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FSA Research Project 2011South Africa

2 | FSA Research Project

About FSA

the FSA Research Project is one of the projects organized by the Financial Study association Amsterdam (FSA), which is the largest financial study association in the Netherlands. It is administered by students from the University of Amsterdam and the VU University Amsterdam.

The objective of FSA is to provide students with an opportunity to put the theory as taught at university into practice. We do this by organizing several national and international projects during the year. In this way the students participating in the FSA projects or those who organize the FSA projects have the opportunity to meet their future employer, while the participating companies get the possibility to meet top students in the final stage of their study.

The projects of the FSA refer to the majors Accountancy, Consultancy, Controlling and Banking & Finance. These subjects are covered in the following well-known projects: London Banking Tour, International Banking Cycle, Beroependagen, National Investment Competition, Access Accountancy, Amsterdam Investment Cruise, Consultition, Fort Boyard, Congres, Multinational Battles, Traders Trophy, FSA Master Courses, FSA Carrièrediner, Access Consultancy and the international FSA Research Project. We also publish the academic magazine Fiducie and the FSA association magazine: FSA & Beyond.

All the FSA activities are organized by students from both universities of Amsterdam with an interest in finance. For the organization of the projects, the FSA cooperates with many companies and in a national context with other student associations in Groningen, Maastricht, Rotterdam and Tilburg within the Financial Association Netherlands (FAN).

Innovation, ambition and enthusiasm are characteristic of the people of the FSA. This is also reflected in our slogan: ’The urge to improve is what makes the difference’. It has made us what we are today and stimulates us to find new and better ways to bring students and employers closer together. The FSA is always looking for talented members and there are enough opportunities for students to join us.

FSA Research Project | 3

IntroductIon 4

commIttee 6

AdvIsory BoArd 8

commIttee of recommendAtIon 10

WhAt We offer 12

clIent BenefIts 14

reseArch experIence 15

ABout south AfrIcA 16

doIng BusIness In south AfrIcA 20

CoNTeNT

Financial Study association Amsterdam (FSA)Roetersstraat 11Room e2.111018 WB AmsterdamThe NetherlandsT: +31 (0)20 525 65 12F: +31 (0)20 525 59 16e: [email protected]: www.fsaresearchproject.nl

FSA Research Project Committee 2010-2011

David Alvero Bouma (external Relations)Joost Hoogervorst (Coordinator)Leonie Janssen Daalen (Chairman)Gabor Ruigrok (Coordinator)Tom Snoek (Treasurer)Maaike Zwiers (external Relations)

CoLoPHoN

This brochure was compiled to promote the FSA Research Project South Africa. The ResearchProject is a project of the Financial Study association Amsterdam. For more information, please visit www.fsa.nl or www.fsaresearchproject.nl.All rights reserved.

INTRoDUCTIoNThe FSA Research Project is proud to present its destination for 2011: South Africa. In July and August, a team of twenty highly talented and motivated students will conduct international research for companies with aspirations towards emerging markets. extensive training and supervision by knowledgeable experts in the preparatory phase will have the team fully prepared for departure.

The economy of South Africa is a developing and influential market economy, especially after the country successfully organized the 2010 FIFA World Cup. For the coming two years, above average growth is forecast. Next to its abundance of natural resources, South Africa has well developed financial, legal, communications, energy, and transport sectors and its stock exchange is the 18th largest in the world. Furthermore, there are several sectors in which the government and private parties are investing to stimulate innovation and development.

In December 2010, South Africa has received a formal invitation from BRIC, an economic coalition that includes Brazil, Russia, India and China, to be a full member of a new emerging markets bloc called BRICS - Brazil, Russia, India, China and South Africa. South Africa and BRICS member states collaborate closely in various international organisations and formations such as the United Nations, the G-20 and the IBSA (India, Brazil and South Africa) Dialogue Forum.

The FSA Research project is an excellent opportunity to provide answers to your business questions. We deliver tailor made professional consultancy services and research reports for companies with international aspirations. As the FSA operates on a non-profit basis, company specific research can be conducted for a competitive price. The quality is guaranteed by years of experience, the careful selection of the researchers, seminars and language courses from knowledgeable experts, and guidance by the best professors the city of Amsterdam has to offer. Also we regularly receive support and advice from SAVUSA (South Africa Vrije Universiteit Strategic Alliance). Furthermore, we work in cooperation with Klaas Deknatel who is a publisher for www.emergingafrica.nl, an online financial magazine targeted at Dutch companies and entrepreneurs that have a professional interest in emerging Africa.

This brochure is intended to inform you about the structure of the FSA Research Project and how we can add value to your business. If you have any further questions, please do not hesitate to contact us. We will be more than happy to meet you and to provide additional information.

