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SOUTH AFRICA - OVERSEAS BUSINESS REPORT - OBR9209

SUMMARY

This article is derived from a report dated September 1992, prepared at the
U.S. Department of Commerce - Washington, DC. The article consists of 57
pages and discusses the economic and commercial climate in South Africa,
with emphasis on information useful for potential U.S. sellers and
investors. It includes the following sections:

United States Policy Towards South Africa
Trade Outlook
Economic Overview
South Africa's Black Economic Sector
Infrastructure

Trade Regulations
Import Financing
Foreign Exchange
Banking and Credit
Investing in South Africa
Taxation
Intellectual Property Rights
Marketing and Distribution
Notes for Business Travellers
United States and Foreign Commercial Service
Sources of Information
Tables

SOUTH AFRICA

OVERSEAS BUSINESS REPORT

Prepared by Emily Solomon, Office of Africa

CONTENTS

United States Policy Towards South Africa
U.S. Export Regulations -- State and Local Sanctions
Trade Outlook
Economic Overview
Demography -- Parastatals -- Agriculture, Forestry, Fishing --
The Drought -- Mining -- Manufacturing
South Africa's Black Economic Sector
Black Business Community -- Black Consumer Market
Infrastructure
Transportation -- Energy -- Communications
Trade Regulations
Southern Africa Customs Union -- Tariffs -- Import Control --
Import Permits -- Import Surcharge -- Value-Added Tax -- Excise
Tax -- Customs Information -- Documentation -- Warehousing --
Barter/Countertrade -- Used Goods -- Temporary Import of Samples
Import Financing
Quotations and Terms of Payment -- Letters of Credit --
Export-Import Bank of the United States -- Air Shipments
Foreign Exchange
Currency: Commercial Rand and Financial Rand -- Common Monetary
Agreement -- Foreign Exchange for Import Payments --
Licensing and Royalty Agreements
Banking and Credit
Consumer Credit -- Black-Owned Banks -- Development Agencies -- Foreign
Banks

Investing in South Africa
Investment Climate -- American Chamber of Commerce --
Signatories Association -- U.S. Fair Labor Principles --
Investment Regulations -- Registration and the Companies Act --
Exchange Control Affecting Foreign Investors --
Investment Restrictions -- Investment Incentives --
Regional Industrial Development Program -- Industrial Development
Corporation -- Export Subsidies -- Johannesburg Stock Exchange
Taxation
Corporate Tax Rates -- Tax on Royalties -- Individual Income
Tax -- Value-Added Tax -- Other Taxes
Intellectual Property Rights
Patents -- Trademarks -- Copyrights
Marketing and Distribution
Distribution Centers -- Distribution Channels -- Alternative Business
Disputes Resolution -- Government Procurement -- Franchising -- Direct
Mail Marketing -- Standards --
Weights, Measures, and Labelling -- Pricing --
Advertising -- Local Languages -- The Press -- Television and
Radio -- Advertising Regulations
Notes for Business Travellers
Entrance Requirements -- Foreign Personnel -- Tourism --
Business Etiquette -- Commercial Language -- Local Time and
Business Hours -- Telephone Service -- Electric Current --
Express Mail -- Holidays -- Traveller's Advisory
United States and Foreign Commercial Service
Sources of Information
Tables

U. S. POLICY TOWARDS SOUTH AFRICA

The United States seeks the establishment of a democratic nonracial South
Africa through peaceful negotiations between the government and credible
black leaders.

On July 10, 1991, President Bush issued Executive Order 12769 lifting U.S.
sanctions against South Africa under Title III of the Comprehensive
Anti-Apartheid Act of 1986 (CAAA) -- Public Law 99-440. The CAAA imposed
numerous sanctions against South Africa designed to hasten the demise of
apartheid.

U.S. Export Regulations

Sanctions mandated under separate legislation that remain in effect are: no
sales to any end-user of arms, munitions, military equipment and materials,
and materials and machinery for use in the manufacture and maintenance of
such equipment; and no good or service may be sold to, resold to, or made
available for use by South African police or military entities (exports of
medical supplies and airport anti-hijacking equipment may be approved on a
case-by-case basis).

