Business in South Africa

We examine South Africa and explore how the country will recover post-COVID-19  

Writer: Sean Galea-Pace


South Africa is one of Africa’s most popular destinations.

According to Statistics South Africa’s latest Tourism and Migration Survey, around 3.5 million travellers passed through the country’s ports of entry in August 2017. The countries with the largest number of tourists visiting South Africa were from the United States, UK, Germany, the Netherlands and France. Most of the tourists visiting South Africa from elsewhere in the continent came from Southern African Development Community countries.

In 2018, the number of tourists visiting South Africa reached over 16.4 million, a figure that pre-COVID, was only expected to increase. Originally, it was forecasted that by 2023, South Africa would see the number of tourists surpass 19.6 million. In fact, South Africa ranked second in the leading African countries in terms of international tourists’ arrivals, according to Statista. 

Indeed, COVID-19 has hit South Africa hard. Strict lockdown regulations at the beginning of the pandemic meant a seven percent contraction in 2020. This year is set to see an estimated growth of 3.6 percent, supported by a commodity price rise and a rollout of the vaccine. The impact of the pandemic saw government debt with debt-to-GDP forecast to reach 81.1 percent in 2020/21 and the fiscal deficit 14.7 percent. 

However, South Africa remains the most sophisticated and developed economy in Africa and has high-class firms in finance, real estate and business services, manufacturing and wholesale and retail trade. The country is regarded as the gateway to Africa for investors because of comparative sophistication, ease of doing business, continental expertise and ability to act as a base for critical services for doing business on the rest of the continent. The African Continental Free Trade Agreement took effect from January 2021 and is the key in unlocking Africa’s potential in its post COVID-19 growth recovery. Overall, Africa’s GDP is anticipated to rise by between $28 billion and $44 billion following full implementation in 2040.

South Africa is Africa’s largest economy after Nigeria. However, the country is still encompassed with a large poverty rate and unemployment rate which is ranked in the top 10 countries globally for income inequality. In 2015, 71 percent of net wealth is held by 10 percent richest of the population, whereas 60 percent of the poorest held only seven percent of the net wealth and the Gini coefficient was 0.63, whereas in 1996 was 0.61.

The country has a market-orientated agricultural economy that is highly diversified and includes the production of all the major grains with the exception of rice, such as oilseeds, deciduous, subtropical fruits, sugar, citrus, wine and most vegetables. Livestock production includes cattle, dairy, hogs, sheep and well-developed poultry and egg industry. Value-added activities in the industry include slaughtering, processing and preserving of meat, processing and preserving of fruit and vegetables, dairy products, grain mill products, crushing of oilseeds, prepared animal feeds, sugar refining and cocoa, chocolate and sugar confectionary.

The grain industry, which encompasses barley, maize, oats, sorghum and wheat, is one of the largest agricultural industries within South Africa, contributing to over 30 percent of the total gross value of agricultural production. The sector consists of a range of key stakeholders such as input suppliers, farmers, silo owners, traders, bakers, millers, research organisations. The animal feed sector is a key player in the grain supply chain. Around six million tonnes of grain and 1.6 million tonnes of oil cake are used by the animal feed manufacturing industry in South Africa.

Indeed, corn is the largest locally produced field crop and is the most important source of carbohydrates in the SADC region for animal and human consumption. South Africa is the main corn producer within the SADC region, with an average production of approximately 12 million tonnes per annum. Local commercial consumption of corn equates to over 11 million tonnes, and surplus corn is usually exported.

The agricultural industry contributes to around 10 percent of South Africa’s total export earnings in FY 2019 at a value of $10.7 billion. Citrus, wine, table grapes, corn and wool are the largest exports by value. South Africa also exports commodities such as nuts, sugar, apples, pears and mohair. It is one of the largest growth potentials in the economy. Food and raw materials are traded in the European and Asian winters and the demand in South Africa is growing for high quality fruits, nuts and vegetables. The sector in South Africa is characterised as being a dual system.

During 2019, the United States exported $389 million of agricultural, fish and forestry products to South Africa, which is up by nine percent from the previous fiscal year. Major products exported by the United States to South Africa included, poultry meat, wheat, planting seeds, distilled spirits and tree nuts. Post-COVID, South Africa will seek to bounce back through tourism. South Africa remains a prevalent tourist destination and the industry accounts for a significant proportion of the country’s revenue. Following a challenging 2020, a prosperous 2021 would be a welcome tonic.