Kind regards,

Committee FSA Research Project 2011: South Africa



IntroductionBy Uri Rosenthal, Minister of Foreign Affairs

The Financial Study association Amsterdam (FSA) has picked South Africa as the site of its Research Project for 2011. This is a smart choice. South Africa’s recent admission to the new emerging markets bloc BRICS – Brazil, Russia, India, China and now South Africa – shows that it is reclaiming a prominent position in the world. Not long ago, the country was known for its brutal apartheid system – especially for imprisoning Nelson Mandela, who later became South Africa’s first black President and a global icon of hope and reconciliation. Today, it is still engaged in a challenging transformation. But it has come a long way. Visiting South Africa in the transition period of the Reconstruction and Development Programme, I was struck by the enthusiasm and energy in both the private and public sector.

Twenty years after Mandela’s release, South Africa treated the world to an impressive World Cup. The country has taken a leading position in the region and throughout the African continent – hesitantly at first, but with increasing self-confidence over the years. As from January 2011, South Africa is – again – a member of the UN Security Council. Its membership of BRICS shows that it is ready to play its part in restructuring the world’s economic and financial architecture. It is shouldering its responsibilities.

economically, South Africa has recovered from the effects of the global crisis. Its economy grew at a rate of 3.4% in 2010, and this pace is expected to continue. Without doubt there are enormous problems: unemployment is massive (35%) and income is unevenly distributed. The South African government will have to come to grips with these major domestic challenges. So far, it is doing so by maintaining a tight macroeconomic policy that is aimed at growth. Naturally, private sector development and foreign investment will be key factors in sustaining economic expansion. This is also one of the main principles of Dutch development cooperation.

South Africa, like the Netherlands, has an open economy. This offers ample opportunity for trade and investment between our two countries. The Dutch government encourages and facilitates foreign trade and investment: they are the engine that powers our growth, and it is essential that we keep this engine going. This is why we stand ready to assist entrepreneurs and corporations that are considering investing abroad, including of course in South Africa. We do so through our network

of embassies and consulates. our efforts are focused on water development, agriculture and transport – important sectors both for South Africa and for Dutch companies, which can benefit from the various economic programmes and grant facilities the Dutch government offers. Many Dutch companies are already active in the South African market. Some of them have succeeded in making corporate social responsibility an integral part of their commercial operations. The Dutch government has developed a toolkit specifically for this purpose. our embassy in Pretoria can assist companies in this area as well (for more information and examples of successful investments, see www.internationaalondernemen.nl).

The FSA Research Project offers companies that are investing in South Africa, or are considering doing so, a perfect opportunity to conduct company-specific research. This is a win-win situation: the highly qualified students participating in the Research Project gain valuable experience and get a detailed view of how international companies operate; the corporations benefit from tailor-made answers to questions they do not have the time or human resources to investigate themselves. Previous Research Projects, including last year’s in China, proved to be big successes. I am confident that the South African experience will add to FSA’s strong track record. It is my great pleasure to invite you to participate!

uri RosenthalMinister of Foreign Affairs of the Kingdom of the Netherlands

CoMMITTee

Joost hoogervorst, 23CoordinatorMSc Business Studies

leonie Janssen daalen, 22ChairmanBSc economics and Business economics

david Alvero Bouma, 24external RelationsMSc Business Studies: entrepreneurship & Governance and Valuation

gabor ruigrok, 21CoordinatorBSc economics and Business

maaike Zwiers, 23external RelationsBSc economics and Business economics

tom snoek, 25treasurerBSc economics and Business


f.l.t.r. Joost Hoogervorst, Leonie Janssen Daalen, David Alvero Bouma, Gabor Ruigrok, Maaike Zwiers, Tom Snoek

PARTICIPANTS

Leanne JacomettiMSc Business Studies: Strategy, 22

Bente feldbergMSc Business Studies: Marketing, 25

noor BoukemaMSc Strategy Policy: Communica-tion and organization, 24

hannah KeulenBSc Clinical Psychology, 22

douwe van loenen MSc economics: International Financial economics, 25

meindert engwerda MSc Business Studies: Strategy & organization, 24

Bart AupersMSc Business Administration:Strategy & organization, 23

floris hoogstratenMSc Business Administration: Strategy & organization, 24

eva sepers MSc Business Administration: Strategy & organization, 22

esther de KruijkMSc Culture, organization and Management, 24

Barbara egelerMSc Business Administration: Marketing, 23

Christine PietersMSc Business economics: Finance & org. economics, 25

hugo feenstraMSc Business Administration: entrepreneurship, 24

Jesper hansonMSc economics: International Relations, 22

Joren JanssenBSc economics and Business eco-nomics, BSc earth & economics, 23

maurits snijderBSc economics and Business: Finance, 22


ADVISoRy boARd

prof. dr. A. lucas FinanceAndré Lucas is an expert in Financial Risk Management, Asset Pricing, and Financial econometrics. His research focuses on empirical modelling issues for market and credit risk, in particular at the portfolio level. He has published on this topic in journals such as Journal of

econometrics, Journal of Business and economic Statistics, Applied Mathematical Finance, and Journal of Banking and Finance.

