South Africa

The South African defence budget for financial year (FY) 2016/2017 was expected to reach some 47.2 billion South African Rand -ZAR- (approximately 3.6 billion US dollars) equivalent to around 1.05% of the country’s Gross Domestic Product (GDP), significantly increased compared to FY 2015/2016, when the country spent some ZAR 45 billion (approximately 3.4 billion US dollars). According to South Africa’s authorities, the defence budget was to be further increased in FY 2017-18 and FY 2018-2019 to 48.7 (3.7 billion US dollars) and 50.7 billion ZAR (3.84 billion US dollars) respectively. In the foreseeable future, according to recommendations from various sides defence spending should aim to reach 2% of the country’s GDP.

South Africa is located in the southern tip of the African continent. The country has coasts on both the South Atlantic and Indian Oceans. It shares borders with Botswana (which runs for 1,969 km), Lesotho (1,106 km), Mozambique (496 km), Namibia (1,005 km), Swaziland (438 km), and Zimbabwe (230 km). South Africa has three capitals, Cape Town, which is the legislative capital, Bloemfontein, the judicial capital, and Pretoria, the administrative capital. The largest and most important city is Johannesburg (with a population of some 4.4 million people), the economic heartland of the country.

South Africa is an upper middle-income, emerging market. It is rich in natural resources and has well-developed financial, legal, communications, energy and transport sectors. South Africa is one of the largest economies on the African continent. At the same time, more that 18.5 million people (i.e. 35.9% (according to 2012 estimates) of the 52 million population (2011 census)) in the country, live below the poverty line and a large proportion of South Africans, have a low level of education. However, compared with other sub-Saharan countries, South Africa has an advanced level of economic and social development, as electrification in the country is widespread and the basic education and health infrastructure is relatively extended.

This is reflected in the country’s medium Human Development Index (HDI) value. HDI measures human development of a country and is published by the United Nations Development Program (UNDP). The factors that are taken into consideration in order to form the aforementioned index are life expectancy, education (measured by adult literacy and gross enrolment in education) and standards of living (measured by purchasing power parity (PPP) income). The prices of the index range from 0 to 1. Countries with an index below 0.5 are characterized as “underdeveloped”; countries with an index between 0.5 and 0.8 are characterized as of “medium development”; and countries with indices higher than 0.8 are characterized as “highly developed”. In 2014, the HDI for South Africa was 0.666, classifying the country in the medium human development category, positioning it 116th out of 188 countries and territories considered. Nevertheless, it should be noted that the country, between 1980 and 2014, has progressed in each of the HDI indicators, as life expectancy at birth increased by 0.5 years, mean years of schooling increased by 5.0 years, expected years of schooling increased by 2.2 years and GNI per capita increased by about 11.8%.

The Automotive industry is one of the most important sectors of South Africa’s national economy. There are several competitive advantages that the South Africa's automotive industry offers to international manufacturers. Competitive costs and a high degree of manufacturing flexibility are some of them. Additionally, the production facilities have access to cheap raw materials and electricity, as well as a stable transport and telecommunications infrastructure. Of course the country’s national automotive industry still faces a number of challenges. One of the most important ones is that South Africa remains a relatively small market in global terms, isolated from larger markets and shipping routes.

The South Africa's automotive sector was badly hit by the international economic crisis of 2008/2009. Nevertheless it seems that it is recovering as new vehicle sales and exports started to grow again. In 2015, the automotive industry was one of the most dynamic parts of the manufacturing sector, contributing approximately 7.5% to the country’s Gross Domestic Product (GDP) and 14.6% of the country’s total export earnings. According to official estimates provided by the Automotive Industry Export Council (AIEC), in 2015, approximately 341 thousand passenger cars were produced in South Africa and the vast majority of those (67%) were exported, while in the same year, about 243 thousand light commercial vehicles were manufactured in the country and approximately 103 thousand (or 42.3% of the total production) of those vehicles were exported. Local production for the year was significantly augmented compared to 2011, when South Africa, produced approximately 312 thousand passenger cars and about 193 thousand light commercial vehicles.

Tourism is regarded an important pillar of growth for South Africa. The country’s scenic beauty, magnificent outdoors, sunny climate and cultural diversity have made South Africa one of the world’s fastest developing travel destinations. The sector was given a massive boost, when the country hosted the World Cup in 2010, receiving in total 8.1 million foreign visitors in that year. In August 2016, the number of tourists that arrived in South Africa, increased by 14% from 731,248 in August 2015 to 833,638 in August 2016. The ten top overseas countries of origin of these tourists, were the UK, the US, Germany, the Netherlands, France, China, Italy, Australia, India and Spain.

Mining is one of the driving forces of South Africa’s economy. In 2015, the mining sector’s contribution to the GDP amounted to 7.7%, increased by 3% compared to the previous year. The mining commodities with the largest contribution to the sector’s earnings were coal, the platinum-group metals (PGM) and gold, with 23%, 22% and 11% respectively. The sector employed approximately 462 thousand people in the final quarter of 2015. This number represents a decrease of 29,000 people or 5.9% compared to the last quarter of the previous year (2014).

In the past, South Africa was ruled by a political and ideological system that was called apartheid. Apartheid was based on the notion of separate development of the different racial groups in South Africa and was enforced through legislation by the National Party (NP), the governing party from 1948 to 1994. Apartheid ended in 1994, when multi-racial democratic elections were held and won by the African National Congress, led by Nelson Mandela, the iconic personality of the anti-apartheid revolution.

South Africa is a member of several international organisations. In 2010, the African country joined Brazil, Russia, India and China, in becoming the “S” of the BRICS association. Additionally, South Africa is a member of the African, Caribbean, and Pacific Group of States (ACP), the African Development Bank Group (AfDB), the International Bank for Reconstruction and Development (IBRD), the World Trade Organization (WTO) and the United Nations (UN).