level with the development initiatives and potential in places like the Makhathini Flats. In July Premier Sezo Mchunu announced the Makhathini Flats would receive a R1.1-billion investment to revamp agriculture and improve agricultural infrastructure. The main focus of the investment would be livestock, irrigation infrastructure and planting various rare crops including ground nuts and cassava. KwaZulu-Natal has also implemented the first stage of Operation

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Phakisa, the national initiative aimed at unlocking South Africa’s economic potential. Food production Food production makes a mark with companies such as Unilever, Illovo Sugar, TongaatHulet t Group, Rainbow Chicken and Clover. Industrial investment plays a substantial role in the provincial economy with two of the country’s busiest ports situated there, Richards Bay and Durban. The international trade success is to some extent dependent on developed transpor t and logistics infrastructure. Recently, the Dube TradePort has driven economic growth. It is home to the King Shaka International A ir por t, an agr icultural greenhouse, a cargo terminal and various other sections relating to trade, business and transport, all on 3 000 hectares of land just north of Durban.

OVERVIEW GENERAL GOVERNMENT SERVICES 13% PERSONAL SERVICES 6% FINANCE, REAL ESTATE & BUSINESS SERVICES 20% TRANSPORT, STORAGE & COMMUNICATION 14% WHOLESALE, RETAIL, MOTOR TRADE, CATERING & ACCOMMODATION 14% CONSTRUCTION 3% ELECTRICITY, GAS & WATER 2% MANUFACTURING 22% MINING & QUARRYING 2% AGRICULTURE, FORESTRY & FISHING 4% KwaZulu-Natal sector contribution.

SOURCE: STATS SA

It has attracted a R2-billion and development. It will also host a manufacturing and technicalforeign direct investment services sector for the renewable-energy industry. through Indian business conglomerate Action Group Major new projects and is making a solid The R1.5-billion Inkululeko Development Project, piloted within contribution to Kwa Zulu- the Ndumo community, is an integrated multi-purpose and Natal’s economy. multi-sectoral initiative that includes constructing high quality education centres, health services, modern roads and libraries, Economic future clean running water, sustainable livelihoods, job creation and T he Re newable Ene rgy community centres for vulnerable children and orphans. Development Hub (RED In terms of Inkuleleko, unveiled in December 2013, the provincial Hub), a partnership between Department of Education has several projects including rebuilding the provincial government, St Phillips, Maphindela and Thelemama primary schools as well eThekwini Municipality, Ilembe as building an as-yet unnamed new model school. District Municipality and private “This is a project developed as part of the commitment to firms, is leading a renewable improving the lives of people who live in rural areas,” said Senzo energy project. Mchunu, Premier of KwaZulu-Natal today when he launched the The deal was confirmed in province’s master plan to combat prevalent poverty affecting. March 2013 and will consist Mchunu is also passionate about reducing HIV/Aids in the of various components province, clearing the slums and raising the standards of the including laboratories, a most vulnerable in society. In that debate was the desire to create renewable-energy education 900 000 new jobs by 2020. Mchunu stressed that by assisting the vulnerable it hd and training facility (which will involve Durban University enabled government to reduce the “sense of exposure” that of Technology), as well as a such communities felt and, in so doing, had helped precipitate technology hub for research economic growth by encouraging their participation. KWAZULU-NATAL www.kwazulunatal.gov.za Capital

Population

Pietermaritzburg 10 919 100 (2015) Languages isiZulu, English

Area

Premier

94 361 km 2

171

Senzo Mchunu (ANC)

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Regional overview: Limpopo

impopo is untamed Africa at its best. This is where some of the finest game parks on the continent are located – a place teeming with wildlife and a must-see destination for thousands of visitors from across the globe.

Given the nature of Limpopo’s vast natural resources that range from abundant wildlife to spectacular scenery, it should come as no surprise that the province’s national parks (operated by SA National Parks, SANParks) remains among the country’s most popular family holiday destinations. But Limpopo is about far more than wild open spaces and the big famed five – it is the gateway to the rest of the African continent and is at the very centre of regional, national and international developing markets. Key sectors Cattle, sunflowers, cotton, maize, peanuts, avocados, tea, tomatoes, citrus and macadamias are among Limpopo’s key agricultural resources. Subtropical fruit like mangoes, paw-paws, litchis, bananas and pineapples are in abundance in the province and make up the bulk of export income. Many farms have been converted to private game reserves which are a great asset to the tourism sector in Limpopo. Mining The Mining Input Supplier Park in Steelpoort, which is funded by Xstrata, is an excellent example of private sector companies investing in the development of communities in which they operate.

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The Department has played a facilitation role in which 32 industrial units have been built with 22 companies already signed up to move into the facility. Mining is a key sector of the provincial economy. Corridor Mining Resources (CMR), a subsidiary of LEDA, has successfully taken a number of its prospecting licenses to mining right and feasibility study stages. Mining development should reduce poverty and create more job opportunities in the affected communities. Commodities that are currently eyed for future prospects are iron ore and coal. Speaking at the Limpopo legislature the Pinky Kekana, MEC for Economic Development, Environment and Tourism announced the construction of the Masorini Iron Beneficiation (MIB) project worth R2-billion in Phalaborwa. This is a joint venture operation between Iron

OVERVIEW PERSONAL & GENERAL GOVERNMENT SERVICES 25% FINANCE, REAL ESTATE & BUSINESS SERVICES 17% TRANSPORT, STORAGE & COMMUNICATION 9% WHOLESALE, RETAIL, MOTOR TRADE, CATERING & ACCOMMODATION 13% CONSTRUCTION 2% ELECTRICITY, GAS & WATER 3% MANUFACTURING 4% MINING & QUARRYING 24% AGRICULTURE, FORESTRY & FISHING 3% Limpopo sector contribution.

SOURCE: MACRO-ECONOMIC INDICATORS, STATISTICS SOUTH AFRICA.

