South Africa boasts one of the largest economies in Africa, and attracts the business of many of our clients. The country is a big player in the mining, manufacturing, finance and retail markets. Our analysts expect South Africa’s economic reforms to progress at a sluggish pace, as the government's attempts to appease the members of the tripartite alliance – which have differing political views – will result in indecision on policy.

Using our unique Total Analysis model, we ensure that our clients make risk-assessed decisions in South Africa. We keep them informed of the latest market moves and political developments supported by our interactive data and forecasting. Clients also benefit from in-depth analysis of 24 of South Africa’s most important industries as part of our 'top-down' and 'bottom-up' perspective. Our research teams make it easy for you to succeed in South Africa.

Country Risk

South Africa Country Risk

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Core Views:

  • ANC policy is likely to shift left over the course of the next 18 months as the party attempts to fend off a challenge from populist opponents, and to stem the loss of support owing the electorate's frustrations with public service delivery.

  • The South African economy will benefit from lower oil prices, and we have upgraded our 2015 real GDP growth forecast to 2.5% from 2.1% due to oil price declines. Private consumption and, to a lesser extent, investment will be the main beneficiaries of lower oil prices.

  • The South African Reserve Bank will keep the repo rate on hold at 5.75% through 2015, even while the US Federal Reserve hikes rates by 50 basis points. Benign inflationary trends and weak economic growth will prompt the Monetary Policy Committee to become dovish.

  • The rand will continue to...

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South Africa Operational Risk Coverage (9)

South Africa Operational Risk

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BMI View:  Due to its strong military, relative dearth of territorial disputes, and minimal terrorism threats (thanks to a limited presence on the international stage), crime represents the greatest security risk in South Africa, particularly for foreign workers. The biggest threat to investors stems from the country's high crime rate with ATM scams, street muggings, car-jackings and burglaries a regular occurrence across the country. This threat is reflected in South Africa's underwhelming score of 26.7 out of 100 for Crime Risk; 28th highest in the Sub-Saharan (SSA) region. Moreover, an ineffective and corrupt police force leaves businesses reliant on costly private security services to protect their assets.

By far the biggest security risk affecting South Africa is its very high crime rate, which may be underestimated by official statistics....

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South Africa Crime & Security

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BMI View:  Due to its strong military, relative dearth of territorial disputes, and minimal terrorism threats (thanks to a limited presence on the international stage), crime represents the greatest security risk in South Africa, particularly for foreign workers. The biggest threat to investors stems from the country's high crime rate with ATM scams, street muggings, car-jackings and burglaries a regular occurrence across the country. This threat is reflected in South Africa's underwhelming score of 26.7 out of 100 for Crime Risk; 28th highest in the region. Moreover, an ineffective and corrupt police force leaves businesses reliant on costly private security services to protect their assets. In light of this, we have awarded South Africa an overall Crime and Security risk score of 58.4, leaving it in fifth place regionally, and 8.9 points behind regional leader Lesotho....

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South Africa Labour Market

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BMI View: Overall, South Africa scores highly with regards to Labour Market risks, a growing pool of skilled workers, high urbanisation and relatively low non-labour workforce costs boosting the attractiveness of the country compared to other states in the region. However South Africa's overall rating is depressed by the heavy regulations governing workforce demographics, powerful unions keeping wages up and a high unemployment rate. Overall, South Africa receives a score of 47.5 out of 100 in BMI 's Labour Market Risk Index, placing the country seventh out of 44 countries in the Sub-Saharan Africa (SSA) region.

Education presents...

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South Africa Logistics

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BMI View: South African supply chains are reliant on a relatively superior quality transport network, and are subject to lower barriers to trade in terms of import and export costs compared with the rest of the Sub-Saharan Africa (SSA) region. However, both water and power shortages threaten the long-term growth of the South African economy and pose high risk to investors considering expanding their operations to this market. These factors are highlighted in the country's score of 55.6 out of 100 in the BMI Logistics Risk Index, which makes it a regional outperformer in SSA, placed second behind Mauritius, and ranking the country in 60th place out of 170 states globally.

Supply chains in South Africa benefit from a relatively developed transport network, thanks to heavy investment in infrastructure...

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South Africa Trade & Investment

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BMI View : South Africa is one of the most attractive and stable countries in the region, offering a well-defined and well-implemented legislative environment with good contract enforcement and strong intellectual property protection. Although we expect investors to continue to be deterred by the lack of reliable transport and utilities infrastructure, and overregulation of the labour market, we see little in the way of direct trade and investment risk, particularly given government support of pro-market policies. We have given South Africa a score of 60.5 for Trade and Investment Risks, placing it in second place overall, between...

