General South Africa is the most advanced, diversified, and productive economy in Africa. Boasting one of the most pro-business environments on the continent, South Africa is a logical option for U.S. companies seeking to enter the Sub-Saharan Africa marketplace. The country has a population of over 60 million, covers 1.22 million square kilometers, and is the world’s largest producer of platinum, vanadium, chromium, and manganese.

Economy South Africa has enjoyed relative macroeconomic stability but is struggling to recover from the COVID-19 pandemic, July 2021 riots, floods in three provinces and a precarious electricity supply situation. The Covid-19 pandemic led to a 7 percent contraction to $302 billion in 2020, a 13.1 percent decline from 2019.  The Gross Domestic Product (GDP) amounted to $ 405.87 billion in 2022, with the economy expanding by 2%, (GDP US $ values are not purchase power parity adjusted). Nigeria has overtaken South Africa as the largest economy in Africa.

Inflation is showing a steady drop to enter the SA Reserve Bank’s target range of 3–6 %. The steeply declining SA Rand to Dollar exchange rate is largely a function of the lower inflation and interest rates and perceived increased political risk.   Lower commodity prices have put additional pressure on already highly constrained national fiscal receipts.

The maturity of the South African economy is reflected in the mix of economic sectors:   The largest sector of the economy is services which accounts for around 73 percent of GDP. Within services, the most important are finance, real estate and business services (21.6 percent); government services (17 percent); wholesale, retail and motor trade, catering and accommodation (15 percent); and transport, storage and communication (9.3 percent). Manufacturing accounts for 13.9 percent; mining and quarrying for around 8.3 percent and agriculture for 2.6 percent.

Advantages Parts of the country’s urban areas boast well-developed infrastructure, comparable to OECD standards, but rapid urbanization has led to glaring contrasts. The growing services sector is a major employer, and the corporate side of the economy has been traditionally well-managed, although it faces low productivity gains. The banking and financial services sector is stable.  The Johannesburg Stock Exchange (JSE) ranks among the top emerging market exchanges in the world. Many critical State-owned enterprises (SOEs) utilities are of growing concern due to rapid service contraction and declining revenues.

Regional Agreements South Africa is well integrated into the regional economic infrastructure as formalized by membership in the Southern African Development Community (SADC).  In addition, the Southern African Customs Union (SACU) agreement with Botswana, Namibia, Lesotho, and eSwatini (Swaziland) facilitates commercial exchanges. South Africa is a member of the World Trade Organization (WTO), the G20, and the informal BRICS (Brazil, Russia, India, China, and South Africa) association of emerging economies. South Africa also has ratified the African Continental Free Trade Agreement (ACFTA).

U.S. Agreements The African Growth and Opportunity Act (AGOA) provides duty-free access to the U.S. market for most Sub-Saharan African countries, including South Africa. The United States and South Africa signed a Trade and Investment Framework Agreement (TIFA) in 2012. The United States and SACU concluded a Trade, Investment, and Development Cooperation Agreement (TIDCA) in 2008.

Trade Relationships the United States is a critical trading and technology partner for South Africa and ranks as South Africa’s third-largest bilateral partner in two-way trade by value. While Europe and Japan have well-established trade links with South Africa, trade with China is growing fast, including in financial services.

PAC-DBIA The U.S Department of Commerce chairs the Washington DC-based, President’s Advisory Council on Doing Business in Africa (PAC-DBIA), which advises the President through the Secretary of Commerce, on ways to strengthen commercial engagement between the United States and Africa.  For further information on the PAC-DBIA, please see: www.trade.gov/pac-dbia/

Four reasons why U.S. companies should consider exporting to South Africa:

• New-to-market (NTM) companies should consider South Africa’s geographic advantages, infrastructure, widespread use of the English language, and relatively transparent legal processes, which make it a low-entry threshold country. The business environment (legal, publicity, marketing, forensics, process outsourcing, etc.) is arguably the best in Africa.
• South Africa is a business incubator for new-to-market ideas; as the middle class in Africa grows, business models launched in and from South Africa will find easier acceptance in other Sub-Saharan Africa markets.
• The penetration of South African companies and agencies into Africa makes finding the right partner to collaborate with in third markets a low-risk business development model.
• South African companies are receptive to various partnering arrangements with U.S. companies, ranging from agency to licensing, joint ventures (JVs), mergers, and acquisitions; some South African companies hope to enter the U.S. market through similar arrangements.

Political Environment

For background information on the political and economic environment of the country, please click on the link to the U.S. Department of State Countries & Areas website.