prof. dr. A.W.A. Boot FinanceArnoud Boot is Professor of Corporate Finance and Financial Markets at the University of Amsterdam and director of the Amsterdam Center for Law & economics (ACLe). He is a member of the Dutch Social economic Council (SeR) and the Bank Council of the Dutch Central Bank (DNB).

He is also advisor to the Riksbank (Central Bank of Sweden), Research Fellow at the Centre for economic Policy Research (CePR) in London and at the Davidson Institute of the University of Michigan. Prior to his current positions, he worked at the faculty of the J.L. Kellogg Graduate School of Management at Northwestern University in Chicago, and during 2000-2001 he was a partner in the Finance and Strategy Practice at McKinsey & Co. In addition to his academic activities, professor Boot advises extensively on ownership structure issues, particularly related to the public/private domain. He is frequently involved in legal cases (expert opinions), and is consultant to several financial institutions and corporations. His consultancy activities concern the regulation and strategic positioning of financial institutions, corporate finance, governance and anti-trust issues. For these activities, he has also established the Amsterdam Center for Corporate Finance, a ”think tank” designed to improve the interaction between theory and practice.


prof. dr. s.J.g. van WijnbergenEconomicsSweder van Wijnbergen is professor of economics at the Faculty of economics and Business at the University of Amsterdam. In 1997 Hans Wijers brought him in to the Ministry of economic Affairs, where he worked as

secretary-general until 1999.Van Wijnbergen studied physics at Utrecht University and econometrics at the erasmus University. He obtained his doctorate on economics at MIT in the US. Between 1980 and 1992 van Wijnbergen was attached to the World Bank, in the second half of this period as head economist. His research area is focused on international economics, finance, balance of payments- and financial crises.

prof. dr. Ir. h. rijken Corporate FinanceHerbert Rijken is attached to the VU University as professor of corporate finance at the Faculty of economic Sciences and Business Administration. He studied Applied Physics at the tu Delft and Business Administration at

the University Nyenrode. He has obtained his doctorate at the faculty Applied Physics of the TU eindhoven. education- and research activities are mainly focused on corporate finance, in particular credit risk and corporate governance.

prof. dr. t.l.c.m. groot Management AccountingTom Groot is professor Management Accounting at the Faculty economic Sciences and Business Administration at the VU University. He is also head of the department Accounting and director of the research institute

Amsterdam Research Center in Accounting (ARCA) and honorary member of the Association of Financial Controllers. He regularly publishes in national and international magazines about the performance measurement and -judgment, management control and financial management in commercial firms as well as non-profit organizations.

drs. l.A. van eerden Financial Business AdministrationLeo van eerden is attached to the VU University as a professor at the finance department of the Faculty of economic Sciences and Business Administration. He studied International economics at the University of Tilburg and at the

moment he is working on his PhD at the VU University. His current research area is mainly focused on financial crises, regulation, supervision on banks and system risk management.


CoMMITTee oF ReCoMMeNDATIoN

prof. dr. d.c. van den BoomRector magnificus University of Amsterdam

prof. dr. l.m. BouterRector magnificus VU University Amsterdam

drs. l.m.l.h.A. hermansChairman SMe’s Netherlands

Drs. D.R. Hooft GraaflandMember executive Board & CFo Heineken

drs. m.e. hulshofDirector NL eVD Internationaal

dr. f. h. KamsteegAssociate Professor Faculty of Social Science, VU University Amsterdam

llm. e. e. van der laanMayor of Amsterdam

J.g.A. rijnierseCeo Sodexo Benelux, board member of VNo-NCW

dr. A.h.g. rinnooy KanChairman Social economic Counsil (SeR)

A.J. scheepbouwerChairman of Management Board and Chief executive officer, Royal KPN N.V.

prof. dr. c.n. teulingsDirector Centraal Plan Bureau

drs. r.g. de vosDutch ambassador at the Consulate General in Cape Town, South Africa

drs. f.W. Weisglasex-chairman of “de Tweede Kamer der Staten-Generaal”


my south AfricaBy Frans Kamsteeg and Colette Gerards,Faculty of Social Science,VU University AmsterdamAdvisors at SAVUSA

During a recent SAVUSA trip to South Africa in November 2010 we visited three universities, had talks with people from two others, and visited the National Research Foundation (NRF). All thirteen faculties of VU University Amsterdam (VUA), where we work, have joint research projects in the country. Higher education (He) is really South Africa VU Strategic Alliances’ business, or to put it in FSA terms, we are in the business of Higher education, and in today’s South Africa He is business.

