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The Metals 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.
Overview of the South African Metals Industry Sector
Iron and steel
In 2000 the International Iron and Steel Institute (IISI) ranked South Africa as the 21st
largest steel producing country in the world and 8th as a net exporting country of primary steel.
The largest steel producing country in Africa, producing 62% of the total steel crude production
on the continent during this year, South Africa's total crude steel production amounted to 8,6
million tons in 2000. The local market consumed 57% and 43% was exported.
Primary steel products and semi-finished products include billets, blooms, slabs, forgings,
light-, medium-and heavy-sections and bars, reinforcing bars, railway track material, wire rods,
seamless tubes, plates, hot- and cold-rolled coils and sheets, electrolytic galvanised coils and
sheets, tinplate and pre-painted coils and sheets. SA exports to approximately 100 countries,
including the USA, Taiwan, Italy, Hong Kong, Zimbabwe, India, Canada, Belgium, the UAE and
Australia. Iscor is South Africa’s largest steel producer. Other important industry players
include Scaw Metals, Davsteel, Columbus Stainless Steel and Highveld Steel.
Capital Equipment
Segmented into five main areas - mining, building and construction, processing and
industry-related items, agriculture and utilities - the capital equipment industry exports
over R16 billion per annum. It is expected to grow rapidly as South African exporters supply
more to international projects, especially in the mining, processing and agricultural sectors.
Europe (36%), SADC (26%), North America (12%), and the Pacific Rim (10%) are the biggest export
markets for South African capital equipment.
Non-Ferrous
South Africa’s non-ferrous metal industries comprise aluminium and other metals, including
copper, brass, lead, zinc and tin. Aluminium is the largest sector, although South Africa
has no commercially exploitable deposits, so feedstock is imported. SA is ranked 8th in
world production of aluminium. The aluminium industry consists of primary and secondary
rolled products and extruded products. SA produces approximately 677 kt of primary aluminium
per year - 512 kt of it is exported.
Aluminium is locally converted into semi-fabricated product, including rolled products (37%);
castings (21%); extrusions (15%); deoxidant (7%); automotive alloy feedstock (8%); redraw rod (6%);
powder and paste (3%); direct cast (3%); and, miscellaneous (3%). Major up- and midstream players
include Billiton, Hulett Aluminium Rolled Products, Hulett Hydro Extrusions, Wispeco, Profal and Zimalco.
Non-ferrous metals sales are estimated at R3 billion per annum, excluding aluminium but including
primary copper, primary zinc and the secondary copper, zinc, tin and lead industries.
Stainless Steel
South Africa’s primary stainless steel production capacity is in the order of 500 000 tons per
annum, but presently only 150 000 tons are converted locally into value-added products. Holding
over 50% of the world market, South Africa is the leading world designer and producer of tank
containers. The catalytic converter industry is the highest single consumer of stainless steel
in South Africa, with expectations of doubling its present capacity to 20% of the world market.
Acerinox/Columbus Stainless is one of the world’s largest and most modern integrated stainless
steel producers. The company recently completed a major expansion project, taking its annual
production capacity to 500 000 tons of flat rolled product. The plant currently supplies the
South African domestic market with close to 150 000 tons annually, with the balance being
exported to 50 countries worldwide.
Jewellery
The jewellery industry, including gold, platinum and silver, employs approximately 4500 people
while the diamond industry employs approximately 2500. More than 4000 formal jobs in more than
350 manufacturing concerns are located in the Gauteng, Western Cape, Durban and Bloemfontein areas.
Currently there are 150 registered jewellery and goldsmith apprentices in South Africa.
Approximately 20% or US$35 million of South Africa’s finished jewellery is exported. The export
basket includes precious metal jewellery, rough diamonds, unwrought gold, silver and platinum.
Infrastructure
South Africa’s approximately 3000km of coastline includes 6 strategic ports - Richards Bay,
Durban, East London, Port Elizabeth, Cape Town and Saldanha Bay. Together they handled 13,000
vessels and 188 million tons of cargo in 1999. Competitively priced land – usually not in
excess of US$10/m2 – is available.
South Africa’s competitive advantages in the metals sector
Raw materials
South Africa is internationally renowned for an abundance of mineral resources, which accounts
for a significant portion of both world production and reserves. Some of the more important
minerals include:
| Mineral | Unit | Reserves |
World Rank | Production |
World Rank |
| Chromium | Million tons | 5500 |
1 | 6.662 |
1 |
| Vanadium | Thousand tons | 1200 |
1 | 18 |
1 |
| Platinum | | |
| |
|
| Group metals | Unit | 62,816 |
1 | 207 |
1 |
| Manganese | Million tons | 4000 |
1 | 3.635 |
1 |
| Titanium | Million tons | 146 |
2 | 1.057 |
2 |
| Zinc | Thousand tons | 15,000 |
5 | 63 |
18 |
A host of large-scale mineral-beneficiation projects are aimed at exploiting the potential of South
African natural resources. The country has world-scale primary processing facilities covering carbon
steel, stainless steel and aluminium industries in addition to gold and platinum.
