Marine, Aerospace & Railroad Transport Sector
THE TRADE AND INVESTMENT SOUTH AFRICA PROFILE
When Trade and Investment South Africa was formed in 2000 as a division
of the Department of Trade and Industry (the dti), the original investment
promotion agency, Investment South Africa (ISA), and the export functions of
the dti were merged to form a single organisation. Trade and Investment South Africa is responsible for stimulating
foreign direct investment and exports of South African goods and services to international
markets. As part of the country's national economic strategy, Trade and Investment South Africa is tasked with identifying
and targeting key high-growth sectors and enjoys direct access at the highest levels to both
South African business sectors and trading partners. Thus, Trade and Investment South Africa is the essential point of
contact for anyone involved in investment and export promotion in this country.
At Home in South Africa
Locally, Trade and Investment South Africa functions under the umbrella of the dti, a broader family of
institutions controlling state assets in excess of R25bn and led by Minister Alec Erwin.
A number of units dedicated to specific aspects of the business process operate within Trade and Investment South Africa.
Sector specialists and strategic analysts work together to oversee targeted export objectives.
Simultaneously, logistics specialists, who are located in the Enterprise Industries Development
Division (EIDD) of the dti, identify and take steps to eliminate bottlenecks in the supply
chain, for both exporters and investors alike. Thus, the dti provides a single-transaction
arena for investors and exporters at a national level and Trade and Investment South Africa is also mandated to co-ordinate
provincial initiatives to match investor requirements with opportunities available within each
of the nine provinces.
Trade and Investment South Africa focuses on promoting eight sectors of the South African economy that have shown
the greatest growth potential and marketability. These include:
Abroad
Trade and Investment South Africa identifies opportunities and provides core-market intelligence in 48 regional
offices within South Africa's diplomatic centres worldwide. Key investors are targeted
in priority-growth sectors and specific sectoral expertise is added to the equation. The
regional managers operate according to international best practice standards, pioneered by
leading trading nations such as Singapore and Ireland. Trade and Investment South Africa's single-transaction arena approach
to service is ensured and promoted via their efficient use of an extensive array of communication
mediums. From negotiations and exhibitions to handing over prospective leads to domestic-based
facilitators and units dedicated to specific aspects of long-term business processes, Trade and Investment South Africa has
a finger on the communication pulse continuously.
Trade and Investment South Africa is a flexible, customer-oriented organisation, specifically in regard to the services it
delivers and financial incentives it oversees. For instance, in 2001 the export sectors
prioritised by Trade and Investment South Africa realised R15.8bn in trade growth. In addition, South Africa’s manufacturing
sector gained R4.7bn in fixed inward investment. Clearly Trade and Investment South Africa plays a guiding role in the
promotion of South Africa as a leading, internationally competitive business destination.
Investments Unlimited
As the central point of contact for anyone interested in investing in South Africa,
Trade and Investment South Africa offers the following services:
- Information on the various investment sectors and industries within South Africa
- Facilitation of inward investment missions, including travel itineraries and
movement within the country
- Introduction to potential joint-venture partners
- Consultation on the prevailing regulatory environment
- Introductions to relevant stakeholders in the private and public sectors
- Information on tax incentive packages
- Assistance with work permit applications
- Guidance with plant / site locations
- Logistical support for relocation
- Dedicated aftercare services
- Input into policy formulation on investment and trade promotion.
Exports Unlimited
The export process is sector specific, and sector strategies offer the framework
within which exports are encouraged and incentivised. These strategies address
competitive issues and international best practice standards regarding the product.
Trade and Investment South Africa sector specialists have a clear understanding of, and access to, the various
industries. Hence, they are able to provide sound advice, recommendations and
assistance – information that is invaluable to the potential exporter.
Trade and Investment South Africa provides a Customer Care service for manufacturers, a facility that offers
information and advice on current export processes and procedures. To ensure enquiries
are channelled to the relevant specialist organisations, the dti Customer Contact
Centre can be contacted on:
+27 (12) 394 9500 (International callers)
or 0861 843 384 (Local callers)
Trade and Investment South Africa is also mandated with developing small and BEE exporters and to manage the
Export Marketing and Investment Assistance Scheme (EMIA) as a key enabling incentive.
Through EMIA funding is provided to companies for:
In addition, the formation of industry-based Export Councils to assist exporters in
reaching their targets is promoted. The approach has been tailored to allow small
businesses, as well as artists and craftspeople, to form an SMME Export Council and
an Arts and Crafts Export Council, which are able to function as entry points for
first-time exporters. This allows small businesses in any sector to access the dti
support structures and become successful exporters.