Mineral Beneficiation Services (IMBS) and the IDC, which will produce a reduced iron product from PMC magnetite ore, for use in the steel-making industry. Feasibility studies have been completed for a further two plants with a capacity of producing 500 000 tons per annum and will directly employ about 650 people, as well as providing further opportunities for local support industries. Finally, showing more confidence in the sector, Anglo American subsidiary De Beers has approved a mining infrastructure expansion project in Musina worth R163-billion. Economic zones The Department submitted proposals and obtained approval from the Department of Trade and Industry for the establishment of

two special economic. During the recent recession Limpopo provided support to 17 distressed companies through the Turnaround Solutions programme and was able to save 296 jobs. Limpopo’s provincial economy is dependent on the contribution of co-operatives and SMMEs which impact job creation in the province. To further guide business regulation and governance, the Department has completed amendments to the Liquor Act, which seeks to remove liquor outlets located close to schools and places of worship. Tourism and the environment Peermont Global has made an undertaking to the Gambling Board that it will commence construction of a third casino in Burgersfort in the Tubatse area, which is sure to boost visitor numbers to the region, while the annual Limpopo Marula Festival draws 30 000 participants and is growing in popularity. The Limpopo Environmental Management Act was drawn up to address specific provincial issues. Endowed with natural resources that are critical in providing national solutions that will foster conservation, sustainable use, as well as fair and equitable sharing of benefits from the use of natural resources. Limpopo is home to two transfrontier conservation parks, two World Heritage Sites, three biospheres, three national parks, 53 provincial nature reserves and more than 6 000 privately owned game farms, all enriched by beautiful landscapes. LIMPOPO www.limpopo.gov.za

Capital

Population

Area

Premier

Polokwane Languages

5 726 800 (2015) 125 754 km Sesotho, Tshivenda, Xitsonga 2

173

Stanley Mathabatha (ANC)

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Regional overview: Mpumalanga

pumalanga’s charms, attractions, history and culture make it a must-see province, a place steeped in mystery, teeming with wildlife and filled with opportunity.

Mpumalanga is all about vast savannas, sweeping grasslands, imposing mountains and raging rivers. It’s a place where memories are made, friendships formed and opportunities realised. The name means “the place where the sun rises” in the local tongue, and the province lies north of KwaZulu-Natal and borders Swaziland and Mozambique. It constitutes 6.5% of South Africa’s land area. In the north it borders on Limpopo, to the west Gauteng, to the southwest the Free State and to the south KwaZulu-Natal. The former capital Nelspruit has recently been renamed Mbombela.

SOUTH AFRICAN BUSINESS 2016

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Agriculture The climatic contrasts between the drier Highveld region, with its cold winters, and the hot, humid Lowveld allow for a variety of agricultural activities. More than 68% of Mpumalanga is used by agriculture. Crops include maize, wheat, sorghum, barley, sunflower seed, soyabeans, groundnuts, sugarcane, vegetables, coffee, tea, cotton, tobacco, citrus, subtropical and decidious fruit. (Continued on page 183)

Mpumalanga Province

OVERVIEW

I N V E S T M E N T D E S T I N AT I O N O F C H O I C E A N D R E G I O N A L T R A D E H U B

THE PLACE OF THE RISING SUN

TRADE AND INVESTMENT OPPORTUNITIES

• • • • • • •

Maputo Development Corridor The Powerhouse of Africa Mpumalanga: Key Sectors Investment Opportunities Economic Diversity Nkomazi Special Economic Zone Trade and Investment Services

175 MPU MAL ANGA

w w SOUTH w. mAFRICAN e gaBUSINESS . go v. za 2016

trad e- in vest@meg a.g ov.za

The powerhouse of Africa

Mpumalanga offers a strategic location in the world market, along with modern infrastructure, sophisticated financial markets and cutting-edge technology. The diverse, cost-efficient mineral and agro-industry inputs, world-class telecommunications and information industry, rapid liberalization of trade and investment market and a government commitment to investment facilitation all combine to create an unparalleled quality of life in the Province.

The South African Province of Mpumalanga’s diverse and resource-rich economy, coupled with its people’s indomitable spirit, makes it one of the most attractive Trade and Investment destinations in South-East Africa.

Good access to East African and Indian Ocean Rim Markets

Mpumalanga

Preferential access to the lucrative EU market Part of SADC – 280- million consumers Located next to Port of Maputo

More than 80% of South Africa’s coal is sourced in Mpumalanga.

The province’s three biggest sectors are manufacturing, mining and agriculture.

AN IDEAL POSITION Situated in the north-east of South Africa, Mpumalanga province shares a common border with the independent Republics of Mozambique and Swaziland and has a population of 4.1-million people and a total area of 83 000km2. In addition to its capital, Mbombela, the Province has a number of major cities including eMalahleni, Middleburg and Secunda which host some of the major industrial complexes of South Africa. The Gross Geographic Product (GGP) of the Mpumalanga Province is US$23-billion (2013).

Mpumalanga’s position and resources make it a valuable transport and logistics hub

COMMUNITY SERVICE 16%

MPUMALANGA’S ECONOMIC DIVERSITY The economic diversity of Mpumalanga is supported by world-class infrastructure, which makes the Province a unique investment destination in South East Africa.

MINING 25%

TRADE 15% FINANCE 12% UTILITIES 5%

Mpumalanga shares a border with 4 provinces and 2 independent countries

19 000 000

0-rated

19m tons of cargo per Bulk cargo & transhipyear moves through the ments are now zeroMaputo Corridor. rated in Mozambique. .

CONSTRUCTION 3% AGRICULTURE 3%

R4.9-billion 2027

TRANSPORT 6% MANUFACTURING 13%

11%

90 000pa

The value of investment The year the investment Maputo Corridor truck Number of trucks that in Port of Maputo (160 contract in Maputo port traffic increases at an cross the Lebombo borSMMEs employed). is up for renewal. annual rate of 10-11%. der into Mozambique. .

Economic diversity: Investment opportunities The Provincial economy of Mpumalanga is exceptionally diverse. Established industries in the Province include Mining, Stainless Steel, Petro-Chemicals, Pulp and Paper, Ferro-Alloys, Tourism and Agro-Processing, amongst others. A wide range of raw materials and feedstocks are available for beneficiation. • Mpumalanga Province was the one of the main contributors to the national economy in 2014, together with Gauteng (34.6%), KwaZulu-Natal (15.9%) and the Western Cape (13.7%). • The major components of the economy are mining, manufacturing, agriculture (which includes

forestry and fishing operations) and tourism (part of which is included in the trade sector). • A significant contributor to the economy is the power-generation industry that operates within the utilities sector and accounts for some 96% of the sector.

