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

BMI View:

Core Views:

  • We have revised our forecast for South Africa's 2016 real GDP growth to the downside, from 1% to 0.7%. This would imply a near-halving of real GDP growth from 2015's 1.3%. We expect household expenditure growth to collapse, while government expenditure growth decelerates on the back of fiscal consolidation and gross fixed capital formation growth also slows given continued policy uncertainties. From an output approach, we see some of the impact of 2015's -8.4% collapse in agricultural production carrying over into 2016, while the resilience of the financial services sector is tested by deteriorating macroeconomic conditions.

  • We believe that the South African Reserve Bank (SARB) will tighten rates by another 50 basis points (bp) to 7.5% in Q3, given three sources of upside pressures on inflation: 1) the second-round effects of food price...

South Africa Operational Risk Coverage (9)

South Africa Operational Risk

BMI View:

South Africa poses risks associated with the country's violent society which companies need to protect themselves against. While crime levels are amongst the highest in the world, South Africa faces a limited terrorist threat and has stable relations with its neighbours and major powers. Businesses are exposed to corruption, but the regulatory framework in place to combat financial and organised crime is stronger than regional averages. South Africa obtains a score of 49.8 out of 100 for Crime and Security Risk, putting the country in fifth place out of 48 Sub-Saharan African states.

The main risks to businesses in South Africa stem from the elevated levels of crime in the country, with homicide and rape rates amongst the highest in the world. While the most pressing concern for expatriates is the threat of home burglaries, the widespread possession of firearms means that crime can easily turn violent. The police force is perceived to...

South Africa Crime & Security

BMI View:

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....

South Africa Labour Market

BMI View:

BMI View: Overall, South Africa scores high with regard 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 49.8 out of 100 in BMI's Labour Market Risk Index, placing the country fifth out of 48 countries in the Sub-Saharan Africa (SSA) region.

Education presents a relatively low risk to investors in South Africa, at least in comparison to the wider region, as it has one of the best secondary and...

South Africa Logistics

BMI View:

BMI View: South African supply chains are reliant on a relatively developed transport network, and are subject to lower barriers to trade in terms of import and export costs compared with the rest of Sub-Saharan Africa. 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 56.6 out of 100 in the BMI Logistics Risk Index, which makes it a regional outperformer, placed second behind...

South Africa Trade & Investment

BMI View:

BMI View: South Africa performs well overall on BMI's Trade and Investment Risk Index, placing only behind Mauritius as a regional outperformer. South Africa's economy and business confidence levels experienced a rough 201;, however, these have not changed the country's fundamental characteristics which have contributed to this score. The following contribute to South Africa receiving its high score: the highest levels of trade volumes and FDI inward stocks in the SSA region; an efficient tax system and competitive corporate taxation rates; a stable banking and financial services sector;...

South Africa Industry Coverage (31)

Agribusiness

South Africa Agribusiness

BMI View:

BMI View: We continue to hold a mixed outlook for the South African agricultural market as a whole. Both corn and wheat will be hit by severe drought and the effects of El Nino, but we do expect grains to rebound over the course of our forecast period. Furthermore, livestock production and sugar consumption will both embark on a positive trajectory. Over the medium term, a weak rand, weather volatility and falling farm incomes will exert downward pressures on the market...

Autos

South Africa Autos

BMI View:

BMI View: Total vehicle sales are forecast to grow 1.7% in 2016 and at an annual average of 1.8% over our 2016-2019 forecast period. The headwinds within the South African economy will drag on new vehicle sales, with the export market providing the outlet required for growth to remain in positive territory.

Domestic Demand Dragging On Vehicle Sales
Total Vehicle Sales By Segment
e/f = BMI estimate/forecast. Source: NAAMSA, BMI

Key Views...

Commercial Banking

South Africa Commercial Banking

BMI View:

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

Consumer Electronics

South Africa Consumer Electronics

BMI View:

BMI View: We have made further negative revisions to our forecast over the next five-year period for the South African consumer electronics market in our Q2 2016 report update to account for the stronger-than-anticipated rand depreciation against the US dollar. Consumer electronics device spending growth in South Africa has been negatively impacted by economic weakness in 2013-2015, with the squeeze on spending from rand depreciation against the US dollar most significant in the PC and AV segments. Rand depreciation eroded South African household purchasing power in global markets, though with the trend of depreciation expected to ease over the medium term, it will to some extent be offset by an increasing supply of low-cost smartphones and tablets. Such low-cost smart devices have...