Higher education in South Africa is as complex as society itself, sharing many of its bigger problems. There are huge differences in financial means between the institutions, they have very different historical backgrounds and traditions, research and teaching capacities are very unevenly divided, and staff and student population only rarely represent the ideal of the Rainbow nation. This huge country has cosy and well-to-do and Afrikaans speaking campuses in the centre of economic activity, such as at Stellenbosch and Pretoria University, but also isolated campuses such as North West University’s Mafikeng campus near the Botswana border, with an almost all-black Setswana speaking student population.

yet after the abolition of Apartheid, the South African Higher education system has changed drastically. In 2003 the number of institutions was reduced from 36 to 22, predominantly through mergers. Creating synergy and efficiency were drivers of this operation, but ‘transformation’ was the key word. This word expresses the vision of a new system with equal chances for all South Africans, (‘formerly’) advantaged and disadvantaged, beyond the divide of race, ethnicity, and class. But (borrowing from Nelson Mandela’s autobiography) it is still a ‘long way to transformation’. Recently, a study by the South African Academy of Science, showed that the country only produces 23 (predominantly white male) PhD’s per million inhabitants (Netherlands 193), an inter-nationally astonishing low figure. Increasing the number of academically skilled researchers then is one of major challenges of government and institutions together.

Knowing this we feel privileged to work for SAVUSA as we try to make a contribution exactly to this goal. Through the Desmond Tutu and SKILL program we have brought South African students to the Netherlands to do Master’s

courses, full Master’s programs, and PhD research training. This effort is generously funded by the Dutch Ministry of Development Cooperation and the Royal Dutch embassy in Pretoria. For years large numbers of Dutch students have taken up exchange periods at South African universities, but very few South Africans travel northbound. SKILL aims to address this discrepancy. At Master’s level students can enroll in courses in water and water management, agriculture, transport and logistics, tourism and finance and accounting (in Amsterdam, Delft, and Wageningen). These fields of study are meant to overlap the priority skill areas defined by South African government. At the PhD level SKILL offers pre-PhD training workshops for 75 students per year at several universities in South Africa. Twenty of these students are offered the opportunity to spend a six month period for PhD coursework and training in the Netherlands once they have been registered as PhD students. SAVUSA/SKILL also funds a chair in Finance and two PhD students at WITS Business School in Johannesburg, in close cooperation with the Zijlstra Center at VU University.

Beside feelings of pride to be able to work on this formidable and responsible task, some modesty is in place. At SAVUSA we only serve a limited number of South African students, whose personal efforts are definitively far more decisive. For the FSA students that are going to partake in the South Africa program, we think it is good to know that they are going to meet people who are anxious to make their country transform, economically, socially, and academically. And that they are going to meet young people like themselves, students, with ideas, goals, and dreams about themselves and their role in society. For all of them, South Africans and Dutch alike, broadening their skills and horizons is no doubt a major drive.


WHAT We oFFeR

We conduct high quality, company-specific research in emerging markets on a non-profit basis for companies who are thinking to internationalize their operations.

WhAt? The main objective of the project is to conduct research in South Africa and the Netherlands, which can be fully customized to the wishes of the company. of course, the research can be conducted in several areas. examples of research that have been conducted previously are:• Market Analysis • Competitor Analysis • Industry entrance analyses• Sector Analysis • Growth strategy analyses• Feasibility Analysis• Identification of possible business partners• Background research and competitive market analyses• Distribution and Logistics Research • Finance or Investment opportunities • outsourcing and off Shoring • Import and export Analysis • Market expanding opportunities

hoW? Before going abroad, thorough desk research will be conducted and maximum preparation will be ensured. Researchers are offered intensive training about conducting research, South Africa, and relations with clients. The acquisition period starts in January and as soon as the client has given the final assignment, desk research will start. During the entire process we will be supported by our advisory board. They can be contacted by the committee in case of any questions and will act as our consultants.

