South Africa
Brief description
South Africa is a republic which is surrounded by land at the top and the two oceans, Indian Ocean and Atlantic Ocean. Located on the southern tip of Africa, with an area of 1.2 million sq. km its location is also responsible in a major way for the economic and social-political milieu of the republic of South Africa. It has four capital cities namely; administrative, Pretoria; legislative, Cape Town; judicial, Bloemfontein. Other famous cities include Johannesburg, Durban and Port Elizabeth. The population is 49.3 million as of 2009 composed of black 79.7%; white 9.1%; colored 8.8%; Asian (Indian) 2.2%. The annual population growth rate as of 2009 was 1.2%. Languages spoken are: Afrikaans, English, isiNdebele, isiXhosa, isiZulu, Sepedi, Setswana, siSwati, Tshivenda, and Xitsonga all being official languages. Religion is predominantly Christian; traditional African, Hindu, Muslim and Jewish. [Background Note: South Africa, 2010]
Government
The government is parliamentary democracy. The union of South Africa was created on May 31, 1910; became a sovereign state within British Empire in 1934; became republic on May 31, 1961; left Commonwealth in October 1968; rejoined the Commonwealth in June 194. The constitution entered into force on February 2, 1997. Government branches: Executive–president (chief of state) elected to a 5-year term by the National Assembly. Legislative–bicameral Parliament consisting of 490 members in two chambers. National Assembly (400 members) elected by a system of proportional representation. National Council of Provinces consisting of 90 delegates (10 from each province) and 10 nonvoting delegates representing local government. Judicial–Constitutional Court interprets and decides constitutional issues; Supreme Court of Appeal is the highest court for interpreting and deciding non-constitutional matters [Background Note: South Africa, 2010].
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The legislative branch is one of the three branches of the government. In this branch, laws are created and voted on and sent to the next level. There are two chambers The House of Representatives and the senate. The House of Representatives has 435 representatives from the 50 states. They serve foe six-year period. The number of representatives depends on the state population density. From here, ...
Economy
GDP (2009): $287 billion.
Real GDP growth rate: 3.1% (2008); -1.8% (2009); 3.7% (5-year average).
GDP per capita (2009): $5,787.
Unemployment (first quarter 2010): 25.2%.
Natural resources: Almost all essential commodities, except petroleum products and bauxite. It is the only country in the world that manufactures fuel from coal.
Industry: Types–minerals, mining, motor vehicles and parts, machinery, textiles, chemicals, fertilizer, information technology, electronics, other manufacturing, and agro-processing.
Trade (2009): Exports–$71.9 billion; merchandise exports: minerals and metals, motor vehicles and parts, agricultural products. Major markets–China, U.S., Japan, Germany, U.K., Sub-Saharan Africa. Imports–$75.7 billion: machinery, transport equipment, chemicals, petroleum products, textiles, and scientific instruments. Major suppliers–China, Germany, U.S., Saudi Arabia, Japan.
GDP composition (2009): Agriculture and mining (primary sector)–7%; industry (secondary sector)–20%; services (tertiary sector)–73%. South Africa is one of the largest producers of platinum, manganese, gold, and chrome in the world; also significant coal production [Background Note: South Africa, 2010].
Education system
Education is compulsory for children aged 7 to 15 years of age and the education system is categorized into three parts namely:
* General Education and Training (GET)
* Further Education and Training (FET)
* Higher Education and Training (HET)
School life spans 13years or grades, from grade 0, otherwise known as grade R or “reception year”, through to grade 12 or “matric” – the year of matriculation. General Education and Training runs from grade 0 to grade. Further Education and Training takes place from grades 10 to 12, and also includes career-oriented education and training offered in colleges, community colleges and private colleges. Diplomas and certificates are qualifications recognized at this level [Education, 2010]. The matric pass rate, which was as low as 40% in the late 1990s, has improved considerably. A total of 581 573 full-time students and 38 595 repeat students sat the matriculation exams in 2009, 60.6% of whom passed. Education is in transition. Under the apartheid system schools were segregated, and the quantity and quality of education varied significantly across racial groups. The laws governing this segregation have been abolished. The long and arduous process of restructuring the country’s educational system is ongoing. The challenge is to create a single, nondiscriminatory, nonracial system that offers the same standards of education to all people. The adult literacy rate is 87.2% for Females and 88.9% for Males. (UNDP 2009)
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Market for clothes in South Africa
Overview of sector trends
TIPS data, as presented in Table 1, shows that the South African clothing sector has performed poorly. By comparing the average of the indicators for the period 1994-8 with the average for the period 1999-2003, it is clear that the sector’s performance has deteriorated. In particular, there has been deterioration in real value added at basic prices (10.4%), real exports (4.4%), employment (0.6%), output per employee (11.9%), remuneration per employee (6.8%) and gross mark-up (7.8%).