U.S. export restrictions against South Africa were most recently revised in
the Federal Register on February 6, 1992 (Volume 57, Number 25, page 4553),
and are delineated in Section 785.4 of the Export Administration
Regulations. Written assurances are no longer required for exports of
computers to South Africa. Special assurances against police or military
use must be furnished to the exporter before any general license shipment of
technical data. South Africa continues to be subject to export controls for
national security reasons, as well as to controls aimed at curbing the

proliferation of nuclear, chemical, and biological weapons and missile
technology.

Additional information about U.S. commercial policy can be found in the
Department of Commerce paper entitled "U.S. Trade and Investment Regulations
for Post-Apartheid South Africa." General questions regarding Department of
Commerce export regulations should be directed to telephone (202) 482-4811.

State and Local Sanctions

Some 140 states and local governments in the United States have passed
anti-apartheid legislation to restrict their commercial or investment ties
to South Africa. These measures include procurement bans, selective
contracting and purchasing statutes, and mandatory divestment by pension
funds. A detailed listing of these local policies can be obtained from the
Investor Responsibility Research Center listed in the "Sources of
Information" section of this report.

TRADE OUTLOOK

South Africa remains the largest export market for U.S. products and
services in sub-Saharan Africa and ranks 30th among U.S. world export
markets. U.S. exports to South Africa in 1991 totalled $2.1 billion,
representing a 15 percent share of South Africa's total import market. The
U.S. market share in 1990 was 10 percent. The U.S. trade surplus with South
Africa for 1991 reached $400 million compared with a $30 million surplus in
1990. The United States is South Africa's third largest supplier, behind
Germany and the United Kingdom. U.S. foreign direct investment in South
Africa at year-end 1991 totalled $1,015 million, representing 106 direct
subsidiaries or branch offices of American companies.

U.S. equipment, products, and services are regarded by South Africans as
among the best in the world and enjoy a very high acceptance rating in South
Africa. Principal U.S. exports to South Africa include electronic data
processing and related equipment ($104 million); aircraft and aircraft parts
($110 million); and wheeled or tracked mining, construction, and
agricultural machinery ($45 million).

With the improving political climate in South Africa, more American firms
are inquiring about export opportunities. However, some traditionally
strong markets for U.S. exports -- auto parts, and mining and agricultural
equipment -- may be negatively affected by South Africa's current economic
recession. Promising sectors for U.S. exports are computers, software, and
peripherals; aircraft and associated avionics; mining equipment; industrial
process control equipment; medical equipment; and residential and industrial
security equipment. South Africa's drought will result in 4.4 million
metric tons of maize imports in 1992. The country is expected to continue
maize purchasing for several more years to meet domestic demand for both
human and animal consumption. Exporters should also note that South
Africa's black consumer market is growing appreciably faster than the white
market. South African consumers have strong preferences for American style
and quality; they recognize many American brand name products, even if the
products are not currently available in South Africa.

ECONOMIC OVERVIEW

South Africa has a sophisticated, modern economy based firmly on
manufacturing, mining, and agriculture. It has an efficient, well-developed

infrastructure, a fully-developed financial structure, and a large
commercial sector. Although the economy is moderate in size by world
standards, it is the largest and most broadly developed in Africa.

Economists estimate that South Africa has the potential to grow at an annual
rate of 5 percent. However, economic growth over the past several years has
been less than 1 percent in real terms. The economy is relatively open by
world standards; exports and imports together account for more than 50
percent of the country's gross domestic product (GDP). Because gold exports
make up roughly one-third of South Africa's total exports, fluctuations in
the price of gold can have a significant effect on the economy. The 1992
drought which plagues South Africa (and its neighbors) is considered to be
the worst this century, resulting in total failure of the country's maize
crop. The drought is expected to delay the hoped-for economic recovery.

Apartheid severely limited the range of economic opportunities open to South
African blacks. For example, blacks were prohibited from owning more than
one retail outlet until the late 1970s. However, blacks play key roles in
the economy as consumers and laborers, and a sizable black business
community has evolved over the past two decades.

While South Africa is largely a free enterprise economy, state-owned firms
have monopolies or near monopolies in telecommunications, postal services,
water supply, television, air, rail, and ports. Conglomerates dominate the
private sector. Six groups control 85 percent of the companies listed on
the Johannesburg Stock Exchange.

Although the economy is in recession, many South Africans are optimistic
about the future. The lifting of sanctions, the opening of world markets to
South African products, and the dismantling of the apartheid system all
signal a new era. The South African Government, along with leading bankers
and economists, is endeavoring to transform the economy from an isolated
import substitution regime into an outward-oriented regime based on export
production. This change should create a larger import market in South
Africa, as well as make South African firms more internationally
competitive.