An introduction to the South African Economy
South Africa is one of the richest countries on the continent and in the world in
terms of minerals and other natural resources. It was, and still is, amongst the
world’s largest exporters of gold and diamonds and it also exports a wide range of
other industrial minerals. A Mediterranean climate in its southern region facilitates
its role as a major world exporter of citrus fruits and wine.
This abundant natural wealth led European settlers here as early as the 17th century.
The economy boomed and physical infrastructure was developed. Unfortunately in the middle
of the 20th century, the country faced the problem of apartheid, decisively resolved in 1994
with the first democratically elected government. Since then the country has begun to rebuild
its economy and achieve much of the vast potential of which it is capable.
Today South Africa has a population of 44 million people and a GDP of US$113 billion (2001).
In terms of its business environment and international competitiveness, it is rated at the low
end of the OECD countries and at the top end of developing countries. The Global Competitiveness
Report ranks South Africa 25th out of 75 countries, fifth best amongst all developing countries
in the world. In terms of general infrastructure, the country is rated 22nd, and in terms of its
financial market sophistication 16th. Unlike most developing countries, South Africa has a strong
technological base, which has resulted in its patenting products, such as the computer tomograph,
using indigenous technology.
In addition, South Africa has concluded highly attractive preferential trade agreements with the
European Union, the United States and the Southern African Development Council countries, all
within the last three years. These agreements open up new market and business opportunities for
businesses wanting to invest directly in South Africa or partner with it for other types of
business collaboration.
An overview of the South African Marine Industry
The MARINE industry consists of the boat, shipbuilding and the ship and boat repair
sectors. The turnover of the boat building industry is around R500m of which 85% of
production is exported to the USA and Caribbean. Exports of South African built yachts
was the fastest growing export sector in 2001, exceeding R400 million. South African
exports of rowing boats, canoes and other pleasure boats are 5th in world rankings.
South Africa is ranked 12th in world exports for sailboats and 13th in the export of
inflatable boats.
In the conventional shipbuilding sector, South African companies have changed their
focus, scaling down on their fabrication projects and concentrating on building ship
repair activities.
About 70% of South Africa’s boat builders are located in Cape Town while the rest are in
Durban and Port Elizabeth.
An overview of the South African Aerospace Industry
The South African aviation industry is an industry that was boosted during the
long period of economic isolation. Today there is indigenous capability to make
light aircraft and helicopters as well as a range of aircraft components. South
Africa is also a major location for aircraft refurbishing. Exports of refurbished
aircraft amounted to R1.5bn in 2000 while exports of aircraft parts amounted to R400m.
South Africa was the third largest exporter of microlight aircraft last year,
representing 11% of world exports for this product. South African rankings in
world exports of rotary type aircraft engines and aircraft seats were respectively
12th and 10th. The industry has developed excellent skills and manufacturing capabilities
as illustrated below:
- South Africa has built one of the most sophisticated helicoptergunships in the world
(the Rooivalk), thereby paving the way for the manufacturing of commercial helicopters in SA
- Present production includes light and microlight aircraft; parts such as propellers,
avionics, gearboxes and engines
- Aircraft service capability includes maintenance, conversions and upgrades of
large commercial and military aircraft.
An overview of the Railway Equipment Industry
The rail industry in South Africa developed in tandem with the mining industry.
Today it is more diversified, serving domestic as well as export demand. The strong
engineering base, fostered by the mining industry, has also helped in the competitive
manufacture of rolling stock and other rail equipment. The primary market focus of the
industry is its two most important domestic clients, Spoornet (the national rail service
provider) and South African mining companies. In early 2002, Spoornet announced a R10bn major
refurbishing programme over 10 years. The capability of the industry is quite comprehensive:
- Industry stakeholders have the capability to plan and scope railway projects and to manufacture
rolling stock, signaling and other rail-related equipment
- Spoornet has world-class capabilities in the operation of long-haul rail systems and has
developed several world-class technologies
- Local railway stock has a very high local content because of the availability of steel and
the necessary engineering skills to manufacture these products
- Estimates suggest that 100 local companies are involved in the industry
- South Africa is a major contender in railway projects and maintenance contracts,
particularly in Africa (The sector is also a source for scoping, designing, planning and
rolling out railway projects.)
- Railway engineering skills and experience are available to replicate elsewhere in Africa
the rail systems implemented in South Africa. The industry is capable of maintaining networks
needed to support infrastructure projects across the continent. It also has access to necessary
raw materials and capable manufacturers to supply the required railway components and services.
