Major Economic Indicators

Recent Developments

• The South African economy is estimated to have grown by 3.1% in real GDP terms in 2008, and is forecast to post a decline of 0.3% in 2009, reflecting the impact of the financial tsunami.
• Exports are slackening due to weak external demand and falling commodity prices. In March 2009, South African exports were down 18.4% year-on-year (YoY), while seasonally-adjusted manufacturing production index dwindled by 15% YoY in February 2009.
• Retail sales, though slowing, still managed a 5% YoY growth in February 2009 (January: growth of 6.7% YoY) on a seasonally-adjusted basis.
• Hong Kong's total exports to South Africa decreased by 20.2% YoY to US$191 million in the first four months of 2009, while its imports from South Africa surged by 21.2% YoY to US$200 million on the back of strong silver and platinum imports.

Current Economic Situation

South Africa, a country best known for its precious metals and agricultural products like fruit and wine, has transformed from an agriculture- and mining-dominated economy to a sophisticated manufacturing- and services-based economy, with services comprising over 60% of the country’s GDP. The country is one of the most industrialised countries on the African continent. Its manufacturing sector, accounting for 17.4% of GDP in 2008, is heavily capital-intensive, led by energy, chemicals and iron and steel. The South African steel industry is indeed one of the global leaders, and includes a number of extremely competitive companies. In recent years, South Africa’s telecommunication sector has been developing quickly, and its major operator, MTN, has operations in over 15 African countries and has expanded into the Middle East.

South Africa has a large domestic market, and over two-thirds of GDP are attributed to private consumption. Being the largest economy on the African continent, South Africa offers good potential as a consumer market.

Retail sales, though slowing, still managed a 5% YoY growth in February 2009 (January: growth of 6.7% YoY) on a seasonally-adjusted basis. This is expected to offer some support to South Africa’s economy amidst a global economic downturn. In 2010, the World Cup, which will be held in South Africa, is expected to give a boost to the country’s retail sales.

Exports, which amounted to 27.3% of South Africa’s real GDP in 2007, are slackening due to weak external demand and falling commodity prices. In March 2009, South African exports were down 18.4% YoY, while seasonally-adjusted manufacturing production index dwindled by 15% YoY in February 2009. Export industries such as agriculture and mining are large employers in the country. A weak external demand is likely to put pressure on employment opportunities. The unemployment rate has been declining, from 23.9% in 2006 to an estimated 22.9% in 2008.

Trade Policy

South Africa is a member of the World Trade Organisation (WTO). Imports originated from other WTO members, including Hong Kong and the Chinese mainland, are subject to the country's most-favoured-nation (MFN) tariff rates. In addition to import tariffs, most goods are subject to a value-added tax (VAT), whose standard rate is currently set at 14%. However, VAT on goods imported for use in manufacturing or resale by registered traders can be claimed as an input tax reduction. Payment of duty and VAT can be deferred if the goods are put in bonded warehouses.

South Africa may initiate anti-dumping or countervailing investigation and impose duties when allegations are substantiated. A number of China-origin products are currently subject to anti-dumping duties when imported into South Africa (see Appendix). But anti-dumping duties imposed on imports of blankets of acrylic fibre or blankets partially containing acrylic fibre from Hong Kong have expired since July 2004. As a result, there are no anti-dumping measures against Hong Kong products at present.

Most goods can be imported into South Africa without a permit, except for certain goods like foodstuffs, petroleum products, chemicals and second-hand goods, finished machinery and gold. Import permits are usually issued by the Department of Trade and Industry, and are used mainly to collect information rather than to limit trade.

South Africa has good trade links in the region and abroad. The African Growth and Opportunities Act (AGOA) of the US allows some 6,500 South African products to be exported to the US under its general system of preferences until 2015. South Africa also signed a free trade agreement (FTA) with the EU, that came into force in 2000. Under the FTA, 95% of South African exports to the EU would receive preferential access. South Africa is also a member of the South Africa Customs Union (SACU), comprising Botswana, Lesotho, Namibia, and Swaziland. It is aimed that by 2012, 98% of SACU trade will be subject to zero-tariff.

Hong Kong's Trade with South Africa ^

As a result of the financial tsunami, Hong Kong's total exports to South Africa decreased by 20.2% YoY to US$191 million during the first four months of 2009, after growing by 2.1% YoY to US$798 million in 2008. Major exports in 2008 included telecommunication parts and equipment (US$188 million, or 23.5% of the total), toys, games and sporting goods (US$56 million, 7% share), articles of apparel, of textile fabrics (US$39 million, 4.9% share), footwear (US$39 million, 4.8% share), and jewellery (US$26 million, 3.2% share).

On the other hand, Hong Kong's imports from the South Africa were up 21.2% YoY to US$200 million in January to April, 2009, after increasing by 15.2% to US$567 million in 2008. Robust imports were driven by a surge in silver and platinum imports, standing at US$79 million in the first four months in 2009, surpassing the US$48 million imported in 2008.

In 2008, major import items included pearls, precious and semi-precious stones (US$102 million, 18% of the total), fresh or dried fruit and nuts (US$69 million, 12.1%), chilled, frozen, or dried crustaceans, molluscs and aquatic invertebrates (US$49 million, 8.6%), silver and platinum (US$48 million, 8.4% share), and non-electric engines and motors (US$38 million, 6.6% share).

South Africa’s Involvement in the Hong Kong Economy

As of May 2009, there were 12 South African companies operating in the territory, with industries spanning from banking to jewellery. Examples include the Standard Bank, De Beers, and South African Airways. Up to May 2009, 810 South Africans were residing in Hong Kong.

In the first four months in 2009, there were 18,625 South Africans visiting Hong Kong, down 22.8% YoY from 24,120.

Appendix

South Africa's Imposition of Anti-dumping Duties against Chinese Mainland
(in force as at 31 December 2008)