Companies locating in South Africa not only enjoy the opportunity to source inputs at very competitive prices, but often also benefit from a domestic market for their products and services. Investors are able to utilise South Africa and, particularly, KwaZulu-Natal with its excellent infrastructure and logistics mechanisms, as a trade gateway for the provision of products and services deep into Africa.   South Africa’s increasing international presence has resulted in a number of trade agreements being negotiated with other countries. Facilitating the growth of the country’s export markets, these favourable agreements have opened the door to innumerable opportunities for companies based here to increase their international trade   The African Growth and Opportunity Act provides potentially extensive opportunities for a variety of the country’s economic sectors – from manufacturing to agriculture – to access the enormous US consumer market on a duty and quota-free basis on approved products.

Incentives

Industrial Development Zones – An IDZ is a purpose-built industrial estate linked to an international sea or air port that leverages fixed direct investments in value added and export-oriented manufacturing industries.  

TRADE AGREEMENTS  –  A number of agreements which provide for preferential market access into South African as well as for South African products into other markets, have been concluded or are in the process of being negotiated with other countries and trading blocs.

STANDARD SCHEME, CREDIT GUARANTEE SCHEME  – 

The Standard Scheme provides cover OF up to R1 million of the bank facility at 80%, with the fee payable at 3% per annum, in advance.   The initial duration of the scheme is 36 months, although this may be extended twice for a period of 12 months each. Normal criteria applies.

Key Sectors 

Agriculture 

Agriculture in KwaZulu-Natal is extremely diverse and is reflected in the patterns of its topography.   Most of the world’s agricultural activities may be practised here. Given the region’s good and reliable rainfall, together with fertile soils, KwaZulu-Natal’s agricultural sector has become extremely productive and is known for its specialist capabilities across a number of types of farming. KwaZulu-Natal has a total of 6,5 million hectares of land for farming purposes, of which 82% is suitable for extensive livestock production, while 18% comprises arable land.  In order to unlock the agricultural potential of the province, concepts such as agri-villages, community estates, river valley catalytic models and land reform support, as well as the pillars of the new agrarian transformation, set to change the provincial agricultural and rural landscape, are being initiated by the Department of Agriculture and Rural Development.  

Business Services  

The strength of KwaZulu-Natal’s manufacturing and agricultural sectors, together with its seaports and main North-South freight corridor between the coast and hinterland indicate the need to further grow ICT & E sector investment in order to support the province’s economic growth.  The infrastructure and access to transport, as well as the existing manufacturing base provides the ICT & E sector with the opportunity for significant growth. A total of 12 digital community hubs have been established in rural areas of the province as a means of increasing access to digital information by communities. The strength of the KwaZulu-Natal ICT-E sector is the result of the KZN Industrial Hubs Strategy, which exists to guide and attract ICT-E investment into the province.   Advantageously, the electronics industry is set to form the backbone of the KwaZulu-Natal industrial hubs mooted for the province’s towns of Richards Bay, Newcastle, Ladysmith and Port Shepstone.   

Clothing 

The South African clothing and textile industry has suffered massive erosion as a result of increased importation of such items into the country. KwaZulu-Natal has been one of the hardest-hit regions by this development. Nonetheless, the province has unsurpassed skills in this area of activity and affords massive opportunities for investment in the sector.  

Renewable Energy   

Globally, the case for the Green Economy has been made abundantly clear.   Renewable energy is the only electricity generation technology whose price has decreased dramatically, with solar PV module prices falling by 80% during the past five years, while wind turbines have become 30% less expensive. South Africa’s wind resources are regarded as amongst the top five in the world and could sustain 25% of our grid’s capacity. Furthermore, it is estimated that by 2020 the price of wind and solar PV will be at least R0-50/kwh, unlike Eskom’s Medupi power station, which – once completed – will charge close to R1-10/kwh.  

