- 1 Business Relationships
- 2 Foreign direct investment
- 3 FTAs and Treaties
- 4 Development Cooperation
- 5 Prospective fields of study (MOP)
Trade relations with the EU
Relations between the European Union and South Africa are mutually correct. Both sides have a strategic partnership agreement and conduct regular political dialogue. Since 2016, mutual trade relations have been covered by the Agreement on Economic Cooperation between the European Union and the Southern African Development Community (EU-SADC EPA), within the framework of which the vast majority of customs tariffs were removed. Trade with EU member countries accounts for more than a quarter of all international trade of the Republic of South Africa. The EU also accounts for up to 50% of foreign direct investment flowing into the South African Republic (before Brexit, this value exceeded 75%). The EU and its member states are the main donors, providing up to 70% of development funds coming to South Africa. In 2021, South Africa recorded a positive trade balance with the EU for the first time in history, thanks to increased demand for mineral raw materials.
|Exports from the EU (million EUR)||22,022.80||21,723.50||22,893.30||17,579.50||22,007.30|
|Imports into the EU (million EUR)||15,871.20||17,236.90||18,990.40||16,487.20||22,053.60|
|Balance with the EU (million EUR)||-6 151.6||-4,486.6||-3,902.9||-1,092.3||46.3|
Source: European Commission
Trade relations with the Czech Republic
The Republic of South Africa is the largest trading partner of the Czech Republic on the African continent, and the Czech Republic is also an important outlet for South African goods in Europe. From 2019, the application of the Agreement on Economic Cooperation between the European Union and the Southern African Development Community (EU-SADC EPA) began to be significantly reflected in the balance of trade with the Czech Republic. However, with the exception of the pandemic-marked year 2020, the overall volume of mutual trade has been increasing significantly in recent years, and this trend can be expected to continue.
|Exports from the Czech Republic (billion CZK)||8||14.1||16.5||10.8||12.2|
|Imports to the Czech Republic (billion CZK)||11.8||10.2||17.8||15.1||19.3|
|Balance with the Czech Republic (billion CZK)||4||-3.9||1.3||4.2||7.1|
Trade relations with countries outside the EU
South Africa’s negative trade balance with countries outside the EU is due, among other things, to the import of oil and products derived from it (Middle East, USA) or electronics (China). This fact also confirms the positive effect that the aforementioned EU-SADC EPA agreement has on mutual trade between the Republic of South Africa and the EU.
|Exports from countries outside the EU (million EUR)||53,610.7||58,389.5||53,250.6||55,222.3||82,842.8|
|Imports to countries outside the EU (million EUR)||54,840.9||61,895.7||55,932.9||42,077.9||57,272.2|
|Balance with non-EU countries (million EUR)||-1,230.2||-3,506.1||-2,682.3||13 144.5||25,570.5|
Source: EIU, Eurostat
Foreign direct investment
After a dramatic drop in the volume of foreign direct investment (FDI) in 2020, which was most affected by the pandemic, there was a 77% increase in global FDI in 2021, to approximately 1.65 trillion. USD, which is even more than it was before the pandemic. The largest increase in FDI was recorded by developed countries, to which more than 777 billion USD went in 2021. Although the increase in the volume of FDI also affected developing countries, as there was an increase of more than 30% compared to 2020, Africa still ranks last among world regions as an FDI destination. South Africa, however, has traditionally occupied the leading positions within the continent and continues to be one of the most attractive investment locations in Africa.
The largest investor in South Africa is clearly the EU as a bloc of member states. From the point of view of individual countries, these are Great Britain, the Netherlands, Belgium, Japan, the USA, Germany, France, Italy and China.
At the moment, the Pretoria Office of Foreign Trade registers the FDI of the Czech company PFNonwovens Holding s.r.o., which in 2017 invested approximately R billion (CZK 2 billion) in its production plant, which is located in the Atlantis Special Economic Zone, approximately an hour’s drive from Cape Town. Since then, PFNonwovens has again invested in the expansion of its production plant, with an investment of R 650 million (CZK 1 billion). At the moment, this is the only so-called green field investment by a Czech entity in South Africa.
In terms of other capital investments, an outflow of Czech capital from South Africa was recorded in 2020, in the amount of USD 12.34 million.
The investment and business environment of South Africa can be considered stable and well regulated. The JAR judiciary can be assessed as independent and competent.
As one of the few EU countries, the Czech Republic still has an agreement with South Africa on the support and mutual protection of investments.
FTAs and treaties
Treaties with the EU
The contractual basis between the Republic of South Africa and the EU consists mainly of the following international contractual institutes:
- Mixed agreement between the EU and its member countries on the one hand and the South African Republic on the other: Trade, Development and Cooperation Agreement (TDCA)
- Economic Partnership Agreement (EPA) between the EU and the countries of the Southern African Development Community, SADC (the so-called SADC EPA Agreement)
- A mixed agreement between the EU and its member countries on the one hand and the African, Caribbean and Pacific (ACP) countries including the South African Republic on the other, the so-called Cotonou Agreement (the South African Republic is a contracting party with reservations) 98.1% was liberalized by the EU tariffs on South African products. Specific customs rates and documentation requirements for individual types of goods can be consulted on the European Commission’s EU Trade Helpdesk and Market Access Database websites.
