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.

South Africa Country Risk

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Core Views:

  • Growth will rebound only slightly in 2017, after a sharp slowdown in 2016. Elevated unemployment and sluggish credit growth will weigh on private consumption, while continued fiscal consolidation limits government spending. Elevated policy uncertainty and a poor operating environment will act as a continued headwind to investment.

  • We believe that the South African Reserve Bank (SARB) will keep the policy rate on hold at 7.00% through end-2017. With inflation poised to come within the upper bound of the target band sustainably by mid-2017, and growth sluggish, we believe the hiking cycle is largely passed.

  • We expect South Africa's fiscal deficit to narrow, though at a slower pace than anticipated by the government. Weak economic growth will act as a headwind to fiscal revenues.

  • In the...

South Africa Operational Risk Coverage (9)

South Africa Operational Risk

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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

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BMI View: South Africa faces 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 49.7 out of 100 for Crime and Security Risk, putting the country in sixth place out of 48 Sub-Saharan African states.

Crime Heightens Risks In South Africa
South Africa and Regional Average Crime & Security...

South Africa Labour Market

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BMI View: Risk levels in South Africa's labour market vary according to sector. Businesses looking to use South Africa as a base for accessing the Sub-Saharan African market will benefit from a larger pool of skilled workers than in the country's regional peers. Labour intensive industries such as mining and manufacturing, while enjoying access to large labour pool, face numerous risks stemming from the population's poor health levels and high trade union activity which affect productivity and raise costs. As a result of these varied implications, the country scores a moderate 48.5 out of 100, which ranks it in seventh place out of 48 Sub-Saharan African states.

Availability of Labour (42.1/100): South Africa...

South Africa Logistics

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BMI View: South Africa remains one of the outperformers from a logistics perspective in the Sub-Saharan Africa (SSA) region. This is largely on the back of the country's extensive and well connected transport network, which is of superior quality to those of many other SSA states. This means that overland transportation time and cost burdens are significantly lower than in the majority of its regional peers, and on the whole the safety of cargo being transported is less compromised. Nevertheless, frequent incidences of widespread electricity, fuel, and water shortages have created significant risks for business operation within South Africa and caused much financial loss. Consequently, South Africa ranks in 2cnd place out of 48 SSA states, albeit with a relatively low score of 53.2 out of 100.

Widespread Utilities Shortages Pose Risk For...

South Africa Trade & Investment

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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 (22)

South Africa Agribusiness

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BMI View: We continue to maintain our mixed outlook for the South African agricultural market as a whole in our latest Q4 2016 report update. We believe that both corn and wheat, crucial grain sectors of the country, took severe losses due to the El Nino-related drought. Nevertheless, we expect them both to rebound out to 2020 as the weather conditions improve. 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. We view South Africa as a generally lucrative market with strong economic growth, rising...

South Africa Autos

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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...

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

South Africa Consumer Electronics

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BMI View: We have made a downward revision to our historical data and forecast for the handset market value in South Africa, to reflect lower household income data from our Retail team as well as newly sourced trade data for handsets and components. We nevertheless retain our view that the handset market will outperform, as the depreciation of the rand over 2013-2016 has squeezed demand for higher value PC and AV devices. Our Country Risk team expects the rand to stabilise from 2017, which will allow rising demand for smartphones, tablets, supported by an increasing supply of low-cost devices, as well as previously deferred PC purchases, to drive a return to growth in US dollar terms.

Latest Updates And Industry...

South Africa Defence & Security

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BMI View: South Africa's defence budget will remain limited in the medium term, amid difficult economic conditions and as the government focuses spending on much-needed service delivery improvements rather than military development. Over the longer term, as the economy improves, defence spending will register gradual growth amid rising regional terrorist threats and domestic risks linked to crime and social unrest, necessitating investment into maintaining and improving the SANDF's capabilities. We expect exports from the well-developed South African defence industry to grow steadily over the next decade, as foreign engagement with local companies strengthens.

Headline Defence Expenditure Forecasts (South Africa 2016-2020)

South Africa Food & Drink

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BMI View : We hold an optimistic outlook for the food and drink industry over 2016 and 2017 owing to the well-established South African food market, with industry players well-placed to overcome short-term consumer downturn. The drinks market will benefit from an emerging affluent consumer base boosting premium demand, while the soft drinks industry faces a more volatile outlook owing to the ongoing sugar tax debate. Retailers increasing value-added offerings will win over its cash-strapped core consumer base amid pressing economic pressures.

Food and Drink Spending

South Africa Freight Transport

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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.


South Africa Information Technology

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BMI View: We retain a positive growth outlook for the South African IT market in 2016 and throughout the remainder of our forecast period to 2020. We forecast the software and IT services segments in particular to outperform, as both public and private sector organisations leverage a growing availability of cloud-based solutions to drive cost cutting and efficiency gains in their operations. On the hardware side, however, the depreciation of the rand against the US dollar poses a significant downside risk to our outlook. Our Country Risk team's core scenario is for much more gradual rand depreciation over 2017-2020, but interest rate hikes in the US or increased political instability could send the rand on a steeper depreciatory trajectory, and further squeeze consumer purchasing power for imported...