The field research will take place in South Africa and will last for five weeks. once the participants have returned to the Netherlands, the gathered data will be processed and the final report will be written. The company will constantly be kept well-informed and updated about the project’s progress. The research results will be presented to the contracted company and, upon request, the report will be published.


student selectIon For every FSA Research Project, about 100 students apply. These students are active in the fields of Finance, Accountancy, Management Accounting (Controlling), International Financial economics, Marketing, Fiscal economics and other related disciplines such as Law and Social Science. We have selected sixteen of the most promising students.• Final stage of study (150 eCTS prerequisite)• Highly motivated and ambitious• Internationally oriented • organizational experience• Good academic results• Team playing skills

Note: Participating companies are able to express their preference for participating students

desK reseArch Desk research covers a period of approximately six months. The first half of this period will be used to learn about the South African economy, politics, culture and language. The students acquire this knowledge through lectures given by guest speakers, i.e. people from business practice. During the second half of the desk research students will start the research for their individual business assignments.

fIeld reseArch During the Research Project, approximately five weeks of field research will be carried out in South Africa. The information needed for these assignments will be obtained by means of interviews and visits to companies and institutions. The way the field research is conducted can be adjusted according to the specific preferences of the participating companies.

reportIng After our visit to South Africa each participating student will analyze and process the information gathered during the previous phases of the Research Project. The individual contributions of the participating students to the general survey will then be compiled to a customized report covering the research question proposed by the client. The students will present their individual research reports to the participating companies. A seminar organized in December will inform the companies about the results and give them the chance to get acquainted with professors and participating students.


CLIeNT BeNeFITS

For over 15 years, the FSA Research Project has conducted research in a variety of emerging markets. This has resulted in an extensive network and the accumulation of valuable knowledge concerning this field of research. This enables us to continue delivering the required work and to end up with satisfied clients of the FSA Research Project year after year. each individual research project will be customized to the needs of the participating organization with the objective to completely satisfy the client. This way, we can offer:

hIgh QuAlItyStudents conducting the research are selected based on both personal and educational performance. Primarily, these students are in the final stage of their study. Prior to departure, the students carry out extensive desk research and study the sector and industry specific characteristics of the particular research subject. Because of this, the time spent in South Africa can be fully dedicated to field research. The selected students will dedicate five weeks to the field research in South Africa. In order to guarantee quality of the research, it will be conducted under supervision of university professors of both the VU University Amsterdam and the University of Amsterdam.

confIdentIAlItyIt is possible to manage discrete research. This means the company name and/or the results of the research will not be published or discussed publicly. Clients named in the subsequent section have given their explicit authorization.

competItIve prIce Since the FSA is a non-profit organization, we are able to offer specific research at a price of approximately 10,000 eUR (excluding VAT), based on research to be carried out by two students. The costs will increase accordingly in case the assignment requires more students.

clArIfIcAtIon• expenses are based on the participation of twenty-two students for a stay of five weeks in South Africa.• Travel and accommodation expenses include airline tickets, insurance costs, and transportation in South Africa.• The organizational expenses consist of correspondence, telephone bills and brochures.• The academic supervision and the final report, which will be presented, are part of the research expenses.• each participating student will contribute 750 eUR.


over the last fifteen years the Financial Study association Amsterdam has gained considerable experience in organizing foreign Research Projects. The destinations of the previous editions are displayed in the ‘FSA Research Project’ – world map at the end of this brochure. In each of these projects, research assignments have played an important role. As mentioned before, the research can be conducted in a variety of fields. examples of participating companies in the past have been: • ABN AMRo • Royal Philips • ABP • P&o Nedloyd • Corus • Rabobank • De Nederlandsche Bank • Stork • DHL • TPG • Grontmij • TNo• ING Group • Unilever

This list shows a number of companies active in different industries. Due to confidentiality issues, we can only mention a limited number of companies, which have given their explicit permission. Some examples of research assignments are provided below. Noteworthy is that only large companies are named here, numerous researches have been done for several small and medium enterprises.

green technology (china, 2010) This research was to identify the opportunities in the Chinese market. The focus was on Shanghai, Beijing and the province of Shandong. The research consisted of two parts. on the one hand, the aim was to find out possibilities for doing business in China (including the legal aspects). on the other hand, it was focused on sustainability and agriculture in particular. To highlight the reciprocal investment possibilities, also a blueprint was made of both these sectors in the Dutch market.

Synclair Packaging B.V. (Argentina, 2009) the research included a market-scan of the flexible food packaging industry in Argentina, specifying the meat industry, and the identification of possible distributors. This was done in order to give recommendations about entering the Argentinean food packaging market.

strawberindo lestari (Indonesia, 2008) this research represents a study on the logistical process of PT Strawberindo Lestari’s export activities to Singapore and Malaysia. The goal of this project was to find a more cost efficient method of transportation, while preserving the quality of the products.

nec philips (south Africa, 2007) This particular research was about finding appropriate business partners for the joint-venture NeC Philips in Mozambique, Tanzania, and Kenya to distribute one of their products. In order to realize this they had to plan and arrange a large variety of business meetings with potential distributors in each of these countries. The outcome of this research assignment was an advisory report concerning which distributors were best suited for the job. NeC Philips actually used their advice to select one of the potential partners.