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South Africa Industry Coverage (24)

Agribusiness

South Africa Agribusiness

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BMI View: While we hold a positive view on the South African agricultural sector and see particular growth in the livestock sector, we are less optimistic on sustained growth in cereals production. This will be due to slower yield growth owing to lower input usage from a weaker currency and limited development in GMO seed plantings. The sugar sector also presents interesting growth opportunities, mainly thanks to renewed investment and improved technologies. The country's livestock sector will see greater growth over the coming years, owing to lower grain prices and increasing demand from a more affluent population. We believe the country's main agribusiness companies will reap the benefit from lower global grain prices and...

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Autos

South Africa Autos

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The near-term outlook for South African new vehicle sales remains downbeat as we enter 2015, with the local economy continuing to experience significant headwinds. As of end-November 2014, new vehicle sales were down by 8.6% year-on-year (y-o-y), at 550,705 units, according to data issued by the National Association of Automobile Manufacturers of South Africa (NAAMSA). For the full year 2014, BMI is estimating a fall of 9.1% took place.

Looking forward, BMI retains its view that the short-term outlook for South African new vehicle sales remains challenging. Our negative stance is backed up by weak macroeconomic fundamentals, with BMI's Country Risk team targeting GDP growth of 2.1% in 2015, up from an estimated 1.5% for 2014, as the consumer sector struggles amid high unemployment and elevated interest rates. Intermittent industrial action and power shortages will also...

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Commercial Banking

South Africa Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

South Africa Consumer Electronics

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BMI View: In the Q2 2015 update we undertook a major revision of the historical data for South Africa's consumer electronics market, scaling down our estimate for PC market value, as well as extending the forecast period to 2019. Even with the revision, our outlook for medium-term consumer electronics spending growth remains on track. Relatively weak economic growth, and particularly our in-house Country Risk team's forecast for rand depreciation against the US dollar 2015-2019, weigh on the growth outlook. The erosion of South African household purchasing power in global markets will to some extent be offset by an increasing supply of low-cost smartphones and tablets as mobile operators encourage greater data usage...

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Defence & Security

South Africa Defence & Security

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We expect the South African defence budget to reach USD3.6bn in 2014. For the remainder of the forecast period, up to and including 2018, we expect the defence budget to rise, with the country spending on average USD5.3bn on defence annually. The final year of the forecast period (2018) will see defence spending reach USD6.8bn.

Between 2001 and 2011, the SANDF has comprised an average of 68,400 personnel. The numerical size of the armed forces has fluctuated widely between the 55,000 personnel they possessed in 2004 to the personnel strength of 103,000 recorded in 2006.

We have given South Africa an overall security risk rating of 75 for Q414. We believe that the country has a very low risk of becoming involved in a major international conflict. Secondly, the country is considered very unlikely to experience a major terrorist attack. However, the same cannot be said regarding crime with the country maintaining a...

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Food & Drink

South Africa Food & Drink

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BMI View: The latest data continue to indicate that South Africa's economic growth will remain on a slow side in the coming months. Whilst GDP contracted in Q114 it has shown modest growth since, up 0.5% in Q214 and 1.4% in Q314, but still falls far short of the 4.5% averages that the country achieved in the opening decade of the 21st century. Structural problems, high unemployment and a deteriorating infrastructure are among the main problems holding the country back. Consumer spending as a whole remains relatively tepid, although the mass grocery retail sector has seen some improvement in recent months which is due in part to the resolution of the protracted and costly strikes that were affecting the platinum mining and manufacturing sector.

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Freight Transport

South Africa Freight Transport

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BMI View: BMI maintains a cautiously optimistic stance on South Africa's freight transport sector in 2015. Although there are risks to the mining sector from a potential hard landing in China, we believe that growth in the mining industry will continue, which bodes well for the rail and port sectors. However, imports of containerised goods could struggle to maintain volumes as unemployment rises.

South Africa registered an increase of 7.5% year-on-year (y-o-y) in freight volumes in September...

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Information Technology

South Africa Information Technology

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BMI View: We undertook a significant revision of market data for South Africa's IT market for Q2 2015, revising our estimate for market size downwards, as well as extending the forecast to 2019. However, our bullish outlook for IT market spending growth over the medium term remains unchanged, although prospects for rand depreciation against the US dollar weigh on the outlook. The IT market continues to primarily be driven by government spending as well as large enterprises, both of which are expected to slow their spending in the light of a slower economy. However, there is growing interest in IT solutions...

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Infrastructure

South Africa Infrastructure

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BMI View: The ongoing power shortages in South Africa will weigh on the construction industry's growth over 2015, with our 3.4% real growth forecasts for the year reflecting this. While the mining industry and business sentiment in general will be similarly damaged by this, we expect low-cost homes to be a major driver of growth, along with renewable energy projects and railways. Despite headwinds, South Africa remains one of Sub-Saharan Africa's most attractive construction markets, offering both scale and a stable business environment.