South Africa Infrastructure

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BMI View: We maintain our tepid growth outlook the South African construction market between 2016 and 2025 as political and economic headwinds take hold. Business confidence in the economy remains low, hampering the outlay of much-need private investment into infrastructure, while budgetary pressures are hindering the government's ability to deploy the capital earmarked for the sector.

Forecast & Industry Developments

  • We continue to forecast real growth of 1.6% and 2.1% in 2016 and 2017 respectively as the government struggles to deploy the capital it has earmarked for the sector and investor caution towards the South African economy grows.

  • Growth opportunities will primarily stem from upgrades to freight logistics capacity, with commodities...

South Africa Insurance

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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)

South Africa Medical Devices

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BMI View : After a challenging 2016, 2017 will be a more positive year for the healthcare sector as the economy begins to pick up and health spending continues to grow, primarily to support the introduction of the national health insurance scheme. This will boost demand for medical devices with the market seeing high single-digit growth in local currency terms. Domestic production will continue to grow...

South Africa Mining

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

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

South Africa Oil & Gas

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BMI View: Major planned overhauls of the country's regulatory and fiscal regimes are a broad positive for the South African oil and gas sector. However, the pace of reform remains slow, limiting the upside to the upstream sector over the short to medium term. As a result, despite relatively moderate oil consumption growth, domestic production will struggle to keep pace with demand, driving a higher dependence on imports. Our outlook on the downstream segment remains heavily bearish, mainly due to ageing and poorly efficient refining capacity, weak profitability and limited appetite for investment.

Headline Forecasts (South Africa 2014-2020)
2014 2015e...

South Africa Petrochemicals

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The outlook for the South African petrochemicals industry has worsened due to the country's continued poor economic performance as well as the threat of strike action within the petrochemicals sector and related sectors, both upstream and in end markets. In spite of the decline in the value of the rand, the sector is struggling with low levels of competitiveness and weighed down by poor consumption, although past problems with electricity power supply have eased. Sub-2% growth is expected over the short-term with little significant growth expected over the five year forecast period in spite of the growth in capacity in the C3 chain.

Basic chemicals output grew 2.6% y-o-y in the first five months of 2016, reversing the trend in 2015 when full year output fell 0.6%. This was above the trend seen in the overall manufacturing sector which grew 1.0% y-o-y over the period. Plastic also fared better, growing 0.5% y-o-y compared to a 1.9%...

South Africa Pharmaceuticals & Healthcare

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BMI View: Improvements to South Africa's pharmaceutical distribution procedures will improve the population's access to essential medicines. Moreover, advancements to the country's drug monitoring capabilities will make the country a more attractive destination for local manufacturing over the long term. While South Africa is taking steps to address the distribution of counterfeit medicines, the widespread prevalence of substandard drugs will remain a risk to our outlook for the country.

Headline Expenditure Projections

  • Pharmaceuticals: ZAR43.41bn (USD3.40bn) in 2015 to ZAR47.48bn (USD3.08bn) in 2016; +9.4% in local currency terms and -9.3% in US dollar terms. Forecast in US dollar terms revised...

South Africa Power

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BMI View: Thermal power generation will continue to account for over 85.0% of total power output in South Africa over our 10-year forecast period due to the addition of just under 10GW of new coal-fired capacity. The highest growth in new capacity additions will come from non-hydropower renewables, forecast to grow at an annual average of 12.5%. New capacity coming online and the full commercial operation of the Ingula pumped-storage plant pending means the risk of load shedding is reduced.

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

South Africa Real Estate

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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...

South Africa Renewables

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BMI View: The ongoing disconnect between the government and Eskom regarding renewable energy policy presents headwinds to the continued expansion of South Africa's renewables industry - and by extension, a downside risk to our renewables capacity forecasts. We expect no major retrenchment in policy and do not think existing projects contracted are at risk from cancellations; however, this does throw into question future rounds of the REIPPP.

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

South Africa Retail

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BMI View: We forecast that growth in South Africa will slow sharply in 2016, rebounding only slightly in 2017. We expect household expenditure growth to collapse in the short term, which means a challenging time for the country's retailers. From 2018 onwards the outlook is likely to be brighter as the economy starts to recover and household spending picks up again. This trend will be boosted by an increase in households in the USD10,000-plus income bracket and a rise in the key 20-39 year old demographic consumer bracket.

Headline Household Spending

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....

South Africa Telecommunications

BMI View:

BMI View: We maintain a positive outlook for South Africa's mobile market and the country's telecoms sector. Subscription growth in the mobile market is driven by factors including operators' promotional activities, multiple SIM ownership and launch of advanced services. 3G and 4G services have strong uptake as well as a positive impact on non-voice service revenues, with all four carriers launching LTE-Advanced technology ...

South Africa Tourism

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BMI View: Tourism plays a vital role in the South African economy and the country is home to the most developed tourism industry in Sub-Saharan Africa. Supporting infrastructure is relatively well developed, including several major international airports and an extensive road network which make most parts of the country accessible to visiting tourists. A broad range of tourism attractions are on offer, including popular safari holidays and beach holiday destinations. There are, however, significant headwinds to growth, including growing security concerns and regional insecurity .

Key Forecasts (South Africa 2013-2020)
2013 2014e

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