Market Opportunity
Since 1994, which marks end of the apartheid era in South Africa, this emerging market has undergone several changes to cope with the rapidly changing global scenario. South Africa has made much progress in dismantling its old economic system, which was based on import substitution, high tariffs and subsidies, and extensive government intervention in the economy. The new leadership has moved to reduce the government's role in the economy and to promote private sector investment and competition.
Today, South Africa is characterized by the two-tier economic system, demonstrating the features of both developing and developed nations of the world. It is a flourishing and industrialized economy that exhibits many qualities associated with developing countries, including a division of labor between formal and informal sectors and an uneven allocation of wealth and income. Unemployment is one of the country's main socioeconomic challenges; Stats SA reports a 21.7% unemployment rate. Furthermore, an outdated infrastructure has inhibited growth.
Growth was robust from 2004 to 2008, but began to slow in the second half of 2008 due to the global financial crisis' impact on commodity prices and demand. According to the CIA Factbook, the GDP is currently 300.4 billion USD and the Purchasing Power Parity is 4.9 billion USD. The nation's 2.8% real growth and 11.3% inflation rate is an improvement upon previous numbers, yet the South African Government estimates that the economy must achieve growth at an average of 4.5% until 2010 and 6% thereafter to reach its goal of halving its high levels of unemployment by 2014. The Economist forecasts that inflation will subside to 6.6% in 2009 and 5.7% in 2010 and will continue to fall to 4% in 2013.
Over the last ten years, the South African Rand has lost approximately half of its value against leading world currencies. In 2004, the Rand got much stronger again but lost in 2006, 2007 and sharply in 2008, as stated by southafrica-travel.net. Currently, 1 ZAR (Rand) equals to 0.129167 US Dollar (x-rates.com).
Best Industry Segments
Based on statistics from southafrica-travel.net, South Africa produces one fifth of the entire production of the African continent. The economy is well-diversified and the country is capable of producing a wide range of consumer and investment goods. South Africa has rich mineral resources. It is the world's largest producer and exporter of gold, platinum, and chromium and also exports a significant amount of coal. Another major export is diamonds. The CIA Factbook lists automobile assembly, metalworking, machinery, textiles, iron and steel, chemicals, fertilizer, foodstuffs, and commercial ship repair as other exports. Over the last few years, the country's economic dependency on the export of raw materials, especially on gold, has lessened.
South Africa has extensive business connections around the world, importing from Germany (10.9%), China (10%), Spain (8.2%), (US 7.2%), (Japan 6.1%), UK (4.5%), and Saudi Arabia (4.2%) according to the US Department of State. With regard to exports, the country sells to global partners: US (11.9%), Japan (11.1%), Germany (8%), UK (7.7%), China (6.6%), and the Netherlands (4.5%).
Regulatory and Tariff Landscape
Post-apartheid, South Africa has significantly reduced its tariffs and export subsidies. Statistics from the Heritage Foundation show its weighted average tariff rate was 5.1 percent in 2006. The import-weighted average tariff rate reduced from more than 20% in 1994 to 7% in 2008 (US Department of State).
The safety scheme for electrical goods is operated by the South African Bureau of Standards (SABS) on behalf of the South African government. The mark is not required for certified equipment. The SABS is also authorized to issue necessary EMC Certificates for ICT products by the Independent Communications Authority South Africa (ICSCA).
Online Marketing
The Internet is expanding in South Africa, which is one of the most technologically-resourced countries on the African continent. Internet users in South Africa for year-end 2008 are estimated at 4,590,000 with 10.5% penetration according to South African leading technology research organization World Wide Worx. User growth has increased to 91.3% from 2000 to 2008. The internet population is expected to grow in the next five years as it has in the fifteen years since the internet became commercially available in the country.
Online Language Preferences
Afrikaans, English, isiNdebele, isiXhosa, isiZulu, Sepedi, Sesotho, Setswana, siSwati, Tshivenda, and Xitsonga are the eleven official languages in South Africa. According to the 2001 National Census, the three most spoken first home languages are Zulu (23.8%), Xhosa (17.6%) and Afrikaans (13.3%). English is the most commonly spoken language in official and commercial public life. It is recognized as the language of commerce and science; however, it is only the fifth most-spoken home language, spoken by only 8.2% of South Africans at home in 2001 (Southafrica.info).
Search Engine Profile
The top search engine was, with no surprise, Google. Media Vision reports that Google's market share has not dropped beneath 90% since August last year. Yahoo! never made it past 5% market share during the same period of time. At the moment, Google owns 90.31% of the search market and Yahoo! only 1.58%. MSN is the second biggest search engine with 5.22% of the market.
Summary
South Africa, coined the Rainbow Nation because of its multitude of people (48 million) from different backgrounds, languages and religious beliefs, is a copious supply of natural resources, well-developed financial, legal, communications, energy, and transport sectors, and a stock exchange that is 17th largest in the world (the Johannesburg JSE Securities Exchange). It acts as a hub for other African countries in the distribution of goods to major urban centers throughout the region. Unfortunately, its financial system is built on a formal economy that dominates the African continent and an informal economy that embodies poverty. Based on this analysis of the potential of the market, Global eMarketer ranks South Africa as a Tier II market to run an online marketing campaign.
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