The current economic debate (among the various political groups) is being
played against the backdrop of black aspirations for rapid improvement in
living standards and white apprehensions of the loss of income and economic
power. The debate has moved away from "capitalism vs nationalization"
rhetoric towards more constructive discussions among government, private
sector, labor, and political groups about the needs of the post-apartheid
economy and the allocation of resources to meet those needs. A major "all
parties" economic and investment forum is to be held in the near future to
discuss economic and investment policy for a new South Africa.

Demography

The population of South Africa in 1991 (including the so-called independent
homelands of Transkei, Bophuthatswana, Venda, and Ciskei) was estimated to
be 39 million. The South African Government has historically divided its
population into four racial groups which have the following population
distribution: blacks, 28.3 million; whites, 5.1 million; coloreds, 3.2
million; and Asians, 1 million.

The 472,359 square mile area of South Africa is divided into four provinces,
the 1991 population and area of which were respectively: Cape of Good Hope
Province: 6.5 million and 278,465 square miles; Transvaal: 10.4 million and
109,621 square miles; Orange Free State: 2.1 million and 49,866 square

miles; and Natal: 2.6 million and 33,587 square miles.

Much of the white population live in the Pretoria-Witwatersrand- Vereeniging
(PWV) area of the Transvaal, with only the magisterial districts of
Pretoria, Randburg, Germiston, Cape Town, and Simon's Town having white
populations that are larger than their black populations. Most of the
colored population live in the Cape Province with the majority in the
southwestern Cape. The Asian population is concentrated in Natal Province
while the black population is concentrated in the homeland areas.

The projected 1991 population growth rate for South Africa is 2.4 percent.
By the year 2000, the black percentage of the total population will rise
from 75 percent to 81 percent while that of whites will fall from 13 percent
to 10 percent of the total population. According to the Urban Foundation,
the number of blacks living in metropolitan and urban areas will increase by
99 percent between 1991 and 2010. In addition to the trend towards
urbanization, the South African population can be characterized as quite
young. Currently, 50 percent of the population is under 19 years of age, of
which blacks account for 80 percent. This percentage will increase to 84
percent by the year 2000.

It has been estimated that South Africa's population will reach 80 million
by 2020, at which point the country will reach its population capacity
relative to natural resources such as water. In order to protect its
ability to provide for its citizens, the South African Government will be
compelled to take steps to conserve and protect its resources.

Parastatals

Some sectors of South Africa's economy are dominated or significantly
controlled by extensive government involvement. These sectors are
telecommunications, postal service, water supply, railways, harbors,
electricity generation, air services, and radio and television
broadcasting. The marketing of agricultural products is subject to control
by numerous product-focussed agricultural marketing boards. Enterprises in
the manufacturing, mining, agriculture, commerce, and finance sectors are
almost entirely privately held.

Government-owned industries include substantial portions of the energy
sector (Sasol III -- the South African Coal, Oil, and Gas Corporation),
transportation (Transnet -- formerly South African Transport Services),
armaments (Armscor -- the Armaments Development and Production Corporation
-- and Denel Ltd), electric power (Eskom -- formerly the Electricity Supply
Commission), communications (Telkom -- the Telecommunications Commission),
and oil exploration (Soekor -- the Southern Oil Exploration Corporation).
It is estimated that the government and parastatals own 33 percent of the
country's fixed assets. In 1988 the government embarked upon a widespread
program to privatize and deregulate public enterprises. By 1990 the program
resulted in the privatization of Foskor (the Phosphate Development
Corporation), Iscor (the Iron and Steel Corporation), and Alusaf (the
Aluminium Company of South Africa). Government-owned enterprises that are
being commercially restructured include the Post Office, Telkom, Transnet,
and the state-owned forests and airports.

The privatization program has since been put on hold as a result of
considerable domestic political opposition. However, many analysts believe
that further privatization is a necessity for the proper functioning of the
economy by reducing the size of the public sector and allowing these
industries to operate more efficiently. The Industrial Development
Corporation (IDC) plans to start selling off its Rand (R) 2.7 billion in

investment holdings in 1992 as part of the government's restructuring
program.