Mpumalanga is the third-largest coal-exporting region in the world

INVESTMENT OPPORTUNITIES SECTORS, INDUSTRIES AND PRODUCTS THAT CAN BE BENEFICIATED MANUFACTURING STAINLESS STEEL Cutlery Catering Equipments Surgical instruments Automotive components

STEEL White & grey goods Pipes & tubes Wire

PETRO-CHEMICALS Plastic products Recycling plastics Artiﬁcial rubber products Paint & vanish Inks & dyes

MINING COAL Waste briquettes

GOLD JEWELLERY CHROME PLATINUM IRON ORE VANADIUM MANGANESE GRANITE Building cladding & tombstone

CLAY Porcelain & ceramics Electrical insulators

PAPER Recycling

SUGAR Confectionery

MINING Machinery and services

RENEWABLE ENERGY Solar and bio-fuel Biomass

SUMMER CEREALS & LEGUMES MAIZE Maize meal

SOYA Meal, Edible oil

CANOLA Edible oil

SUN FLOWER Edible oil

TROPICAL & SUBTROPICAL FRUIT CANE SUGAR Sugar / confectionery

CITRUS Juice & concentrate

MANGOES

FOOD PROCESSING Maize meal Machinery Frozen & dehydrated vegetables Preserves pickles & condiments Nuts

AGRICULTURE

FORESTRY Beneﬁciation of timber products Builders hardware Furniture

TOURISM Tourism infrastructure various grades of accommodation Infrastructure, hotels & lodges

Dried, frozen, juice & concentrates

LITCHIS Dried, frozen, juice & concentrates

AVOCADOES Avocado oil

GUAVA Dried, frozen, juice & concentrates

MACADAMIA NUTS Processed & confectionery

Mpumalanga: Key Sectors

Mpumalanga is one of South Africa’s most productive and important agricultural regions. It also offers an ideal climate and topography for forests, major mineral resources, formidable manufacturing capacity as well as a sophisticated and well-segmented tourism sector. METAL ORES 6.7%

MINING

GOLD & URANIUM 3.1% OTHER MINING & QUARRYING 6.8%

COAL AND LIGNITE 83.4%

Structure of the mining sector in Mpumalanga 2014

Mpumalanga exports over US$14-million of macadamia nuts annually.

The mining sector accounts for a quarter of all economic activity in the province and is also the largest single sector, providing employment to 25% of the province’s workforce. The major mining activity in the province is centered on the coal and lignite industry. Mpumalanga contributes 83% of all coal produced in South Africa, making it the world’s third-largest coal-exporting region. Towns such as eMalahleni (Witbank) and Middelburg in the Nkangala District Municipality are at the centre of the coal-mining industry.

Mpumalanga’s coal-mining industry is developing as a significant attractor of both foreign and local direct investment in the province. A significant percentage of the province’s coal is exported to countries such as China, India, South Korea and Japan.

AGRICULTURE About 14% of the province’s land area is natural grazing land which is used in the production of beef, mutton, poultry, dairy and wool. The Mbombela district in the Lowveld is South Africa’s second-biggest producer of citrus fruit, while more than half of South Africa’s soya bean crop is produced in Mpumalanga’s Highveld areas. The agriculture sector in Mpumalanga can be divided into two broad categories: • SUMMER CEREALS AND LEGUMES This consists of maize, soya, canola and sunflower that has – in the main – been cultivated in the Highveld region of the province. • TROPICAL, SUBTROPICAL AND CITRUS FRUIT, NUTS AND CANE SUGAR These are mainly cultivated in the Lowveld region of the Province.

FISH FARMS 0.5% AGRICULTURE & HUNTING 58%

Mpumalanga is one of South Africa’s most productive and important agricultural regions and plays a key role in the export profile of South Africa, primarily in fruit and nuts.

10 000 000

1/4

R950-million 80%

FORESTRY & LOGGING 41.5%

Structure of the agriculture sector in Mpumalanga 2014

120-mill ton

The region exports over About a quarter of SA’s Turnover from subtropi- Mpumalanga generates Number of major pipe- Mpumalanga supplies 10 million cartons of tobacco crop is cultivat- cal fruit, which employs 80% of South Africa’s line networks that pass 80% of South Africa’s avocados annually. ed in Mpumalanga. about 13 000 people. energy. through Mpumalanga. stainless-steel needs.

MANUFACTURING There are two primary pillars of the manufacturing sector in Mpumalanga, and these account for in excess of 75% of the output for this sector: • Fuel, petroleum and chemical products • Metal, machinery and appliances The fuel, petroleum and chemical products manufactured in Mpumalanga are essentially synthetic fuel and its byproducts, which are produced from coal in the Highveld region of the Province. The other major components of the manufacturing sector are the Ferro-Alloy, Steel and Stainless Steel industries based in eMalahleni (Witbank) and Middelburg in the Nkangala District Municipality. Agro-processing is centred primarily in the Lowveld region of Mpumalanga and it makes a valuable contribution to the provincial economy’s manufacturing sector. Agro-processing is centred around processing the vast amounts of tropical and subtropical fruit and nuts cultivated in the Lowveld.

WOOD & WOOD PRODUCTS 6.2%

OTHER MANUFACTURED PRODUCTS 7.0%

FOOD, BEVERAGE & TOBACCO PRODUCTS 10.7%

Mpumalanga has a diverse manufacturing sector that accounts for 15% of provincial GGP, in addition to an expanding retail sector.

FUEL, PETROLEUM & CHEMICAL PRODUCTS 50.7%

METAL, MACHINERY & APPLIANCES 25.5%

Structure of the manufacturing sector in Mpumalanga 2014

Most of the nation’s power stations are located in Mpumalanga, and three previously mothballed power stations have recently been reopened.

FORESTRY

TOURISM

The forestry sector comprises logging, saw-milling, wood products, pulp and paper as well as specialised cellulose for global markets. Pulp, paper and specialised cellulose are the main exports, along with sawn lumber, wood chips and wattle extract. The industry is ideal for recycling initiatives. The forestry products sector continues to contribute about 1% to national GDP, with the Far East, Europe and the UK making up its major export markets. The export market for pulp and paper from South Africa remains strong and, buoyed by better margins, pulp production figures have been on the rise since 2007. Global paper giants Sappi, Mondi and SAFCOL have extensive plantations and mill operations in the province, which is home to Africa’s biggest integrated pulp and paper mill. Attractive opportunities exist for small-scale growers, contractors and sawmillers, while forested areas also lend themselves to beekeeping and honey-making.

Mpumalanga boasts world-class parks and reserves, astonishing botanical gardens, rivers and lakes. Safaris are a major drawcard, and the Kruger National Park is the jewel in South Africa’s tourism crown, while subsectors such as business travel (including conference facilities), adventure, heritage and cultural tourism all hold huge growth potential. The casino industry in particular has enjoyed great growth and shows signs of further potential for additional investment. In addition to the establishment a Provincial Liberation Heritage Route, priority investment projects that have been highlighted include: • A cable car over a part of the Blyde River Canyon. • A cantilevered glass walkway at God’s Window. • An International Convention Centre (ICC) in the capital, Mbombela.