Defence & Security

South Africa Defence & Security

BMI View:

BMI View: South Africa possesses the largest defence sector in Africa, and local manufacturers - a growing number of which are entering into international product development partnerships - export items such as armoured vehicles, artillery and defence electronics to a wide range of countries across the world. Domestic demand for defence equipment remains strong, driven by Pretoria's continued commitment to regional peacekeeping, as well as the high levels of crime and social instability in the country, which...

Food & Drink

South Africa Food & Drink

BMI View:

BMI View: Growth in South Africa's food and drink industry will be tepid due to a weaker economic outlook and lower consumer spending. Cash-strapped consumers will restrict growth for premium products in the industry, while rising health consciousness and the proposal of a tax on sugary drinks will suppress growth in the fast food and soft drinks industry. The MGR sector will be boosted by the underdeveloped non-urban areas offering strong growth opportunities.

Food and Drink Spending
(2013-2020)
...

Freight Transport

South Africa Freight Transport

BMI View:

BMI View : Our forecasts for the South African freight transport sector are positive across all modes in 2015 - air, road, rail, and through the country's ports. The economy will see a partial recovery from 2014's anaemic growth of 1.4%, and we forecast a real expansion of 1.9% this year and in 2016. That said, growth in freight volumes will not be particularly robust, and there are significant downside risks to our projections, not least from the mining sector and a potential hard landing in China. South Africa's freight transport sector is driven primarily by two forces: private consumption and the mining sector. Manufacturing industries play a limited role in the intermodal transport of containers, but this is primarily driven by imports. Automotives production necessitates the transport of spare and intermediate parts.

...

Information Technology

South Africa Information Technology

BMI View:

BMI View: We continue to hold a positive outlook for the South African IT market in 2016 and beyond, over the course of our forecast period out to 2020. Nevertheless, the primary concern is the heavy depreciation of the South African rand against the US dollar. We believe rand depreciation will weigh-in on the market over the course of our forecast period, as was the case from 2013-2015. The outlook for 2016 is less challenging as economic conditions begin to ease, and over the medium term vendors will be able to target specific growth opportunities as consumers and businesses strengthen. A strong driver of growth will be government spending via service expansion and modernisation efforts. There is also growing interest in IT solutions by SMEs looking to explore new sales and marketing channels as well as to improve operations efficiencies, offering new opportunities.

Latest...

Infrastructure

South Africa Infrastructure

BMI View:

BMI View: South Africa's construction sector has entered into a tepid period of growth as business sentiment has been heavily eroded, which we expect will lead to significant cuts to capital expenditure over 2016 and 2017. While South Africa will remain a choice investment desitination in SSA, the 2016 budget did little to alleviate concerns over a ratings downgrade, which will further drag on growth. Rail and renewable energy infrastructure projects remain our favoured sectors, along with low-cost housing.

Latest Updates And Structural Trends

  • Business sentiment is set to drag on growth heavily over 2016 and 2017. We now forecast just 1.6% real growth in the construction...

Insurance

South Africa Insurance

BMI View:

BMI View: South Africa is home to a large and well developed insurance industry, with life insurance in particular boasting high rates of penetration and density. Both life and non-life are expected to record healthy growth in premiums over the forecast period through to 2019, barring short term contractions caused by currency movements. Some significant structural challenges remain: widespread poverty has lead to high rates of underinsurance in the non-life sector and low household income has also hampered the life sector where most households which can afford to purchase cover already do so. The dominance of domestic firms, particularly in the life sector, also reduces scope for new or greater entry by foreign multinationals.

...
Headline Insurance Forecasts (South Africa 2012-2019)

Medical Devices

South Africa Medical Devices

BMI View:

BMI View : 2016 will be another challenging year for the healthcare sector as the economic outlook worsens on the back of a very weak currency. Domestic production is growing in sophistication, but the vast majority of the market will remain dependent on imports. The FY2016-17 budget release confirms that health spending will continue to grow, primarily to support the introduction of the national health insurance scheme.

...