We have marginally revised down our 2015 forecast for real growth in the South African construction industry to 3.4% year-on-year for 2015, down from 3.9%. This move is on the back...

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Insurance

South Africa Insurance

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BMI View: We have a positive outlook for South Africa's overall insurance sector over the 2015-2019 period. While the rand's ongoing depreciation against the dollar is suppressing the development of premiums in USD terms, we confirm medium single-digit growth rates in local currency terms in both the life and non-life segments. Consistently accounting for over 80% of total written insurance premiums, life insurance is set to account for the predominant part of the industry's overall growth in the coming years. Interestingly, while the largest sub-segments - motor vehicle and property insurance - are seeing their non-life market shares fall, the sluggish economic growth has brought credit-financial guarantee...

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Medical Devices

South Africa Medical Devices

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BMI Industry View : The medium term prospects for the medical device industry look encouraging; based on current trends, the market, of which over 90% is supplied by imports, is expected to grow at a CAGR of 5.6% from 2013-2018. A key driver of growth is expected to be the public-private partnerships to develop hospitals in South Africa but this could be tempered slightly, by a depreciating rand against the US dollar and the general state of the South African economy. The long term growth prospects of the South African medical device market will be strongly influenced by the ANC government's policies in regards to the new National Health Insurance (NHI) scheme, the promotion of public-private partnerships to develop and upgrade hospitals, the serious shortage of healthcare personnel and an urgent need to effectively...

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Metals

South Africa Metals

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BMI View:  Subdued refined metal prices, elevated energy costs, and continued labour unrest will lead to only modest growth in South Africa's metals industry. Nevertheless, positive consumption trends will persist, supported by multi-year growth from the auto, construction, and infrastructure sectors.

We expect just modest consumption growth of refined metals in South Africa in the coming years on the back of our forecast for the country's...

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Mining

South Africa Mining

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BMI View: The past decade of minimal growth in South Africa's mining sector is set to continue as the country's gold and platinum sectors face diminishing margins and industrial strife. The coal and iron ore sectors will come under pressure as weak prices dent production growth.

South Africa's share of global mined output is set to decline as other mining jurisdictions experience faster rates of growth. We expect investment, particularly in gold mining, to be more attracted to low-cost, high resource opportunities in the rest of the continent such as the Democratic Republic of Congo.

South Africa's mining sector is amenable to investment, with few obstacles confronting foreign companies wishing to enter. The government is generally stable and South Africa's business environment is one of the best on...

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Oil & Gas

South Africa Oil & Gas

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BMI View: South Africa has vast unconventional and deepwater resource potential, offering significant upside risk to its longer-term production prospects. However, a sustained lower oil price environment may see these types of high-risk, high-cost venture brought under strain. Ongoing regulatory uncertainty surrounding the amended petroleum bill also threatens to dampen interest in the country's nascent upstream. Structural weakness in the South Africa's downstream will drive a growing refined fuels import dependency, as domestic fuels production fails to keep pace with demand.

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Headline Forecasts (South Africa 2012-2018)
2012 2013

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Petrochemicals

South Africa Petrochemicals

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BMI View: On the back of lower oil prices, private consumption in South Africa is expected to rise, which should have a positive knock-on effect on the domestic petrochemicals industry as demand recovers somewhat. Meanwhile, the depreciation of the rand is expected to support local output. This, however, depends on how well the authorities control inflation.

South Africa's plastic and rubber output declined in 2014 alongside the overall depressed economic situation, with real GDP growth estimated to have slowed to 1.4%. For 2015, we expect the South African economy accelerate on the back of lower oil prices, with GDP growth forecast at 2.5%. On the back of improved economic conditions, resulting in rising private consumption and rising demand, the country's petrochemicals industry is set to recover somewhat, as consumption of plastics used for packaging is set to increase.

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Pharmaceuticals & Healthcare

South Africa Pharmaceuticals & Healthcare

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BMI View: A cooling economy, rising unemployment and a worsening consumer outlook will limit the South African pharmaceutical market's potential in the short term. However, the government's commitment to an expansive fiscal policy, particularly to spending on healthcare infrastructure and general healthcare expenditure, will support continued growth in the sector over the next five years.

Headline Expenditure Projections

  • Pharmaceuticals: ZAR34.01bn (USD3.52bn) in 2013 to ZAR38.13bn (USD3.53bn) in 2014; +12.1% in local currency terms and +0.2% in US dollar terms. Forecast revised upwards from Q414.

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Power

South Africa Power

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BMI View: This quarter we have slightly revised our forecast to factor in some domestic supply from the Ibhubesi gas field in 2017. That said, our fundamental assumptions remain relevant. Our negative outlook for South Africa's power sector is based on inefficient existing generation capacity, a lack of investment, delays to project commissioning and the precarious financial situation of Eskom . These factors show little sign of abating over the short-to-medium term - with wide-ranging implications for the country's economy and mining sector in particular . On a more positive note, we highlight...