Mpumalanga’s forestry sector accounts for 12.3% of South Africa’s agricultural GDP.

Mpumalanga has the ideal climate and topography for forests, with South Africa’s biggest sawmill and largest panel and board plant.

South Africa’s third mostvisited province, Mpumalanga has a sophisticated and well-segmented tourism sector attracting both foreign and local investment interest.

70%

30 million

11%

R40-billion

The percentage of manufacturing jobs in food and forestry.

The volume of water treated every day by local water authorities.

The total land area covered by plantations or natural forests. .

The annual value of the Number of scheduled South African forestry flights departing KMIA industry. on a daily basis.

The world’s most luxurious private game lodges are located around Kruger.

R2-billion The value that Kruger brings to the South African national economy.

Nkomazi Special Economic Zone

The Nkomazi SEZ is strategically positioned in the border town of Komatipoort. This Multi-Sector SEZ is the axis of economic integration between the South African provinces of Mpumalanga, Gauteng and Limpopo and the independent states of Swaziland and Mozambique. SOUTH AFRICA

Lydenburg

MOZAMBIQUE Sabie

Middelburg Belfast

JOHANNESBURG

Komatipoort / Ressano Garcia

NKOMAZI SEZ

Mbombela

eMalahleni Carolina

The Nkomazi SEZ offers the investor a unique and incentivised base of operations on the Maputo Development Corridor running through the most highly industrialised and productive regions of Southern Africa.

MAPUTO

SWAZILAND

LOGISTICS Nkomazi SEZ offers numerous opportunities for the creation of bonded warehouses, a distribution centre, container yard, truck stops and petrol depot (with maintenance, fitment and repair facilities). FMCG exports from the major South African retailers destined for their growing number of Sub-Saharan Africa branches provides many opportunities within the logistics sector, as does an intermodal facility (road-rail-road and rail-to-rail) for transhipment of citrus and minerals for further transport to the Maputo Port.

MINERALS AND ENERGY The mineral resources of Mpumalanga are varied and several of the biggest, most diversified mining companies have multiple operations in the province. Mpumalanga accounts for 83% of South Africa’s coal production and is the third-largest coalexporting region in the world. Opportunities for investment have been identified in mining services and mineral beneficiation. A natural gas pipeline, connecting the gas fields of southern Mozambique with the industrial south of Mpumalanga Province, transverses the Nkomazi SEZ and affords an investment

opportunity for a gas-fired power plant for electricity generation. Other investment opportunities in this sector include phosphate for fertilizers, the production of ammonia and urea and the beneficiation of fluorspar for downstream agro-chemicals and fluorine production.

AGRO-PROCESSING The Nkomazi SEZ is strongly focused on the agro-processing sector and the establishment of an agro-processing industrial park within the SEZ is leveraged off the existing large-scale citrus and sugar industries in the region. Opportunities for investment that are also present in food processing and packaging for the large retailers operating in South Africa expanding their presence in the East African market. Other identified investment opportunities

include lemon oil and lemon juice concentration plant, subtropical juice concentrate processors, as well as a fresh produce trade hub supplying the national fresh produce markets.

AUTOMOTIVE The automotive sector has significant opportunities in terms of the distribution of vehicles, both imported as well as those that have been locally manufactured. These opportunities extend to the manufacture and distribution of automotive components and accessories. Exports of commercial vehicles into Africa are expected to show above-average growth over the next few years. An identified investment opportunity lies in a Vehicle Distribution Centre (VDC) for final vehicle management and control prior to regional distribution.

✈ Komatipoort Aerodrome N4

Lebombo border post Komatipoort

Lebombo Dry Port

Nkomazi SEZ

MOZAMBIQUE

SOUTH AFRICA

R571

15%

100%

11 years

Lower Corporate Tax rate of 15% for companies locating to SEZ.

Tax allowance for green New buildings can be and brownfield projects depreciated at 20% in Mpumalanga SEZ. (year 1), then 8% pa.

20%

CCA

Improvements to build- Customs Controlled ings can be depreciated Area: VAT Exemption at 20% per annum. and duty free area.

12i 12i tax incentive offers support for capital investment and training.

The Maputo Development Corridor (MDC)

The MDC is South Africa’s leading Spatial Development Initiative (SDI) linking Mpumalanga, Gauteng Province and the Nkomazi Special Economic Zone with the deepwater Port of Maputo in fast-growing Mozambique. TOP EXPORTS Coal Macadamia Nuts Cane Sugar Ferro-alloys Manganese Wood Citrus Fruit

The efficient corridor provides investors and exporters with good access to the export markets of South East Africa, the Indian Ocean Rim and Far East Asia. The Maputo Development Corridor comprises road, rail, special economic zone, border posts, port and terminal facilities. The corridor runs through the most highly industrialised and productive regions of Southern Africa. The Corridor has been extensively upgraded to international standards and links the industrial heartland of South Africa to its nearest port in Maputo, Mozambique, which is one of the fastest-growing countries in South East Africa.

GAUTENG

Pretoria

MPUMALANGA

eMalahleni

Joburg AMERICAS 2 046m

Mbombela

Middleburg OCEANIA 80m

TOP EXPORT MARKETS 2014 1 - Mozambique R2.8 bn 2 - India R1.9 bn 3 - Netherlands R1.8 bn 4 - United States R1.7 bn 5 - Japan R1.3 bn 6 - Swaziland R1.2 bn 7 - Hong Kong R0.8 bn

MOZAMBIQUE

Nkomazi SEZ

Komatipoort

Maputo

FOREIGN MARKETS

Africa & Middle East Asia & Australasia Europe & the Americas

Lebombo

MPUMALANGA’S FOREIGN TRADE ASIA 6 099m

EUROPE EUROPE 33 559m 559m

Mpumalanga has a strong industrial export base, a consequence of the abundant primary resources and the secondary-sector opportunities which have developed as a result. Mpumalanga has been well integrated into the global trading system for generations and enjoys strong, established relationships with numerous countries in Africa, Europe, Asia and the Americas and expanding South-South and BRICS trade. The vast range of commodities and products produced in the province provides for great opportunity for diversification of traded goods, as well as creating scope for attracting new trading partners. 16

Mpumalanga’s Export Growth

EXPORTS IN R-BILLIONS

14 12 10 8

AFRICA 6 203m

Mpumalanga’s Regional Export Markets

6 4 2

6.3

5.8

6.9

11.8

7.5

10.1

11.9

12.9

14 .1

17.9

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

SADC FREE TRADE AREA (FTA)

TRILATERAL FREE TRADE AGREEMENT (T-FTA)

• Provides for duty-free trade between 15 SADC members, excluding DRC, Angola and Seychelles.