Metals

South Africa Metals

BMI View:

BMI View: Tin prices will be capped by US dollar strength in 2016, leading us to trim our price forecast to USD14,500/tonne. Beyond 2016, prices will recover gradually as the global tin market posts sustained market deficits and inventories dwindle.

...
Global - Tin Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

South Africa Metals

BMI View:

BMI view: We will maintain our aluminium price forecast for 2016 at USD1,575/tonne. Although prices will bottom in H116, production will outstrip consumption until 2018 and anchor prices. In particular, cheap Chinese exports will keep the market well supplied.

...
Global - Aluminium Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

South Africa Metals

BMI View:

BMI View: Globally, iron ore prices will remain subdued due to weak demand growth in China and expanding output by major miners in Australia and Brazil. China will see output slow as the country's iron ore miners operate on the higher end of the global iron ore cost curve.

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Global Iron Ore Forecast
2014 2015e 2016f 2017f 2018f

South Africa Metals

BMI View:

BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.

...
Global Nickel Forecasts
2013 2014 2015e

South Africa Metals

BMI View:

BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.

Global - Copper Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f ...

South Africa Metals

BMI View:

BMI View: Gold prices will prove resilient in 2016 due to a dovish shift in global monetary policy and elevated systemic financial sector risks. However, we do not foresee a sustained multi-year recovery and the mining sector will thus remain under significant stress. We forecast slowing mine production growth and increasing consolidation.

BMI Gold Forecasts
2014 2015 2016f 2017f ...

South Africa Metals

BMI View:

BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.

Steel Price Forecast
2014 2015 2016f 2017f 2018f 2019f...

South Africa Metals

BMI View:

BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.

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Global - Zinc Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f

South Africa Metals

BMI View:

BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.

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BMI Lead Price Forecast
Current* 2016f 2017f 2018f 2019f 2020f

Mining

South Africa Mining

BMI View:

BMI View: South Africa's mining sector will face persistent headwinds due to labour unrest, mineral price weakness, further divestments and retrenchment.

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South Africa Mining Industry Value Forecast
2015e 2016f 2017f 2018f

Oil & Gas

South Africa Oil & Gas

BMI View:

BMI View: Our outlook for the South African upstream sector remains heavily bearish. Exploration has stuttered due to the collapse of oil prices and the high cost of deepwater drilling and unconventional exploration in the country. The government has yet to finalise amendments to its petroleum bill and a high degree of regulatory and fiscal uncertainty is also warding off investors. The downstream sector is structurally weak and is unlikely to improve due to its ageing and low complexity capacity, domestic fuel price subsidisation and pullback of foreign investment.

...
Headline Forecasts (South Africa 2014-2020)
2014

Petrochemicals

South Africa Petrochemicals

BMI View:

The South African petrochemicals industry witnessed a contraction in 2015 amid slow overall economic growth. The industry is in recession and it could take at least two years before returning to growth as key petrochemicals sectors flatline in a difficult operating environment. The sector is the worst affected area of an economy that is enduring sub-2% growth and falling competitiveness.

In 2015, basic chemicals output fell 0.9% y-o-y, while plastic fell 2.2% and rubber declined 1.2%. However, some signs of recovery were seen in H215 with uptrends in plastics and chemicals. In terms of end-markets, the construction sector is enduring a poor performance, which is helping to depress demand for construction-related polymers. On the upside, the automotive industry enjoyed a boom in 2015 and rising local content in cars manufactured in South Africa offers further opportunities for consumption group.

The automotive parts...

Pharmaceuticals & Healthcare

South Africa Pharmaceuticals & Healthcare

BMI View:

BMI View: Continued delays towards large-scale regulatory improvements in South Africa's pharmaceutical industry pose a threat to generic medicines market growth; however, long-term growth will be supported through a variety of other driving factors including cost-containment measures and revised pricing structures. Despite the South African Department of Health's commitment to improving regulatory conditions, issues relating to consumer perceptions are set to persist.

Headline Expenditure Projections

  • Pharmaceuticals: ZAR43.41bn (USD3.42bn) in 2015 to ZAR47.33bn (USD2.91bn) in 2016; +9.0% in local currency terms and -14.7% in US dollar terms. Forecast in US dollar terms revised downwards from last quarter.

  • Healthcare:...