Agriculture, Forestry, Fishing

Agriculture, forestry, and fishing account for just over 6 percent of South
Africa's GDP. The country is virtually self-sufficient in most important
agricultural products. The main export crops are maize, wool, sugar, and
fruit. South Africa is the world's fourth largest exporter of wool. The
local wine and horticultural industries are earning places on the world
market. Maize is a staple food of the black population; it is also used for
livestock feed. Other crops cultivated in South Africa are potatoes,
tobacco, sorghum, groundnuts, sunflower, soya, coffee, ginger, citrus and
tropical fruits, and cottonseed. The country also has a sizable livestock
sector, including cattle, sheep, goats, and poultry.

South Africa's agricultural sector is characterized by its dualistic nature
of larger commercial farms operated by white farmers, and the small
subsistence level and low technology farming of black farmers, who have been
long denied access to choice agricultural land. White commercial
agriculture is characterized by high technology, sophisticated inputs, and
highly organized single-channel marketing systems with generally adequate
storage and transportation systems. In post-apartheid South Africa, black
commercial agriculture is expected to be developed and expanded.

An estimated 15 million hectares, or 12 percent of South Africa's land area,
is under commercial cultivation. Limited rainfall in other areas is
believed to prevent the expansion of the cultivated area beyond 15 percent;
the remaining 85 percent is suitable for livestock farming. The commercial
agricultural sector employs over 1.3 million people, representing 10 percent
of the country's total work force, and plays an important role in supplying
raw materials to a variety of local processing industries. For example,
cottonseed production (230,000 tons annually) supplies fiber for the
domestic textile industry and is also processed into vegetable oils, soaps,
and cattlecake. Canned fruit and vegetable production is 380,000 tons per
year.

Commercial forestry covers 1.2 million hectares, just over 1 percent of the
total land area. Principal timbers produced are pine and commercial
softwoods, gum (eucalyptus), and wattle. The country is a leading producer
of wattle board and wattle extract, and a major exporter of wood pulp and
wood chips. Domestic timber production meets 90 percent of domestic timber
needs. Imports include wood for furniture manufacture, railroad ties, and
high-quality paper.

The fishing industry lands over 500,000 tons of fish annually, netting the
South African economy R1 billion ($35.7 million) and employing 22,000
people. South Africa's fisheries include abalone, hake, kingklip, rock
lobster, pilchard, anchovy, oysters, mussels, octopus, and shark fins. Hake
accounts for 70 percent of all white fish sold in the country. One-third of
the hake catch, 75 percent of the lobster, and nearly all of the abalone are
exported.

The Drought

In 1992 South Africa and much of the southern African region became victims
to what is considered to be the worst drought of the century for that area.
The drought is expected to hit the South African economy hard for the next
two years. A 15.8 percent drop in total farm production in the first
quarter of 1992 led to a real decline of 1.9 percent in South Africa's first

quarter GDP. South African grain production is anticipated to be 75 percent
below normal for 1992. Numerous other crops have been affected, including
cotton, sunflower, sorghum, peanut, and soybean crops, with some down as
much as 50 percent.

The collapse of the maize crop will send ripple effects through other
important industries, including maize milling, balanced feed, poultry,
dairy, pig, cattle, and starch production. For example, current available
pasture for cattle and sheep has been negatively affected; dairy production
is reported to be down 10-15 percent; and farmers are exhausting feed
reserves. Several commercial farmers could face bankruptcy; farm laborers
are being displaced; and food prices will increase. Additional ripple
effects could be felt in industries which serve the maize market, such as
manufacturers and importers of fertilizer, agricultural chemicals, tractors,
farm implements, and seed.

South Africa will have to import 4.4 million metric tons of maize in 1992.
The South African Maize Board anticipates the need for continued import
purchasing beyond 1992. In addition, South Africa is leading a region-wide
effort to import maize and expedite delivery to neighboring countries. The
Foreign Agricultural Service of the U.S. Department of Agriculture
(202-690-4471) can provide the latest Agricultural Situation Report and
information regarding available U.S. Government financing for agricultural
exports.