dutch trade Board (India, 2006) The research in India was performed for the Dutch Trade Board (DTB), which is an agency related to the Dutch Ministry of Foreign Affairs. This research was focused on the trade relations between Dutch and Indian SMe’s in the biotech, medical, automotive, ICT and agricultural sector. The final report is now used by the eVD in providing information about India to Dutch companies.

dhl (Brazil, 2005) The scope of this research assignment was the Brazilian express-market and the interaction with the Benelux express-market in particular. Furthermore they explored the possibility of expanding their business.

rabobank (russia, 2004) the FSA conducted research within the agricultural business and provided Rabobank with a qualitative industry entrance analysis of the Russian agricultural market.

Ing group (India, 2003) The FSA provided ING Vysya Life Insurance with a quantitative analysis of their investment portfolio in India. A decreasing interest rate was the reason to assess whether, next to bonds, investments should be expanded to stocks. ING used the report to rebalance its investment portfolio.

ReSeARCH exPeRIeNCe


About SoUTH AFRICA

The economy of South Africa has characteristics of both a developed and an emerging market. There have been constant investments for the last decades in several sectors, for example in infrastructure and horticulture. But within these sectors and others, there is also a definite need for innovation. Techniques get obsolete and the effects are particularly clearly visible in the energy sector, where electricity crises occur regularly. Because of all this, the South African government is trying to stimulate international companies to come to South Africa for business. And they are succeeding, because South Africa is increasingly attracting international business opportunities and investments. With a recent invitation for a BRICS-membership, a highly developed economic infrastructure and one of the most promising and vibrant emerging market economies across the globe, South Africa is definitely on the rise!

Economic indicators 2009 GDP: 505.3 billion US dollar (26th in the world list)GDP per capita: 10,300 US dollar Real growth rate GDP: 4.6 percent for the first quarter of 2010Inflation rate: 7.1 percent on averageLabor Force: 17.38 million economically activeIndustries: energy, logistics management, water resource management, horticulture, infrastructure & transportation, mining (world’s largest producer of platinum, gold, chromium), automobile assembly, metalworking, machinery, textiles, iron and steel, chemicals, fertilizer, foodstuffs, commercial ship repair.Source: World Factbook, CBS, EVD (2010), South African Government Information.


Foreign trade 2009Total import in South Africa: $66.02 billion Total export from South Africa:$66.64 billionExport from the Netherlands to South Africa: 1.013 billion euro Import in the Netherlands from South Africa: 1.249 billion euro Main trading partners import: 1. Germany, 2. China, 3. United States, 4. Japan, 5. UK Main trading partners export: 1. United States, 2. Japan, 3. Germany, 4. UK, 5. China Source: CIA World Factbook, EVD, EIU (2009)

foreign direct InvestmentSouth Africa is an attractive country for foreign investors. Currently the amount of FDI is growing, so there is still room for profitable investments. According to the United Nations Conference on Trade and Development (UNCTAD), South Africa received 5 million US dollars of foreign direct investments in 2007. This was about 14 percent of the total FDI flows to sub-Saharan Africa.

The South African government attaches great importance to attracting foreign investment. The focus is especially on labor-intensive activities, for example tourism and industries that process South Africa’s rich resources. Companies must not only possess technical knowledge but also distribution channels. Cape Town, Durban, Johannesburg and Pretoria are the main commercial and industrial areas which receive the most foreign investments. Total foreign direct investment in South Africa in 2007 was approximately 35.6 billion US dollar.

The South African government tries to stimulate inward investment. The Department of Trade and Industry (DTI) developed more than ninety incentive programs to attract investors. The ongoing privatization policies also provide opportunities for investors. In the last years privatization of public enterprises in aviation, railways and telecom-munications made especially the infrastructure and transport sector an interesting goal for investors. At the moment energy-intensive projects are postponed to the long term because of the energy shortage in South Africa, so there is a need for new insights and investments in this sector.Source: EVD

A selection of promising sectorseVD identified several promising sectors for Dutch companies wanting to do business in South Africa. This selection is based on the size and development of the market and the opportunities for import or investments from the Netherlands. The selected sectors are:

• energyof all the countries in the African continent, South Africans consume the most energy per person. This makes the energy sector in South Africa interesting. South Africa uses coal as the main source of their energy, and it is also an important export product. The fact that there is such an abundance of coal makes the electricity prices in South Africa the lowest in the world. Unfortunately, this price level cannot be maintained as energy consumption is expected to keep rising. Furthermore it is inevitable that at some point in the near future the country will start running out of its coal stocks.