• Negotiations are underway to establish a grand African FTA.

• All goods shipped under SADC Certificate of Origin receive duty-free status. • A growing market for over 280-million people.

• Will group the current COMESA, SADC and EAC blocs into one integrated market. • 26 countries with a combined population of nearly 700-million people.

INVEST IN THE PROVINCE OF THE RISING SUN E CON OM Y • S t rat egic l ocati on i n worl d m a r k e t . • S oun d macro-economi c po lic ie s a n d r a p id liberalizati on of trade & i nve s t m e n t m a r k e t . • S t ab le pol i ti cal env i ronmen t & g o ve r n m e n t com mit ment to i nv es tment f a c ilit a t io n . • A lar ge, growi ng domes ti c m a r k e t a n d g o o d access t o Afri can and I ndi a n Oc e a n m a r k e t s . I NFRASTRUCTURE • M od ern i nfras tructure and t r a n s p o r t . • Cut t ing -edge technol ogy a n d s o p h is t ic a t e d f inan cial markets . • World-cla s s tel ecommuni ca t io n s & IC T. • S t rat egic al l y l ocated Nkoma zi Sp e c ia l Econ omic Zone.

C OR P ORAT E • M o d e r n ba nki ng a nd f i na nci a l se r v i c e s. • 100% o w ne r shi p pe r m i t t e d. • L ib e r a l r e pa t r i a t i o n o f pr o f i t s. • L a r g e e co no m i ca l l y a c t i v e po pul a t i o n. R ES OU R C E S & O P P O RT U N I T I E S • R ic h in na t ur a l r e so ur c e s. • Se lf - s uf f i c i e ncy i n a gr i cul t ur e . • D ive r s e a nd co st - e f f i c i e nt m i ne r a l a nd a g r o - in dust r y i nput s. L IFES TY LE • U n p a r a l l e l e d qua l i t y o f l i f e . • G o o d m e di ca l f a c i l i t i e s. • H ig h - qua l i t y, w e l l - pr i ce d r e si de nt i a l ho usi ng. • U n ive r si t y o f M pum a l a nga .

MPUMALANG A ECO NOMIC G ROWTH AGENC Y

T H E M P U MALA NG A E C O NOMIC GROWTH AGEN CY ( MEGA) IS T H E O F F I CI A L T R A DE A ND I N V EST M ENT PROM OTI ON ARM OF THE P ROV IN CIAL GOV ER NMENT O F MP U MA L A NG A . OUR VALUE PROPOSITION

• We are experts on the economy of Mpumalanga and the investment opportunities it offers. • We use our knowledge of the province to packa ge investment opportunities that have a high probability of success. • We ha ve strong capabilities in all areas rela ted to the total investment value chain. TRADE PROMOTION • Export & import enquiries. • Government export incentives. • Market information & contact details. • Custom duties, tariff headings & foreign trade documentar y requirements. • Market research / export publications.

• We ha ve solid alliances and partnership relationships with a range of investors and other potential contributors to the investment process. • We are focused on customer needs and provide innovative solutions with a high level of ser vice.

• Regional trading issues and preferential trade agreements. • Foreign & local trade fairs and exhibitions. • Contact with foreign and bilateral chambers of commerce and South African trade representatives abroad. • Inward & outward trade missions.

INVESTMENT • Provide accurate and latest market information and facilitate feasibility studies. • Assist with applications for incentives and claiming relocation costs. • Assist with work permits, obtaining factor y space/land & facilitate finance. • Facilitate joint ventures. • Fast track applications.

M BOMB EL A OF FICES

J OHA NNE S B U R G R E G I O N A L O F F I C E

T. +2 7 1 3 755 6328 | F. +27 13 755 6239

T. +27 11 7 8 3 4 9 0 7 / 9 | F. + 2 7 1 1 7 8 3 5 9 1 2

w w w. m e g a . go v. z a MPUMAL ANGA

trad e- in vest@meg a.g ov.za

OVERVIEW PERSONAL & GENERAL GOVERNMENT SERVICES 16.1% FINANCE, REAL ESTATE & BUSINESS SERVICES 13.4% TRANSPORT, STORAGE & COMMUNICATION 9.6% WHOLESALE, RETAIL, MOTOR TRADE, CATERING & ACCOMMODATION 11.2% CONSTRUCTION 2.5% ELECTRICITY, GAS & WATER 4.7% MANUFACTURING 20.6% MINING & QUARRYING 18.5% AGRICULTURE, FORESTRY & FISHING 3.4% Mpumalanga sector contribution.

SOURCE: STATISTICS SOUTH AFRICA.

(Continued from page 174) Forestry is extensive around Sabie in the far north of the province. Located near the forests, Ngodwana is the site of one of South Africa’s largest paper mills, Sappi. Natural grazing covers a p p r ox i m a te l y 14% of Mpumalanga. The main products are beef, mutton, wool, poultry and dairy. Mining Extensive mining is done and the minerals found include gold, platinum group metals, silica, chromite, vanadiferous magnetite, argentiferous zinc, antimony, cobalt, copper, iron, manganese, tin, coa and many more. Gold was first discovered in Mpumalanga province in 1883 by Auguste Roberts in

the mountains surrounding what is now Barberton. Gold is still mined in the Barberton area today. Mpumalanga accounts for 83% of South Africa’s coal production. 90% of South Africa’s coal consumption is used for electricity generation and the synthetic fuel industry. Coal power stations are in proximity to the coal deposits. A coal liquefaction plant in Secunda is one of the country’s two petroleum-fromcoal extraction plants, which is operated by the synthetic fuel company Sasol. Economic future The Khanyisa power project will be the first of its kind using circulating fluidised-bed (CFB) technology. This innovation takes place during the combustion process where a turbulent mixing of gasses and solids provides more effective chemical reactions and heat transfer. Anglo American Thermal Coal chose Kleinkopje colliery as the site for the power plant. The project manager Julian Eslait explained the challenges of choosing a site for the plant: ‘Identifying a non-undermined stable site big enough for the power station and close enough to fuel and water sources was a challenge.’ The plant will generate 450MW of power and is set to be fully operational by 2015.

MPUMALANGA www.mpumalanga.gov.za Capital

Population

Area

Premier

Mbombela (Nelspruit) Languages

4,283,900 (2015) 76 495 km isiNdebele, siSwati, isiZulu 2

183

David Mabuza (ANC)

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Regional overview: Northern Cape Big sky country, the Northern Cape is the largest of South Africa’s provinces but has the smallest population, making it one of the more remote areas of South Africa.

he province has many major attractions, including its vast, open spaces, unique vegetation – notably the beautiful spring flower spectacle that transforms a semi-desert landscape into one of striking colour and beauty – and the Kgalagadi Transfrontier Park, which is famous for its lions.