South Africa’s Competitive Advantages in the Marine, Aviation and Rail Transport Industries
Raw Materials
South Africa is a major world producer of several basic metals and other minerals. These
include steel, stainless steel, aluminium, ferro alloys, platinum and vanadium amongst others.
Strong Project Management Capability
Due to its long period of economic isolation and its rich mineral resources, South Africa has
developed its own technology in several areas and is a world leader in some, such as deep mining.
It has strong indigenous capacity to manage large construction projects. Amongst the major projects
it has won against strong international competition is the prestigious 7-star South African Burj al
Arab hotel in Dubai. The project management was a joint venture between South African engineering
firm Murray and Roberts and Al Habtoor Engineering of the UAE. Another South African company,
Genrec, undertook the structural steel design and engineering.
Well-developed infrastructure
With 3000 kilometres of coastline and 7 commercial ports, South Africa has by far the largest
and best-equipped network of ports in Africa. With the major upgrading of these ports underway, SA will
be able to function as a hub for increasing commercial traffic emanating from and destined for Europe,
Asia, the Americas as well as the east and west coasts of Africa.
Competitive Electricity Cost
South Africa’s electricity cost is amongst the cheapest in the world.
Electricity cost in different countries
Competitive wage costs
South Africa has a highly competitive and skilled labour force. Wage costs are
generally in the developing country range, even though its infrastructure and technology
level are generally rated at the low end of the developed world. In 2001 the average wage
rates for workers in the industry were as follows:
Average Hourly Rates in 2001 (Total Package)
| Skill Level | Average | Average |
| | Rands | Dollars |
| Lower skilled | 18.05 | 1.80 |
| Semi-skilled | 26.17 | 2.61 |
| Clerical | 40.4 | 4.04 |
| Specialised | 71.67 | 7.16 |
| Management | 134.83 | 13.48 |
Source: StatsSA; (US Dollar = R10.00)
Trade Preferences
South Africa has entered into preferential agreements with the US, EU and sub-Saharan countries.
These agreements confer generous trade benefits as given below.
Africa Growth and Opportunity Act (for the US market)
Under the Africa Growth and Opportunity Act (AGOA), the US extends to South Africa
and other sub-Saharan countries GSP benefits for more than 1800 additional items beyond the
standard GSP list of 4600 items. Special provisions apply to the apparel sector. For South
Africa, these benefits took effect in March 2001 for apparel items and October 2000 for other
items and will remain in force until 30 September 2008. More detailed information is available
from the US government website http://www.agoa.gov
European Union – South Africa Free Trade Agreement
A trade, development, and cooperation agreement containing a Free Trade Agreement (FTA) went into
force between South Africa and the European Union on 01 January 2000. Under the FTA, the EU is
committed to the full liberalisation of 95% of South African imports over a 10-year transitional
period, while SA is to liberalise 86% of EU imports over a 12-year transitional period.
Southern African Development Community
The SADC trade protocol came into effect in September 2000 and provides for the phasing down
of tariffs of 11 of the 14 SADC member countries. The participating member countries are from
the sub-Saharan region, but exclude SADC members Angola, the Democratic Republic of Congo and
Seychelles. This trade bloc has a combined population of 135 million. The participating member
countries hope to establish a free trade zone by the year 2004.
South Africa Customs Union
Under the present SACU agreement, participating member countries South Africa, Botswana, Lesotho,
Namibia and Swaziland have totally abolished internal tariff barriers. Their respective governments
are presently ratifying a new agreement, which was finalised on 25 October 2002. The main change
introduced in the new agreement pertains to revenue sharing.
Business Opportunities in the Marine, Aviation and Rail transport industries
| Opportunities for Investment | Subsector Opportunities |
| Boat building | Sailing boats and catamarans |
| Custom-made vessels |
| Ship repair yards |
| Training schools |
| Aviation | Rotor and fixed wing aviation equipment and services; |
| Manufacture of helicopters |
| Aviation training services; |
| Aerospace Industrial Development Zone at Johannesburg International Airport |
| Rail | Rolling stock and services for the domestic market; |
| R7 bn Gautrain project; Rail infrastructure on the African continent,
sponsored through NEPAD |
Opportunities for procurement:
| Subsector | Opportunities |
| Boat building | Catamarans, yachts, inflatables |
| Aviation | Light aircraft, microlight aircraft, rotary type aircraft
engines, aircraft seats and parts |
| Rail | Locomotives, coaches, wagons, signaling equipment, railway
components and services |
Incentives
A range of incentives is available to qualifying investments. The more commonly
used incentives are given below:
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