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International emerging markets: South Africa
31 Jan 2008
South Africa – Alive With Possibility. That’s the tagline from the South African government’s equivalent of our UKTI. Its natural resources are abundant – and the Chinese are buying-up as much as they can to fuel the Chinese economy. Being the leading producer of gold, platinum and manganese in the world, with huge deposits of chromium, coal, iron ore, tin, diamonds and copper to name the most mined, South Africa is a leading mining equipment user and massive steel producer; but it lacks oil and bauxite, so energy and infrastructure development must nearly all be imported. Opportunities abound.
A GDP (by purchasing power parity) of just £290 billion in 2006 indicates that, although a massive country its sparse population are working hard to make the country make money. A real growth of 5% sets it among the world’s emerging economies with a GDP per head of £6500 – much higher than many emerging markets. This is derived from 30% industry, where 25% of the working population of 17 million work, 67% service industries, where 45% of the workers are and – surprisingly – just 4% agriculture where the remaining 30% or so work. This leaves 50% of the population below the poverty line.
Much of the produce of South Africa is exported to Japan (12%), the US (12%) Germany (8%) the Netherlands (6%) and China (4%) – but the Chinese proportion is set to grow enormously with the recent acquisitions the Chinese have made of South African minerals, metals and other natural resources.
The main engineering-based industries are – naturally – mining, metalworking, and machinery. But with 2,800 miles of coastline ship repair has become of major importance. Perhaps another surprise, the key growth industry in South Africa is in the automotive industry. And not just assembly, but production too.
Automotive production is the second largest industry in SA, producing more than half a million units in 2006, 140,000 for export, set to grow by 13% year on year for the next few years. GM, Toyota, Ford, VW, Nissan, Daimler Chrysler (as was) and Tata Motors are all huge investors in SA. In fact, the right hand drive versions of all Mercedes C class, BMW 3 series, Toyota Corolla, VW trucks VW Golfs and Jettas are all part-manufactured and assembled in South Africa. Many of these producers use the now 350-strong component manufacturers based in-and-around Johannesburg and Capetown. As a result, aluminium castings and catalytic converter manufacture is moving back into SA at a pace, with metals ore production now a third of all of SA’s manufacturing.
So as you go to the jeweller to buy a diamond eternity ring for Valentine’s day, think of South Africa as more than the world premier producer of diamonds but also alive with engineering possibilities.
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All images copyright © Mercator Media 2008