And, of course, the Northern Cape has diamonds. Who knows what sort of country South Africa would be today, were it not for the discovery of diamonds in the hot, dry flat interior of the country in the late 1800s? The small western portion of the Northern Cape Province bordering the Free State is now known as The Diamond Fields. Kimberley, which is also the Capital of the Northern Cape and the location of the Kimberly Big Hole, is at the heart of the province’s diamond fields. There are several diamond-mining and historical attractions in Kimberley itself, including the Big Hole and Kimberley Mine Museum. Agriculture With extensive stock and vegetable farming land, agriculture is central to the Northern Cape economy, but cutting-edge renewable-energy projects are revitalising this arid land.

Major exports include fruit, especially table grapes and meat from the widespread sheep and goat farming in the province. Agriculture contributes more than its fair share to the economy, especially in terms of employment creation. For this reason, the revitalisation of the agriculture and agri-processing value chain is critically important. Initiatives like the Vaalharts Irrigation Scheme will be prioritised to meet the needs of irrigation across a large swatch of the province. Northern Province is also the lead province in South Africa when it comes to solar renewable energy initiatives and in terms of its Renewable Energy Strategy. It plans to be an exporter of renewable energy to the rest of South Africa by 2020. Renewable energy For its part, Eskom has connected 950 Megawatts (Mw) of renewable energy from Independent Power Producers (IPP) to the grid, ahead of deadline. Eskom has also recently spent over R300-million on capital improvements in the Northern Cape, including the new Schmidsdrift Substation and the Canal Substation near Van der Kloof. These projects provide significant added ca-

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OVERVIEW PERSONAL & GENERAL GOVERNMENT SERVICES 23% FINANCE, REAL ESTATE & BUSINESS SERVICES 14% TRANSPORT, STORAGE & COMMUNICATION 8% WHOLESALE, RETAIL, MOTOR TRADE, CATERING & ACCOMMODATION 12% CONSTRUCTION 3% ELECTRICITY, GAS & WATER 4% MANUFACTURING 3% MINING & QUARRYING 27% AGRICULTURE, FORESTRY & FISHING 7% Northern Cape sector contribution.

SOURCE: NORTHERN CAPE PROVINCIAL SPATIAL DEVELOPMENT FRAMEWORK.

pacity for farming in the area. According to Mining Weekly, companies like Kumba and Assmang believe that when rail and port capacity is sufficient in South Africa, and enough water and energy is available, iron ore is expected to reach a combined total output of 100-million tons per annum in the upcoming years.

Emerging farmers The government’s Orange River Emerging Farmer Settlement and Development Programme has to date seen the allocation of 2 800 hectares of water rights to communities and groups of Historically Disadvantaged Individuals (HDIs). This programme aims to assist beneficiaries of the Land Reform Programme with infrastructural and project co-ordination along the Orange River. The remaining water rights will be allocated throughout the period 2015 to 2019.

Education and health At least 65% of the Northern Cape’s budget is spent on education Sol Plaatjie and health. A major effort is being undertaken to eradicate the The province’s first university, backlog of water to schools, as well as to replace those schools Sol Plaatje, opened its doors constructed from inferior material. in 2014 and is located close Plans are afoot to improve the province’s capacity for the to Kimberley. The university is training of nurses. It is also intended to fully capacitate the merging technikon courses with EMS College and disaster training initiatives, as announced traditional university degrees in by President Jacob Zuma during the opening of Harry Surtie one department. It will add val- Hospital in Upington. ue to the Northern Cape econThis state of the art hospital will soon be followed by a new omy and make a considerable hospital in De Aar, and these two projects highlight the route the contribution to the government- province has travelled in accelerating the delivery of mega projects services sector. in line with its overall service delivery strategy. NORTHERN CAPE www.northern-cape.gov.za Capital

Population

Area

Premier

Kimberley Languages

1 185 600 (2015) 372 889 km Afrikaans, isiXhosa, Setswana 2

185

Sylvia Lucas (ANC)

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Regional overview: North West North West is perhaps one of South Africa’s least known provinces, but it is, nevertheless, a place packed with interesting attractions, beautiful open spaces and welcoming people wherever you go.

ituated in the north of South Africa on the Botswana border and fringed by the Kalahari desert in the west, Gauteng province to the east and the Free State to the south, it is known as the Platinum Province for the wealth of the metal it has underground.

The capital is Mahikeng (previously Mafeking) a town best known for the famous siege during the Boer War, which ended in a

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decisive victory for the British and made a hero of Robert Baden-Powell. Mining Mining contributes 23.3% to the North West economy. Ninety-four percent of the

OVERVIEW PERSONAL & GENERAL GOVERNMENT SERVICES 20% FINANCE, REAL ESTATE & BUSINESS SERVICES 13% TRANSPORT, STORAGE & COMMUNICATION 7% WHOLESALE, RETAIL, MOTOR TRADE, CATERING & ACCOMMODATION 11% CONSTRUCTION 2% ELECTRICITY, GAS & WATER 1% MANUFACTURING 5% MINING & QUARRYING 39% AGRICULTURE, FORESTRY & FISHING 2% North West sector contribution.

SOURCE: INVEST NORTH WEST.

country’s platinum is found The Bushveld Igneous Complex is found in the region and is in the Rustenburg and Brits rich in PGMs as well as minerals like iron, tin, chromium, titanium districts, which produce more and vanadium. platinum than any other single South Africa produces 70% of the world’s chrome, and most of area in the world. it is sourced in the North West where there are 20 chromite mines. North West also produces a The manufacturing sector comprises mostly fabricated metals, quarter of South Africa’s gold, food and beverages and non-metallic minerals such as cement as well as granite, marble, flu- and stone. orspar and diamonds. Food and beverages is the biggest subsector contributing Employment along the to the manufacturing industry. Platinum Corridor, from Major companies with manufacturing capacity in the North Pretoria to eastern Botswana, West like Nestlé, Rainbow Chickens, Tydstroom and Clover accounts for over a third of total have all taken advantage of the province’s strategic location employment in North West. adjacent to the business hub of Gauteng. The North West is responsible for 64% of platinum, 46% Agriculture of the granite and 25% of the North West is sometimes referred to as the Texas of South gold produced in the coun- Africa, with some of the largest cattle herds in the world found at try. Platinum is found in the Stellaland near Vryburg. Rustenburg and Brits regions, The Marico region is also cattle country, while the areas around which produce more platinum Rustenburg and Brits are fertile, mixed- crop farming land. than any other area in the world. The province is an important food basket in South Africa. Granite, marble and diamonds Maize and sunflowers are the most important crops and the are also mined in the province. North West is the major producer of white maize in the country. NORTH WEST www.nwpg.gov.za Capital