A wide range of materials is available for jewellery, including gold, platinum, diamonds, tiger’s eye,
and a wide variety of other semi-precious stones.
Competitive Labour Rates
While South Africa has first-world infrastructure and institutions, its cost levels are
comparable with developing countries. Average labour cost to the employer within the metals
industry could be categorised for the various levels as follows:
| Activity | Activity |
Technician | Manager |
| Basic | 1,10 p/hour |
4,50 p/hour | 1 700 p/month |
| Pension | 7,5% |
7,5% | 7,5% |
| Medical | 15% |
15% | 15% |
| Car allowance | N/a |
10% | 17,5% |
| Food allowance | 7,5% |
7,5% | N/a |
Source: DTI survey, US$=R10
Availability of world’s cheapest electricity
Electric power, largely generated by Eskom, the country’s electricity utility, is amongst the
cheapest available anywhere in the world. This low electricity cost has been instrumental in the
establishment of sizeable ferroalloy, stainless steel and aluminium beneficiation industries.
Finance
Through partnership with a state-financing organisation, the Industrial Development Corporation
of South Africa (IDC), companies can access loans or equity at preferential rates. The IDC will
consider the provision of ordinary and preference share capital in some instances and, as far as
practical, it endeavors to tailor facilities to suit the applicant’s requirements. IDC finance is
available to large and small projects within South Africa and the Southern African Development
Community (SADC).
Trade Preferences
South Africa has entered into preferential agreements with the US, EU and sub-Saharan countries.
These agreements confer generous trade benefits as outlined 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, this
benefit took effect in March 2001 for apparel items and October 2000 for other items and will
remain in force until 30 September 2008. A list of specific preferences for the metals industry
is given in Annex A. 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 effect 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. A list of specific preferences for the metals industry is given in Annex B.
The Generalised System of Preference (GSP)
GSP is extended to South Africa by 25 countries, allowing South African exporters to gain
preferential access to their markets. GSP countries include Austria, Belgium, Canada, the
Canary Islands, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland,
Italy, Japan, Luxemburg, Martinique, the Netherlands, Norway, Portugal, Reunion, Spain, Sweden,
Switzerland, the UK and the USA. The Japanese offer on GSP is given in Annex C.
Southern African Development Community
The SADC trade protocol, which came into effect in September 2000, 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. A new
agreement finalised on 25 October 2002 is presently being ratified by their respective
governments. The main change introduced in the new agreement pertains to revenue sharing.
Major foreign companies operating in the sector in South Africa
Recognising South Africa’s many advantages, several international companies have
established major operations in South Africa. Some of the more prominent ones are listed below:
| Company |
Country of Origin |
Activities |
| Billiton SA Ltd |
UK |
Aluminium smelter |
| Pohang Iron and Steel |
South Korea |
Ferrochrome smelter |
| Acerinox |
Spain |
Stainless steel |
| Oro-Africa |
Italy |
Manufacture of gold and diamond chains, rings, bracelets |
| Silmar Spa |
Italy |
Manufacture of gold chains |
| Oro-Maska |
India |
Manufacture of gold chains, bracelets, rings and diamond pendants, chains |
| South Africa Royal Manufacturers |
Canada |
Manufacture of gold chains, rings, bracelets |
Business opportunities
| Industry |
Opportunities |
| Steel |
Downstream beneficiation Automotive parts, car bodies, pipes, tubes, can stock
Structural steel products, furniture |
| Stainless Steel |
Rolling Mill, pipes and tubes, building materials, Catalytic converters, exhaust
manifolds, Refrigerators, microwave shell, household utensils, Hollowware, furniture |
| Aluminium |
Primary smelter, building products, windows and frames, patio doors, extrusions,
conductors and rods Vehicle bodies and flooring, engines, cylinder blocks, pistons,