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Real Estate

South Africa Real Estate

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BMI View:  We believe that the real estate sector in South Africa will remain stable, but there are downside risks to our forecasts as a result of macroeconomic headwinds affecting the sector. We believe that the most significant opportunities lie within the retail sector, although over the long term, there is significant opportunity for commercial real estate firms to cater to businesses setting up in South Africa with a view to expanding elsewhere on the continent.  

Over the short term we are fairly pessimistic for the commercial real estate market. High inflation, low GDP growth and a slowdown in major trading partner China will all have an impact on the sector, whilst rising living costs and interest rates will affect personal consumption. This will lead to low growth in rental rates in the short term, and we would...

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Renewables

South Africa Renewables

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BMI View: The commissioning of Africa's largest solar plant aligns with our positive view on South Africa's rapidly expanding renewables industry. The outperformance of the country's renewables industry compared to the conventional power sector continues, and we believe could even serve to worsen the prospects for the power sector by drawing resources away from the expansion of thermal capacity.

We have been tracking South Africa's rapidly expanding renewables industry over the last three years, as the Renewable Energy Independent Power Producer Programme (REIPPP) has progressed. The success of the procurement programme, in terms of attracting international renewables developers and suppliers into the market and bringing projects online, has cemented South Africa as one of the key renewable energy growth markets, not just in Sub-Saharan Africa (SSA) but globally.

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Retail

South Africa Retail

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BMI View:  Latest data indicate that the South African consumer sector is struggling due to high unemployment and increasing interest rates. Private consumption rose by just 1.5% quarter-on-quarter (q-o-q) SAAR in Q214, the slowest rate of growth since the global financial crisis; while retail sales rose by only 0.9% year-on-year (y-o-y) in Q314. However, while the emerging middle class in South Africa is expanding only slowly, our data show increased household spending on non-essential products in areas such as clothing and communications, with retailers such as Forever New and Hennes & Mauritz  (H&M) keen to capitalise on these trends.

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Shipping

South Africa Shipping

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Growth at South African ports is threatened by the global headwinds that are posing challenges for the country as a whole, namely the China slowdown and the drying up of foreign inflows due to the raised possibility that the extraordinarily loose monetary policy that has been the norm in the US is tapered off. However, with continued investment in facilities, growth in private final consumption, and ever-expanding coal exports, we forecast growth in both total tonnage and container volumes at South African ports in 2015.

Headline Industry Data

  • Richards Bay Port tonnage throughput in 2015 is forecast to return to growth at 2.0% following a 2014 decline. Over the medium term to 2019 we project a 2.2% average annual increase.

  • Port of Durban container throughput is forecast to grow by 2.5% in 2015. Growth will average 3.2% per annum in the medium-term...

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Telecommunications

South Africa Telecommunications

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BMI View: Investment in fibre optic network infrastructure will enable South Africa's telecoms service providers to diversify their product offerings for corporate and residential customers, and create new revenue streams to offset the disruptive impact of regulatory interventions and competition dynamics on traditional service revenues. In addition to enterprise solutions, residential services such as IPTV and VoD services will grow rapidly in the coming years on the back of these network infrastructure rollouts as well as the growing demand for convergence services by consumers.

Key Data

  • The mobile market grew by 2.6% q-o-q in Q314 to bring total growth in 9M14 to 15.2%.

  • Market average ARPU declined by 1.1% in Q314 in spite...

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Tourism

South Africa Tourism

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BMI View: South Africa's national tourism strategy involves boosting the number of international and non-regional inbound tourists as well as promoting sustainable domestic tourism. We are anticipating a significant rise in inbound tourism over our forecast period, which will in turn increase the value of the hotel industry.

South Africa's tourism sector has grown substantially in recent years, owing partly to an influx in arrivals around the time of the 2010 FIFA World Cup, as well as the further development of both domestic and international tourism. African countries represent the largest market for inbound travel and are expected to continue to do so over the forecast period to...

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Water

South Africa Water

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BMI View:  We have maintained our water forecasts this quarter, as South Africa's water industry continues to remain comparatively strong, with a large amount of projects in the pipeline. However, with numerous issues plaguing the water services sector, and limited funds, we anticipate little in the way of new infrastructure project developments over the coming year.

We highlight various core problems facing the water sector in South Africa. The first of these is the inadequate infrastructure - both the existing facilities and networks which are frequently outdated, inadequate or under-maintained, resulting in poor quality water and wastewater treatment, and high levels of water leakage (as high as 45% in some regions). The second infrastructure issue is the lack of...

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