Population

Area

Premier

Mahikeng Languages

3 707 000 (2015) 104 882km Tswana, Afrikaans, Sotho, Xhosa, Tsonga 2

187

Supra Mahumapelo (ANC)

SOUTH AFRICAN BUSINESS 2016

OVERVIEW

Regional overview: Western Cape One of the world’s premier tourism meccas, and a province renowned for its exquisite natural splendours, the Western Cape is home to a booming tourism market, diverse manufacturing, world-class infrastructure and Africa’s largest wine exporter. Positive future When assessing what the Western Cape has achieved over the past years, Wesgro CEO Tim Harris is positive about its future. The province, for starters, has performed well on the Foreign Direct Investment (FDI) front, he says. “When it comes to FDI, we are doing quite well. Since 2010, the Western Cape brought in R7 billion, of which the bulk has gone to the services, technology, and communications industries,” Harris explains. “Apart from contributing to the provincial economy, these FDI projects have created 4 000 permanent jobs for instance in the manufacturing sector, as well as countless indirect jobs.” Wesgro figures show that the United Kingdom and the United States were responsible for the bulk of the FDI inflows into the Western Cape, with shares of respectively 26% and 23%. Other major investors were The Netherlands (8%), Germany (7%) and France (5%). A country that is gaining momentum in the Western Cape on the FDI front is China, with Hisense being one of the most important investors. This Chinese manufacturer of consumer electronics and household appliances opened a

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25 200m2 factory in Atlantis – an impoverished area some 40km outside of Cape Town, on the West Coast. This town used to be a thriving manufacturing hub until the sector started to crumble. leading to high levels of unemployment. Resurrecting Atlantis Harris adds that the future for Atlantis is set to change, and that Hisense is just the beginning, as Atlantis is in the process of being established as a Special Economic Zone (SEZ) with a specific focus on manufacturing and renewable energy. Another important

OVERVIEW GENERAL GOVERNMENT SERVICES 10.8% PERSONAL SERVICES 6% FINANCE, REAL ESTATE & BUSINESS SERVICES 31% TRANSPORT, STORAGE & COMMUNICATION 9.1% WHOLESALE, RETAIL, MOTOR TRADE, CATERING & ACCOMMODATION 17% CONSTRUCTION 5% ELECTRICITY, GAS & WATER 2% MANUFACTURING 15% MINING & QUARRYING .1% AGRICULTURE, FORESTRY & FISHING 4% Western Cape sector contribution. SOURCE: STATS SA

company that has settled The same counts for start-ups, emerging businesses, and tech down in the area is Gestamp companies. Harris: “Cape Town is the home of some very exciting Renewable Industries (GRI), a newcomers such as Takealot and Yuppiechef, which are among Spanish renewable energy firm some of South Africa’s most successful businesses. which recently opened a new The question is what makes the Western Cape the favourable wind tower factory there. business that it apparently is? “Businesses like it here because of “Atlantis has some real our world-class infrastructure, and the fact that Cape Town, the benefits. There used to be an central region in particular, simply works,” Harris says. “Secondly, industrial base there, which the companies we have dealt with, have told us that it is easier over the past 20 years eroded,” to do business in the Western Cape and Cape Town than, for Harris says. “The infrastructure instance, in Johannesburg. This is an important consideration and the sites are still there, and for any business owner who wants to settle down in South Africa.” there is transport infrastructure too which connects Atlantis to Going green the port of Saldana and the city. The province prides itself on ‘green living’. The provincial The MyCiti busses go there too, government marked the one-year anniversary of the ‘110% making it a well-connected Green’ initiative in June 2013. Premier Helen Zille described the space that is ready to go.” campaign as making a paradigm shift to connect environmental preservation and economic growth. Projects include installing South Africa’s retail hub solar-panel heating systems, recycling and promoting carbonIt doesn’t stop here. Many of neutral manufacturing. South Africa’s and Africa’s Companies that are on board with this initiative include Eskom, largest retailers have their Juwi, Nedbank Group, Vineyard Hotel and Woolworths. offices in and around Cape A 90MW wind farm near Wolseley was recently given the goTown, including Pick n ahead. This joins a demonstrative wind farm in Darling (5MW) and Pay, Shoprite, Clicks, and the Sere Wind Farm still under construction, which will produce Woolworths. a proposed 100MW, both in the Western Cape. WESTERN CAPE www.westerncape.gov.za Capital

Population

Area

Premier

Cape Town Languages

6 200 100 (2015) 129 462km Afrikaans, isiXhosa, English

189

Helen Zille (DA)

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FOCUS

Khayelitsha – the power of township buying power There is a big drive to empower the township economy nationwide. In Cape Town, The Khayelitsha Development Forum (KDF) is a voluntary organisation that works to efficiently mobilise community development initiatives through extensive public participation, empowerment programmes, resources mobilisation and effective coordination. Lesley Julies, Marketing Manager of the KDF, shared his Forum’s vision for Khayelitsha. What role does the Khayelitsha Development Forum play within the Khayelitsha community?

What is your strategy for turning that around?

Our strong point within Khayelitsha is that we have the buy-in of the community and the community are dependable stakeholders in terms of issues of safety, health, job creation or economic development. We definitely need assistance to develop and grow our township economy, but whoever comes in will need the buy-in of the community.

We need money to come into the township, but it’s essential that the attitude of the community is correct. If we start creating a trend that says there can be quality within Khayelitsha and this is the way that we can spinoff positively for Khayelitsha, then it might just be the start of a good trend. At present people are caught in a situation that tells them the situation is the other way around. To change that we have to start at some point, even if it is so small a start, but we need to say to ourselves that we can do it.

