South Africa is our 21st largest trading partner, and is by far Australia's largest and most dynamic market in Africa. Over the past five years, total trade between Australia and South Africa has grown by ten per cent per year on average with South Africa now representing Australia's 15th most significant merchandise export market. Two-way investment flows between Australia and South Africa have expanded since the end of apartheid. South Africa dominates stocks of African investment into Australia. Australian investment in South Africa has also increased mainly in mining, mining equipment, agriculture, agribusiness and infrastructure and services trade.
South Africa's foreign trade has historically been characterised by inward looking and protective policies but with the lifting of United Nations sanctions in 1993 and the end of apartheid, there has been a marked increase in overall trade. Significant import barriers remain but are slowly being reduced. Total trade should increase significantly as the world discovers the quality and price competitiveness of South African goods.
In recent years, merchandise imports have grown faster than exports. South Africa's exports include machinery, motor vehicles and fertilisers to African countries, and minerals and agricultural products to developed markets, mainly the United States, the United Kingdom, Japan, Germany and the Netherlands. South Africa's main suppliers of imports are Germany, the United States, the United Kingdom, Japan and China. The consumer market is mature and competitive and in order to compete, new products must offer niche benefits and be cost competitive.
The state controls the country's railways, national airline, harbours, broadcasting services, postal system and electric utilities, some forestry operations, the main phosphate producer and a range of energy producers. However, it has sold off units or partial stakes in some. Fuel price intervention and a fairly heavy tax burden reflect continued state dominance.
South Africa has significantly reduced its number of tariff lines from eighty to eight levels ranging from 0 - 30 per cent with a few exceptions, notably in clothing and textiles and motor industry manufacturers. Most tariff lines are contained to WTO binding levels. Imports are grouped into three main categories: the free list for which no import permit is needed; goods licensed on the basis of reasonable requirements, which include most industrial raw materials and plant and capital equipment; and items requiring a special permit, which include finished machinery, spare parts not produced in South Africa, fish, fruit, dairy products, coffee, chocolate, clothing, gold, petrochemical products and other synthetics.
Looking forward, the liberalisation of key sectors such as tele-communications, power provision and mass transport, coupled with selective privatisation should boost capital inflows. However, investors must be ready to address two key issues: black economic empowerment (BEE) and the HIV/AIDS pandemic. The South African government is firmly committed to promoting BEE, and investors need to have plans to included training black workers at all levels of the company and working with other BEE companies. This is especially the case if a company has any plans to deal the government. All companies investing in South Africa should have a carefully developed HIV/AIDS policy, that should range from direct provision of healthcare and policies towards direct relatives, to training excessive staff numbers to account for subsequent deaths.