The breadth of Australia’s relationship with South Africa today is impressive, mindful that in some respects we started from scratch in 1994 when sanctions were removed following the end of apartheid. South Africa has come a long way since, and like any modern economy has its share of challenges. However, Australian business visitors to South Africa may be surprised at the similarities and opportunities that exist, particularly with economic diplomacy and promoting trade and investment a priority for both our governments.
South Africa is by far our largest trading partner in Africa. Two-way trade is fairly balanced, with similar exporting and importing amounts. Major Australian exports include aluminium and coal; South Africa’s is passenger motor vehicles. Australian businesses ranked South Africa as a top twenty international market in the 2018 Australian Business Survey.
Our economies are grounded in the mining, resources and agriculture sectors, presenting particular opportunities for investment where we can share expertise. Structural, environmental and seasonal similarities enable mutual understanding of commodity boom and bust cycles and factors relevant to building investment ties.
Our investment relationship is particularly strong and broad, with an inward investment flow from South Africa of nearly $8 billion in 2018. FDI has grown significantly especially into Australia, and South Africa ranks above many of our Asian partners including India, Indonesia and Vietnam.
Mining leads the investment relationship with a number of Australian miners such as Rio Tinto and South 32, and mining services providers such as Orica Mining, having operations in South Africa. Rio Tinto recently announced a further investment of almost $500 million to expand their Richards Bay mining operation in South Africa. ASX companies are the largest foreign investors in South African mining and Australia has the largest presence at the annual ‘Investing in African Mining Indaba’ in Cape Town in February, a key event for the Australian Government. Likewise, South Africa is a key contributor to the annual Australia-Africa Week and Africa Down Under (ADU) in Perth.
But mining is only the beginning of the story. Like Australia, South Africa has transformed into a sophisticated manufacturing and service based economy, with services now comprising about two thirds of GDP. Mining and agriculture now contribute less than 10 per cent of total GDP.
Increased diversity and growth in services (retail, energy, financial, ICT, tourism, property) led to the establishment of the Australian Business Chamber of Commerce Southern Africa (ABCSA) in 2014. Australia’s Cotton On has over 170 stores in South Africa and has its largest store globally in the iconic Mall of Africa. Macquarie Bank, Telstra, Flight Centre and Peak Destinations/ Intrepid all have offices in Johannesburg. There has also been considerable South African investment into Australia. Woolworths purchased David Jones and Country Road stores in 2014, Growthpoint Properties is now one of the top five commercial leasing companies in Australia, and Outsurance owns Youi Insurance.
Direct flights from both our national carriers - Qantas and SAA – make travel times shorter. Our strong tourism links (each year almost 90,000 Australians visit South Africa and over 55,000 South Africans visit Australia) are built on a growing population of almost 200,000 South African residents in Australia. Australia is proud to co-host the Square Kilometre Array radio telescope (SKA) with South Africa, which will have a broad range of exciting scientific applications and extend our global knowledge of astrophysics.
South Africa is Australia’s gateway to Africa, with wellestablished and high standard financial, transport and logistics sectors. South Africa is the core member of the Southern African Customs Union (SACU) which enables duty free access between member countries. The entry into force of the African Continental Free Trade Agreement (AFCFTA) will further entrench South Africa as a launch pad into Africa.
The South African Government has prioritised economic diplomacy and established a new team of investment envoys to attract foreign investment and stimulate economic growth. At the inaugural Global Investment Conference in October 2018, President Cyril Ramaphosa reassured investors that his Government was committed to addressing underperforming economic growth and poor governance. South Africa is also committed to improving the opportunities for those historically disadvantaged under the apartheid regime, with specific economic policies designed to improve equality of outcomes. The Second Investment Conference will be held in November 2019.
Australia and South Africa are both Southern Hemisphere, Commonwealth and G20 countries, with diverse multicultural societies. While we often look north to China, the United States and Europe, there is also much to be gained looking to the west. After all, we are only an Indian Ocean away from each other.