What potential is out there within Khayelitsha? Most of the community finds itse lf in a needy situation, and when you are needy there is always plenty of potential. Renewable energy is a possibility of course, and there was a Japanese company that visited us to investigate the potential for recycling as well as wind and solar systems, because there is room for such a development in the township. There are vast other business opportunities, including quite a lot that are not currently existent within Khayelitsha but that you will find outside Khayelitsha, and sadly this paints the wrong picture. We believe that there is room for providing everything within Khayelitsha, but at the moment there is very little. The seaside in affluent areas is an economic stimulant, but within our area it doesn’t play the same role – it is just sea and just a place that people can go during summer and swim a bit, but that’s it. It doesn’t have the economic spinoffs that many other coastlines offer. Another concern is that sport doesn’t play a meaningful role in Khayelitsha, as it is very underdeveloped. We have to explore everything possible that can turn Khayelitsha around. One of the problems is that any money-spinning ventures within Khayelitsha do not fully benefit the people of Khayelitsha. They mostly just get the crumbs. Money that is generated within Khayelitsha generally does not stay in Khayelitsha – it flows out. The outlet is much much bigger than the inlet. SOUTH AFRICAN BUSINESS 2016

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What is the beneﬁt for the investor or business that invests in Khayelitsha? In a nutshell, money might be cheaper in Khayelitsha than elsewhere! You will be at the doorstep of a huge market, lower overheads and even the cost to employ staff would be vastly different. If your business is located elsewhere then a Khayelitsha resident must be

FOCUS informed about you and they must then make an effort get to your product. However, a Khayelitsha resident is on the doorstep of your product. Randwise, the rates are definitely much cheaper in Khayelitsha, as are the overheads, and there are also a number of dti subsidies that businesses and investors could qualify apply for, and land will be cheaper than any other place - and there is a lot of land available and at times properties available. What businesses would ﬂourish in Khayelitsha? Currently there is a big Boxer supermarket in Khayelitsha, and they do well, so retailers will do well here, and anything from fuel to vehicles. It is a fast-growing market, though, so food in particular has a huge demand, as well as for building materials, health products and medical assistance. After a certain time all doctors in Khayelitsha are closed, and there are only a few ambulances, so after hours medical assistance and services also offer a large potential market. it’s more than just the market – the real potential is the fact that anything that can be mass-produced can be done in Khayelitsha and then distributed throughout Khayelitsha as well as ‘exported’ to other suburbs. You know, it amazes me that a lot of people who are eating meat are in Khayelitsha, yet there are no abattoirs in Khayelitsha, and no fish factories.

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This is an old mindset: you’re comfortable with what works for you, but you are not doing anything to explore better avenues of bigger opportunities to grow your market. Why would you have milling companies elsewhere when maize is consumed mostly in Khayelitsha? Why have a big bakery outside Khayelitsha when the biggest market for bread is in Khayelitsha? So then all that bread you must bring into Khayelitsha. The same goes for clothes and stationery and everything that people buy. There is a need for these products in Khayelitsha, and this will benefit the community greatly… but it will also be a very lucrative market for businesses.

SOUTH AFRICAN BUSINESS 2016

INDEX

INDEX Abeco Tanks .................................................................................................................................................................................... 103 Africa e-Waste .......................................................................................................................................................................... 138, 141 Breede-Gouritz Catchment Management Agency (BGCMA) ..........................................................................................................104 Buffalo City Metropolitan Municipality ............................................................................................................................................ 160 City of Johannesburg Urban Development Zone .................................................................................................................... 166, 169 College of Cape Town ....................................................................................................................................................................... 44 Columbus Stainless .......................................................................................................................................................................... 46 Council for Geoscience...................................................................................................................................................................... 84 Cummins South Africa....................................................................................................................................................................... 88 Department of Trade and Industry (dti).............................................................................................................................................144 Durban Investment Promotion .............................................................................................................................................................2 Eastern Cape Development Corporation (ECDC) ............................................................................................................................158 ENSafrica............................................................................................................................................................................50, 52, OBC Export Credit Insurance Corporation (ECIC) ......................................................................................................................5, 58, 61, 62 Fibre Processing & Manufacturing Sector Education and Training Authority (FP&MSETA) .............................................................. 40 Human Resource Development Council (HRDC) ...............................................................................................................................42 IC Training.......................................................................................................................................................................................... 53 Investing in African Mining Indaba...................................................................................................................................................... 83 Khayelitsha Development Forum (KDF) .......................................................................................................................................... 190 Masisizane Fund ................................................................................................................................................................................31 Mpumalanga Economic Growth Agency (MEGA)......................................................................................................................175-182 Mpumalanga Regional Training Trust (MRTT).................................................................................................................................... 39 MTN Business........................................................................................................................................................................... 119, 121 National Metrology Institute of South Africa (NMISA) .........................................................................................................................37 Petroleum Agency SA .............................................................................................................................................................. 7, 74, 76 Phodisa Holdings Limited.................................................................................................................................................................IBC Polokwane Scrap Metal ...................................................................................................................................................................137 REDISA ...................................................................................................................................................................................... IFC, 56 Transnet Pipelines ............................................................................................................................................................................. 78 VeriFi .................................................................................................................................................................................................124 Wesgro............................................................................................................................................................................................... 64 Western Cape Government.................................................................................................................................................................24

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Phodiso Holdings Ltd is a South Africa-based healthcare investment and Management Group, with over 26 years of existence. The company has presence in private hospital operations, infrastructure development, equipment, and pharmaceutical supplies and hospital management expertise. The company was established by a group of 68 healthcare professionals and business professionals, with a joint vision and passion to bring healthcare to the people. Phodiso Holdings constantly keeps itself abreast of the latest technology, proven business models and secures strategic partners and alliances to grow and maintain the reputable status it has earned in the healthcare industry.

THERE’S NO END TO THE BENEFITS OF A CIRCULAR ECONOMY

Not only are we a shareholder in the second-largest private hospital group in South Africa with platforms in Dubai and Switzerland, we are currently expanding our healthcare platforms into the rest of the continent, where we engage government and private sector on healthcare development.

REDISA creates positive futures for businesses, Locally the continually Phodiso Group made two acquisitions, Presta and people and environment by driving a circular economy Orthomed. Boththe leaders in their respective industries, Presta being athat manufacturer and supplier of disability products wheelchairs and will help redesign, reinvent and reuse theand products we consume. Orthomed being producer of Orthotic and Prosthetic Our first-of-its-kind planand andsupplier revolutionary systems are making products in thecontributions continent of Africa. meaningful to our society – creating jobs, opportunities and brighter futures for all. The potential for our future? Endless. Our Pledge to you and the industry As one of the leaders in the industry we will maintain our focus to offer all citizens quality healthcare in South Africa and in Africa, thereby persistently attracting sustainable investment opportunities for the benefit of all, and to grow our share in the industry through our intellectual resources.

Tel 012 751 1780 • www.phodiso.co.za 5 Bauhinia Street No 26 Cambridge, Office Park 0157 Highveld Techno Park, Centurion JOIN THE JOURNEY | www.redisa.org.za |

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