alloy wheel, high-pressure die-casting, packaging foil, industrial flooring |
| Jewellery both |
Gold – 9ct, 14ct and 18ct to Europe and the USA – ethnic and western designs,
diamonds – loose, cut and polished and made up items, platinum items |
| Capital Equipment |
Machine tool manufacturing, petrochemical equipment |
Annex A: Africa Growth and Opportunity Act (trade preferences offered by the United States)
Aluminium
| HS Code |
Description |
MFN Duty |
Preferential Duty |
| 7601 |
Aluminium and Aluminium Products |
4.9% |
Free |
| 7301 |
Iron and Steel Products |
4.2% |
Free |
Jewellery
| |
Rates of Duty |
| HS No |
Article Description |
General |
Special |
| 7103.99.50 |
Precious gems or stones (o/than diamonds) and semi-precious stones, simply sawn,
cleaved or bruted |
12.6% |
A |
| 7104.90 |
Synth. Or reconstruct. Precious or semi-precious stones, wkd, whether or not graded,
but n/strung (ex. Ungraded temp. strung), mtd./set, nesoi |
7.7% |
A |
| 7113.11 |
Silver rope, curb, etc., in continuous lengths, whether or not plated/clad with other
precious metal, suitable for jewellery manufacture |
6.4% |
A |
| 7116,20 |
Jewellery articles of precious or semi-precious stones, valued not over $40 per piece |
3.9% |
A |
| 7113.19.25 |
Gold mixed link necklaces and chains |
5.9% |
A |
| 7113.19.21 |
Gold rope necklaces |
5.3% |
A |
| 7116.10.25 |
Cultured pearl articles |
6.6% |
A |
| 7117.19.90 |
Imitation jewellery (o/than toy jewellery and rope, curb, cable, chain, etc.) of
base metal (whether or n/plated with prec. Metal), nesoi |
11% |
A |
| 7117.90.55 |
Imitation jewellery nesoi, not of base metal, n/o 20 cents/doz. Pcs or pts |
7.2% |
A |
| 7117.19.20 |
Rope, curb, cable, chain, etc., of base metal (whether or n/plated w/prec. Metal),
val.n/over 33 cents/meter for jewellery mfr. |
11% |
A |
Capital Equipment
| |
Rates of Duty |
| HS No |
Article Description |
General |
Special |
| 84.02 |
Steam or other vapour generating boilers |
5.2% |
A |
| 84.04 |
Auxiliary plant for use with boilers |
3.5% |
A |
| 84.05 |
Producer gas or water gas generators |
Free |
N/A |
| 84.10 |
Hydraulic turbines, water wheels and regulators thereof |
3.8% |
A |
| 84.13 |
Pumps for liquids |
Free |
N/A |
| 84.14 |
Air or vacuum pump, air or other gas compressors and fans, ventilating or recycling hoods |
2.5% |
A |
| 84.16 |
Furnace burners for liquid fuel |
Free |
N/A |
| 84.23 |
Mass meters |
Free |
N/A |
| 84.24 |
Mechanical appliances for projecting, dispersing or spraying liquids or powders |
Free |
N/A |
| 84.25 |
Pulley tackle and hoists |
Free |
N/A |
| 84.28 |
Other lifting, handling, loading or unloading machinery |
Free |
N/A |
| 84.30.31 |
Self-propelled coal or rock cutters and tunneling machinery |
Free |
N/A |
| 84.33 |
Harvesting or threshing machinery |
Free |
N/A |
| 84.74 |
Machinery for sorting, screening, separating, washing, crushing, grinding, mixing or
kneading earth stone ores or other mineral substances |
Free |
N/A |
| 84.79 |
Machines and mechanical appliances having individual functions |
Free |
N/A |
| 84.81 |
Taps, cocks, valves and similar appliances for pipes, boiler shells, tanks, vats or the like, |
2% |
A |
| 84.82 |
Ball or roller bearings |
2.4 |
A+ |
Annex B: European Union – South African Free Trade Area
South Africa’s preferential tariff to the EU will be phased in over a 4-year
period as follows:
Metal Products
| HS Code |
Description |
MFN duty |
Year |
Preferential tariff |
| 7601 |
Aluminium and aluminium products |
6% |
2001 |
75% of the MFN duty |
| 7301 |
Iron and steel products |
2,7% |
2002 |
50% of the MFN duty |
| |
|
|
2003 |
25% of the MFN duty |
| |
|
|
2004 |
0% |
Annex C:GSP Preferences offered by Japan
Jewellery
| HS no. |
Description |
General |
WTO Tariff Rates 12/31/98 |
WTO Tariff Rates 1/1/99 |
Preference |
| 71.13 |
Articles of jewellery and parts thereof, of precious metal clad with precious
metals whether or not plated work clad with precious metal |
|
|
|
|
| 7113.11 |
Of silver |
6.2% |
5.7% |
5.2% |
Free |
| 7113.19 |
Of other precious metals
| |
|
|
|
| Of platinum |
6.2% |
5.7% |
5.2% |
Free |
| Other |
6.6% |
6% |
5.4% |
Free |
Incentives
A range of incentives is available to qualifying investments. The more commonly
used incentives are given below:
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