Water 

Water is now regarded as the highest global risk in terms of devastation, ahead of nuclear war or a global pandemic.   South Africa, the 30th driest country in the world, not only experiences extreme climate and rainfall fluctuations, but has an average annual rainfall which is half the global average. This rainfall is unevenly distributed across a country which currently has access to surface water (77% of total use), groundwater (9% of total use) and recycled water (14% of total use).   Water is not only a crucial component for food production, but is also integral to the country’s industrial, mining and power generation sectors, using 10% of its freshwater, while contributing close to 40% to the country’s total GDP. Agriculture accounts for 15% of GDP and uses 60% of the available water supply. The industrial sector, which contributes 29% towards GDP, uses 11% of the water.   It is predicted that during the next five years, there will be significant growth in the water infrastructure, waste-water treatment, desalination and water recycling sectors. 

Health Services 

South Africa’s health-care spend is estimated at some US$39 billion. The health-care system comprises a large under-funded and under-staffed public sector, which supports 80% of the population and the small private sector, financed by medical aid schemes. The bulk of the country’s health-care expenditure emanates from the public sector, with 50% of total spend.   The sector comprises about 400 public and 220 private hospitals. 

Manufacturing 

KwaZulu-Natal’s manufacturing sector enjoys a significant share of the South African economy and is the second largest in the country with nearly a third of manufactured exports being produced here.   The sector contributes 20% percent of employment to the province.   The largest manufacturing industries in KwaZulu-Natal are the automobile sector, pulp and paper products, rubber and plastics, chemicals and petro-chemicals, food and beverages, as well as textiles and clothing. The mining sector, which includes titanium dioxide and zircon, along with iron, steel and ferro alloys is also considered very important.   The vehicle-manufacturing industry has created a considerable multiplier effect in component and service providers. The automotive leather industry has grown rapidly, with exports significantly increasing foreign exchange earnings as a result of rapid industrialisation in, especially, Newcastle, Ladysmith, Dundee, Richards Bay, Durban, Hammarsdale, Richmond, Pietermaritzburg and Mandeni.

Mineral Beneficiation  

Mining and mineral beneficiation contributes some 6,5% of South Africa’s GDP and is the country’s single largest private employer (500 000 people), with small-scale mining operations also making a significant contribution to employment creation.   Mineral beneficiation has become a major driver in advancing the empowerment of historically disadvantaged communities in this country. It also presents opportunities for the development of new entrepreneurs in both large and small mining industries.   KwaZulu-Natal is endowed with a host of minerals and metals. The province’s coalfields produce largely metallurgical anthracite coal, as well as semi-coking coal products used as a replacement for hard-coking coal, for the steel mills found in KwaZulu-Natal.   The province also boasts mineral and sand mining operations along the north coast, as well as quarrying (limestone, stone and aggregate) activities across the province, inclusive of, especially, the South Coast.

Tourism and Property Development

For the past several years the KwaZulu-Natal property market has enjoyed almost unparalleled growth, repeatedly outperforming other provinces as an investment destination. The reasons are clear, KwaZulu-Natal had for some time lacked a variety of factors necessary to maximise growth, including a lack of national and international marketing focus.   Due to the level of international business activity, Cape Town and Johannesburg were initially thrust into the spotlight in South Africa, resulting in significant foreign investment, which permeated into the property markets of these areas. Any injection of external equity inevitably leads to the consequent uplift in the value of an economy and, provincially, this was evident. This was surprising, given the importance of Durban’s massive container port. Yet Durban and KwaZulu-Natal did not flourish and develop at the same rate as its provincial rivals.   This is no longer the case. South Africa’s best kept secret is out.   Not only is KwaZulu-Natal’s year-round subtropical climate a major attraction, so too are the province’s exceptional beaches, wildlife experiences and splendour of its mighty Drakensberg mountain range.   Investment has come in a variety of guises, inclusive of Durban’s Point Waterfront Development, the Gateway Theatre of Shopping and the development of Umhlanga Ridge, the La Lucia Office Park, Sun Coast Casino, Sibaya Casino, the Midlands Mall and Dube TradePort.

Trade and Investment KwaZulu-Natal

+27 (0) 31 368 9600

info@tikn.co.za