In the last years, there have been so called ‘energy-crises’ in South Africa on a regular basis. During these crises, there was no energy available in the entire country for several hours. There was an urgent need for new investments to increase the overall capacity to generate energy in the country, and this need is still present nowadays. Innovation in the South African energy market would be welcome, and the existing equipment needs some radical improvements. This evolution is likely to come from abroad. In fact, there are already some foreign companies getting involved in South Africa’s energy sector. • Logistics managementSouth Africa and The Netherlands serve common functions in the area of logistics. South Africa is often referred to as ‘the gateway to Africa’ and The Netherlands have a similar role for europe. The logistics sector accounts for at least 10% of South Africa’s GDP and in the coming years this percentage is expected to grow. This growth will be caused by increased investments in logistics. At the moment, the basis of the transportation system in South Africa is sufficient, but because there have been differences in the development of the infrastructure in various parts of the country, there are some areas that need serious attention. The fact that South African companies spend more and more each year on logistics makes the demand for an improved system even more urgent. In 2007 alone, companies in South Africa have spent over 29 billion euros on logistical and similar operations. 96% of the export products that South Africa sends out is transported overseas, which is why an important part of the overall logistic spending goes to nautical transportation and harbour operations. The South African government also focusses on airports, industrial areas and the development of a new railway network. Because of these complex challenges in the logistical area, spending by the government and the private sector is expected to keep rising steadily for the years to come.

• Infrastructure & TransportationSouth Africa is the most important country when it comes down to transportation and trade in Africa. That is why the South African government has considered this sector as one of the most important ones to invest in. In the past decade the investments have slightly decreased. In order to maintain high quality in infrastructure and transportation, the government has recently initiated new investments. For foreign companies, these investments provide opportunities to introduce their innovative technologies in the South African market. The government has announced to provide over 71.6 billion euros to the transport infrastructure sector until the year 2012. In addition to these investments, there are large companies in the private sector who announced that they are planning to use a part of their budget for innovation. Some examples of areas where the investments take place are the building of new ships and railway facilities, eliminating bottlenecks in the road transport infrastructure and stimulating innovation in air traffic. • HorticultureSouth Africa has a well developed agricultural sector, whose production is sufficient to serve the entire country. There is little demand for import of agricultural products, since about 12% of the land is available for production of fruit, vegetables and flowers. However, the sector could use some input from abroad for its organic production technologies. The most opportunities for foreign companies can be found in the following subsectors: supply of agriculture knowledge, supply of starting products and expertise in food processing and agricultural logistics. In addition, there is a need for innovation in the aquaculture, and the handling and processing of animals and their products. Therefore there is a wide range of target companies for potential foreign suppliers. In the last years there have been some difficulties for the entire horticultural sector. examples of these difficulties are increased prices, elimination of subsidies and obsolescences within the sector. To keep up with the

AboutSoUTH AFRICA


world wide level, innovation and modernizations are necessary. The horticultural sector is currently investing to improve production processes and transportation (cooling, packaging, etc). Furthermore, the country has an ideal climate for various agricultural products, and these advantages should be exploited as much as possible. • Water resource management South Africa faces multiple issues in this area. Rains are local and brief. Therefore, water demand structurally exceeds supply. The horticultural sector, which is discussed above, contributes to the scarcity of water. Another major threat is the water quality. Surface- and groundwater are both structurally contracting more pollution. Despite this lack of clean water, the water consumption has been increasing and this trend is expected to continue for the coming decades. Not only because of the growth of the South African population, but also because of an increase in the average water consumption per person. The aim of the government is to make sure that every person in South Africa has acces to clean water. This fact, in combination with the present challenges, makes water resource management an interesting sector for foreign companies. There is a lack of experience, expertise and innovation and the purification plants and sewage systems are obsolete or completely inoperative. For these new investments, South Africa is particularly interested in The Netherlands because of our high quality in water management and the innovative technologies that are used. Although there are some businesses being started up in this sector, the supply of technologies is still far too low to meet the demand. This would seem like a golden opportunity for foreign companies to fill the void.Source: EVD