Power

South Africa Power

BMI View:

BMI View: South Africa's conventional power sources - thermal and nuclear in particular - will be hamstrung by operational delays and financial constraints. The majority of growth will come from non-hydropower renewables, forecast to grow at an annual average of 10% throughout our 10-year forecast period, boosted by a strong regulatory environment. The addition of the Ingula hydropower plant lowers the risk of load shedding during 2016.

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Headline Power Forecasts (South Africa 2015-2021)
2015e 2016f 2017f

Real Estate

South Africa Real Estate

BMI View:

BMI View: The sluggish nature of the South African economy has created uncertainty for businesses, leading to a drop in investment activity. Nevertheless, the office commercial real estate sector has performed well, with good demand for premium grade units. An upward trend in retail sales indicates long-term potential for retail real estate, and regarding the industrial sub-sector, there has been a rise in industrial real estate acquisitions as companies seek to diversify their portfolios.

South Africa is afflicted with high levels of poverty, rising unemployment, low consumer confidence and the possibility of a recession. Real GDP growth has fallen in recent years and in 2015 is forecast at 1.4%, down from 1.5% in 2014, sparking fear of a recession as the economy struggles to recover from the longest drawn-out industrial action since the end of apartheid and weak overseas demand. We believe...

Renewables

South Africa Renewables

BMI View:

BMI View: South Africa's non-hydro renewables capacity will nearly triple over our 10-year forecast period and the country will lead the SSA region for installed renewables capacity by 2024. The attractive regulatory environment, high investor interest and strong power demand in the country will be the main driving forces underpinning growth.

South Africa - Headline Renewables Forecast
2014 2015e 2016f 2017f...

Retail

South Africa Retail

BMI View:

BMI View : Despite South Africa's ongoing economic and power supply problems, the retail sector remains confident and plans for the development of many more shopping malls shows no sign of abatement. Continued modernisation of the country's urban retail real estate sector is helping to attract international retail groups who are keen to cater to the country's expanding middle class. Following Krispy Kreme's launch in Johannesburg in Q415, US-based competitor Dunkin Donuts has also expressed an interest in the market and coffee giant Starbucks aims to make its entry into the South African market in the first half of 2016.

Although recession in South Africa is a possibility as we enter 2016, this is not our core view. The economy shrank by 1.3% during...

Shipping

South Africa Shipping

BMI View:

BMI View: W e expect positive growth across South Africa's ports in 2016. Many South African facilities had a poor 2014 in which volumes declined, but we estimate a return to growth in 2015 and expect that this will be cemented this year. That said, there are significant challenges to this outlook, stemming from the uncertain macroeconomic environment. The South African economy is being buffeted by external headwinds from the China slowdown and lower commodity prices, which is being exacerbated by domestic labour disputes. Fundamentally, many of the ports require investment, and the port of Durban - the largest container port in the country - has been silting up.

Headline Industry Data

  • Richards Bay Port tonnage throughput in 2015 is forecast to expand by 2.2% in 2016. Growth will be 2....

Telecommunications

South Africa Telecommunications

BMI View:

BMI View: We continue to maintain our core forecast for the South African market and retain our positive outlook for 2016. The market has so far performed beyond our expectations, adding over 6mn subscribers in 9M15. Furthermore, the uptake of 3G and LTE services is in line with our recent revisions. We do however caution that with penetration rate inching towards 170%, there is a high likelihood of a significant number of inactive sims connections that have not been discounted. A major discounting by operators will lead us to revise our forecasts. Furthermore, we are carefully monitoring the competitive dynamics of the South African mobile market as we believe 2016 will be the year of major consolidation as fixed line...

Tourism

South Africa Tourism

BMI View:

BMI View: South Africa is home to the most developed tourism market in Sub-Saharan Africa, with the supporting infrastructure to match. Air travel connections are extensive and the hotel market is modern and competitive, particularly in established tourism destinations such as Cape Town and Durban. The country continues to attract a large volume of international visitors and some sectors, such as luxury safari holidays, are proving a valuable growth area. While we are currently forecasting healthy increases across all key market indicators over the next five years, we do note that stricter visa regulations and ongoing security concerns have the potential to derail growth.

Key Forecasts (South Africa 2013-2020)
Indicator ...

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