Contracts with the Czech Republic
An overview of valid international agreements between the Czech Republic and the Republic of South Africa is available on the website of the Ministry of Foreign Affairs of the Czech Republic, in particular the following agreements:
- Agreement on the abolition of the visa requirement for holders of diplomatic and service passports (valid from 1 December 1991)
- Agreement on cooperation between the ministries of defense of the Czech Republic and the Republic of South Africa (signed in 1999 and valid from the date of signature)
- Agreement between the Government of the Czech Republic represented by the Ministry of Defense and the Government of the Republic of South Africa represented by the Ministry of Defense on the protection of classified military information (2003)
- Agreement on Cooperation in the Field of Agriculture and the Food Industry (signed on March 21, 1995 and valid from the same date) · Treaty on the Avoidance of Double Taxation (signed in 1995, entered into force on December 3, 1997)
- Agreement on Mutual Protection and Promotion of Investments (signed in 1998, entered into force on 17/09/1999)
- Agreement on mutual assistance in customs matters (effective from 15/04/2006)
- Intergovernmental Agreement on Economic Cooperation (signed on 12/12/2006)
- Agreement between the Government of the Czech Republic represented by the Ministry of Defense and the Government of South Africa represented by the Ministry of Defense on cooperation in the field of defense (1999)
- Agreement between the government of the Czech Republic and the government of South Africa on air transport (valid since 1993)
The Republic of South Africa is not one of the priority countries for Czech foreign development cooperation. Nevertheless, Czech companies can apply for subsidies for development projects within the Development Partnership Program for the private sector of the Czech Development Agency (the so-called B2B program). Further information about the so-called B2B program is available on the websites of the Ministry of Foreign Affairs and the Czech Development Agency. The Embassy in Pretoria supervises the implementation of so-called small local development projects, which are implemented by local guarantors.
The Czech Republic contributes to EU development funds, and Czech companies can apply for subsidies from these funds and submit proposals for their projects. EUR 241 million was allocated to projects from the European Development Fund (EDF) in South Africa for the period 2014 to 2020. The European Investment Bank (EIB) issues tenders for projects in the fields of agriculture, education and other areas. Overall, the European Union contributes more than 70% of the volume of development aid to South Africa.
The development cooperation priorities between the European Union and the Republic of South Africa are defined by the Agreement on Development and Trade Cooperation between the EU and South Africa (the so-called TDCA), while the financing of development cooperation belongs to the so-called Development Cooperation Instrument. On the website of the Delegation of the European Union in Pretoria, the priorities of the listed development projects (according to the so-called Country Strategy Paper and Multi-annual Indicative Programme) are listed, the goals of which are:
- support for sustainable economic growth, especially in terms of positive impact on the poor
- improving the provision of basic state services to poor citizens
- support of so-called good governance
- job creation
- education, training and innovation
- supporting the capacities and pro-development nature of public administration
Prospective fields of study (MOP)
In terms of global car production, South Africa ranks 22nd, but accounts for more than 50% of the cars produced on the continent. So far, 8 global players in the production of passenger vehicles have located their production or part of it in South Africa, and manufacturers of medium and heavy commercial vehicles are also present. In South Africa, there is a robust supplier-customer network in the automotive industry, offering numerous opportunities for Czech companies. Examples include individual components or the production lines themselves, but also everything related to the planned expansion of electromobility.
Mining, mining and oil industry
The mining industry in South Africa is a significant contributor to GDP creation and employs approximately 450,000 people. About 75% of the world’s platinum reserves and 70% of the world’s manganese reserves are located in South Africa. Mining of coal, gold and diamonds is also important here. However, it is mainly expensive deep mining. Great emphasis is therefore placed on more efficient, low-energy and operationally undemanding innovative technologies enabling a substantial reduction in mining costs. In addition to the technologies themselves, there is also know-how in the area of rehabilitation and new use of the mining landscape and infrastructure.
The economy of South Africa is highly dependent on fossil fuels, especially coal, from which approximately 77% of electricity is generated. The energy infrastructure of the Republic of South Africa is in a very neglected state, which is evidenced by the fact that a number of power plants or their parts with a total capacity of up to 14,000 MW are currently unable to operate, and the country is therefore often faced with controlled power outages, so-called loadshedding. Great emphasis is therefore placed on increasing the capacity of energy from renewable sources, for which JAR has excellent geographical and technological prerequisites. Planned projects in the field of so-called green hydrogen are currently enjoying huge support in South Africa.
Within the continent, South Africa ranks among the largest markets in the field of ICT, as more than 60% of its population of nearly sixty million have access to the Internet. Digital technologies and services in South Africa mainly include the following subsectors: business process outsourcing (BPO/BPS), IT services and hardware, or Fintech. At the same time, South Africa faces a relatively high level of cybercrime, which, however, also represents another opportunity for Czech companies. In addition to the mentioned sub-sectors, JAR offers a whole range of opportunities in the field of so-called cloud computing, IoT, robotics or, generally speaking, in the field of data infrastructure. Last but not least, the opportunities in the area of so-called smart cities are becoming increasingly relevant in South Africa.
The South African economy is highly industrialized compared to other countries on the African continent, with South Africa’s manufacturing sector as such accounting for approximately 13% of its GDP and accounting for nearly 50% of its exports. Machines at a high technical level are almost always imported in South Africa. Technologies that reduce greenhouse gas emissions in energy-intensive industries such as the mining or metallurgical industries represent a great opportunity in this regard. As a result of the presence of global players in a number of manufacturing sectors of the JAR, there is a gradual modernization and introduction of production processes in accordance with 4IR.
Medical and pharmaceutical industry
There are more than 400 public and 200 private hospitals in South Africa with a total bed capacity exceeding 125,000. The opportunity for more sophisticated medical technology in South Africa exists mainly in the private health sector and hospitals, as more than 90% of this technology is imported. In the long term, the plan is to reform the health care system, including compulsory general health insurance (NHI), which will result in the need for massive investments, especially in public health facilities. In addition to spending on HIV/AIDS treatment, spending on chronic and civilization diseases is expected to increase. More and more opportunities can also be seen in the medical cannabis industry.
More information can be found in the Global Map of Industry Opportunities (MOP).