Education12.3 million people in South Africa participate in some kind of education currently. The average number of years in school per person is 13. There are 26,292 schools in the entire country, both public and private. The National Department of education is responsible for the education

and schools in the country as a whole. on average, 5.4% of GDP is spent on education. Source: EVD

historySouth Africa is considered to be the most prosperous country of Sub-Saharan Africa. Despite of this, it shows characteristics of both a developed country and a developing country. According to the IMF, South Africa was responsible for 34% of the total GDP of Sub-Saharan Africa in 2006. GDP per capita is the highest in the area of Gauteng, which encompasses Johannesburg and Pretoria. The region contributes the most to overall GDP, so seen from an economic perspective this is the most important of the nine South African provinces.Source: EVD

geography & factsSouth Africa is the most visited country in the sub-Saharan area. It has many different faces. There is the incredible wildlife, well-developed cities and stunning natural panoramas, but also the townships, poverty, high HIV/AIDS infection rates and a history of racism. Because of these characteristics, there is still a lot to find out about this country. especially now, after the World Cup 2010, since the diversity within the country seems to become less and South Africa is starting to turn into one strong nation. South Africa covers a geographical area of 1,233,404 square kilometers. Important cities are Pretoria as the administrative capital, Bloemfontein as the judicial capital and Cape Town as the legislative centre. The total population consists of 46.6 million people and most of them speak english, Afrikaans or both.Climate: mostly semiarid; subtropical along east coast; sunny days, cool nightsNatural resources: gold, chromium, antimony, coal, iron ore, manganese, nickel, phosphates, tin, uranium, gem diamonds, platinum, copper, vanadium, salt, natural gas.Land use: arable land: 12.1%, permanent crops: 0.79%, other: 87.11% (2005).Source: CIA World Factbook


DoING BUSINeSS IN SoUTH AFRICA

Destination: South AfricaBy Rob de VosDutch ambassador at the Consulate General in Cape Town, South Africa

Sustainable economic growth is the backbone of each country’s development. The new Dutch government’s focus on linking development cooperation with economic growth has already been our approach in South Africa since a number of years. In particular where South African demand meets Dutch expertise bilateral trade and investment can provide mutual benefit to both the Netherlands and South Africa.

South Africa is a country of contradictions. From children chasing chickens along a quiet gravel road in rural KwaZulu Natal to the rush of suits in the Johannesburg stock exchange. The formal economy is still partly driven by commodity exports but also encompasses a strong financial and services sector and a significant manufacturing sector. At the same time, ex-president Thabo Mbeki was the first to coin the phrase “second economy” for South Africa’s informal sector, which runs alongside the well-developed formal sector. The structure of the South African economy has at times proven difficult for policy makers to address – but its complexities also yield significant opportunities for Dutch companies.

The 2010 FIFA World Cup proved to the world that South Africa has a well developed business infrastructure and talented people capable of organising world-class events. I am confident that the pictures people saw of modern-day South Africa will entice more international entrepreneurs to look at this country as a business location – and also as a gateway to the rest of Africa. The continent already has more middle-class households than India and forecasts are for Johannesburg and Cape Town to grow to be two of the five largest cities in Africa together with Cairo, Lagos and Alexandria. The potential for urban consumer spending is remarkable. The World Bank accurately indicates the ease of doing business in South Africa and how in many instances the country even outperforms the Netherlands. But here too are some contradictions. A debate is ongoing for example about the need to improve the performance of state owned enterprises

(which have significant monopoly power in the transport and energy sectors) and increased used of public private partnerships. Both issues are on the political agenda.

The Netherlands has a rich history with South Africa that is continually being capitalised and built upon by the Dutch business community. There are many great business opportunities in South Africa in different sectors. As an embassy and in close cooperation with our consulate-general in Cape Town we specifically aim to promote the Netherlands in those areas where Dutch innovation and expertise match South African demand – such as sustainable agriculture, water management and transport logistics. Growing opportunities are also emerging in renewable energy and sustainability e.g. green buildings, waste management and energy efficiency. South Africa’s immediate growth path is closely linked to government’s public infrastructure investment drive (on which it will spend about €80 billion over the next three years) and also its industrial policies that aim to resurrect the country’s wilting manufacturing sector.

The Dutch government has an array of programmes that assist companies to establish their business in emerging markets but we are also investigating other innovative ways of expanding Dutch businesses’ local platform. In this regard we have been specifically successful in the water sector, port development and agriculture, where we combined embassy support for capacity building and pilot projects with Dutch companies’ expertise. In this way we were able to find synergies between government, knowledge institutions, business and civil society to address some of South Africa’s most pressing challenges.

A specific highlight was the establishment of an actual and virtual platform for the Dutch water sector to get in touch with its South African counterparts. This NL-SA Waternetwork and its web portal are great examples of new ways to strengthen both knowledge exchange and business opportunities between our two countries. We plan to do the same for the transport sector in 2011. We invite Dutch companies and organisations to contact us via www.dutchembassy.co.za or [email protected] for information and support whenever they consider moving into the South African market.


Central europe 1995

Argentina 1996/2009

Brazil 1997/1999/2005

Mexico 1998/2002

Indonesia 2008

India 2001/2003/2006

South Africa 2000/2007/2011

Israel 1994

Russia 2004

Central europe 1995

China 2010

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