Interestingly, both exports and employment increased (by 1.8% and 1.1% per annum respectively) from 1994 to 1998, but declined (by
8.0% and 1.1%) from 1999 to 2003, while real value added declined consistently over the two periods. Real output per employee declined from R67, 935 to R60, 716 between the two periods, whilst remuneration per employee also fell (from R18, 935 to R17, 224).
[Dr. Justin Barnes, 2005]
Constraints and challenges
From a national perspective, the broader regulatory environment does not directly affect the manufacture of clothing, as it is a non-intrusive manufacturing process. However, the highly regulated labor market has a marked impact given the industry’s labor-intensiveness. In this regard wage rates, as well as the oft-cited ‘inflexibility’ of the labor market, appear to have a constraining effect on the sector. Many clothing firms are relocating to non-metro and decentralized areas (particularly in KwaZulu-Natal) where they are able to pay lower wages. This relocation has occurred in an attempt to compete with cheaper imports as a result of global trade liberalization and lower wage rates in competitor countries. As Table 4 shows, South Africa has high labor rates when compared to competitor countries15. Furthermore, South Africa is not only competing with countries that have lower wage rates, they also have more flexible labor markets in terms of additional labor costs (such as overtime and shift pay, sick leave and pension contributions).
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These factors increase costs, decrease flexibility and reduce the ability of firms to compete effectively, particularly when competing in standard, commodity markets.
Table 4: Hourly labor costs – A comparison of selected countries, 2002
Country | US$ per hour | Country | US4 per hour |
Bangladesh | 0.39 | Kenya | 0.38 |
Sri Lanka | 0.48 | Mauritius | 1.25 |
China | 0.68 – 0.88 | South Africa | 1.38 |
India | 0.38 | Madagascar | 0.33 |
Source: Economics Intelligence Unit (2004)
Other constraining elements include the South African textiles industry’s lack of competitiveness16 (with clothing firms forced to source from them due to high tariffs on imported fabric and AGOA’s three-stage conversion rule), the apparent indifference to local sourcing amongst major domestic retailers, the failure of clothing manufacturers to adhere to world class manufacturing standards, the failure of the industry to employ state of the art technologies; and skills deficiencies created by the perception of many professionals that clothing is a ‘sunset industry’ and hence a sector to be avoided when entering the corporate arena [Dr. Justin Barnes, 2005].
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SWOT Analysis
Strengths
* Sophisticated and well established agricultural sector and large scale farming enterprises
* Substantial, world class feedlot industry producing good quality raw material
* Presence of major chemical companies
* Excellent physical infrastructure
* Strong governmental policy framework
* Sound and efficient financial services and ICT sector
* A good tertiary and technical educational system
* Well established international trading regime: AGOA, EU Free Trade Agreement, WTO membership, SADC membership, Motor Industry Development Programme (MIDP). | Weaknesses * Low skill levels
* High cost of labor
* Lack of entrepreneurial spirit
* Low productivity
* Unstable currency
* High entry barriers to the establishment of tanneries and footwear factories
* Export parity pricing of raw materials and import parity pricing of footwear and leather goods
* Government’s lack of expertise and experience in governing and international relations, trade negotiations in particular, ethnic divisions. |
Opportunity * Trade with China and India
* Hosting of Soccer World Cup 2010
* SADC preferential trade arrangements
* African Growth and Opportunity Act (granting preferential access to the US market)
* The Motor Industry Development Programme (includes incentives for automotive upholstery manufacture in SA)
* Aggressive skills development programs
* Highly sophisticated and sound banking and financial services sector
* NEPAD’s African development program. | Threats * Drought and Foot and Mouth disease
* Stock theft
* Low cost Asian producers (India and China)
* Strong Rand and weak Yuan
* High unemployment and crime
* Red tape and burovracy
* High cost of doing business in SA
* Cheap Brazilian leather and meat imports
* Poorly negotiated Free trade Agreements
* The Aids pandemic
* Depopulation of the rural areas
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* Decline if commercial farming due to the government |
[South Africa: SWOT Analysis]
Bibliography
Background Note: South Africa. (2010, June 15).
Retrieved November 11, 2010, from U.S. Department of State: http://www.state.gov/r/pa/ei/bgn/2898.htm#
Dr. Justin Barnes, B. H. (2005).
A Strategic Assessment of the South African Clothing Sector. The National Economic Development and Labour , 2, 4, 5.
Education. (2010, July 05).
Retrieved November 14, 2010, from South African Government Information: http://www.info.gov.za/aboutsa/education.htm
South Africa: SWOT Analysis. (n.d.).
Retrieved November 13, 2010, from International Trade Centre:
UNDP 2009 “South Africa HDI Rank – 129”, IN Human Development Report 2009, [www]http://hdrstats.undp.org/en/countries/data_sheets/cty_ds_ZAF.html [opens new window] (accessed 18 Mar 2010).