Mining

South Africa is a major world producer of minerals and metals. It holds the
world's largest proven resources of several strategic minerals and is the
primary Western supplier of these important minerals. South Africa
possesses 83 percent of the world's manganese reserve base, 89 percent of
the formerly free world's reserves of platinum group metals, 82 percent of
chrome ore, 45 percent of gold, 47 percent of vanadium, 14 percent of
diamonds, 26 percent of zirconium, 2 percent of nickel, 8 percent of
titanium, 5 percent of coal, and 5 percent of antimony. It also contains
significant reserves of several other minerals, including phosphate rock,
iron ore, fluorspar, asbestos, lead, and zinc.

The mining industry has played a key role in the country's history since
diamonds were first discovered in Hopetown in 1867. The discovery of gold
on the Witwatersrand Reef in 1886 brought scores of prospectors to the
country and hastened industrialization. Today the mining and metals
industry is highly developed and supports a sophisticated processing and
manufacturing sector. Some 1,098 mines and quarries produce 60 different
types of ores exported to 84 countries. South Africa's mining industry is
one of the most technologically advanced in the world and employs
approximately 697,000 people.

The mining industry contributes about 11 percent to the total GDP and 14
percent of the country's nonagricultural employment. Revenue from mineral
exports was $11.5 billion in 1990, representing 41 percent of the country's
total export earnings. Gold is still the primary export, earning almost $7
billion in 1990. South Africa is the world's third largest exporter of
steam coal, and coal is the second largest contributor to foreign exchange
earnings after gold. In 1990 South Africa exported 50 million tons of coal
at a value of $3 billion. Together, the three largest export commodities --
gold, coal, and platinum group metals -- accounted for 85 percent of mineral
exports. If processed mineral products such as aluminium, ferroalloys,
steel, and synthetic fuels were included in the data, the contribution of
the minerals sector to foreign exchange earnings and GDP would be

substantially higher.

Gold has dominated South Africa's mining sector and economy for over a
century. About half of the Western world's known gold reserves are believed
to be in South Africa. However, gold's dominance in the economy declined
steadily through the 1980s. By 1990, gold's share of GDP was 6 percent
compared with 12 percent in 1980. Gold production in 1991 decreased to 601
tons from its 1990 level of 605 tons.

The Department of Mineral and Energy Affairs administers the country's
mining laws, in conjunction with the Government Mining Engineer, who is
responsible for safety statistics and the miners' health. Other parts of
the administrative support for mining include the South African Geological
Survey and Mintek, whose mandate is to promote mining technology. Important
South African research organizations are the Council for Scientific and
Industrial Research (CSIR) and the Foundation for Research Development.

South Africa's mining industry consists of six major mining houses and a
number of independent mines. The six major mining companies which control
almost all mineral production are Anglo American Corporation, Gencor, Barlow
Rand, Anglovaal, Gold Fields of South Africa, and Johannesburg Consolidated
Investments. Most of these companies also maintain significant holdings in
other sectors of the economy. Stocks in these companies are traded on the
Johannesburg Stock Exchange and international stock markets. Ninety eight
mining companies belong to the South African Chamber of Mines (see "Sources
of Information"). The chamber's activities include negotiating contracts
with labor unions, recruiting and training mine workers, conducting
research, promoting safety in the workplace, and running hospitals and
clinics for mine workers. The chamber is also responsible for processing
uranium and gold refining.

The past two years have seen little or no growth in the mining industry.
This stagnation is due largely to slack world demand, lower prices paid for
gold and other minerals on the world market, and increased production
costs. Several of the major mines have responded to these pressures by
scaling down operations, reducing production, and closing unprofitable
shafts.

A trend among the mining houses is to abandon prospective large-scale
deep-level projects and concentrate on less expensive, smaller and shallower
projects. These smaller mining operations typically require less than R50
million in capital investments, produce no more than 15,000 tons of ore per
month, and employ fewer than 300 people. Although this small-scale mining
sector is still in its infancy, some South African experts consider it to be
a viable option for the future of South Africa's mining industry because of
its streamlined structure and expected higher return on investment.

The industry employs 697,000 workers, including about 500,000 in the gold
mines and 103,000 in the coal mines. Traditionally, the mining industry has
profited by relying on cheap, plentiful migrant labor: black men drawn from
rural areas both in South Africa and from neighboring countries. The past
few years have seen increased organization and politicization of these
workers, which have resulted in significant increases in wages. With the
recent rise in political expectations among the black population, additional
demands for wage increases are expected to impose greater cost burdens on
the mining houses. The industry's two major unions are the National Union
of Mineworkers (NUM), which primarily represents black workers, and the Mine
Workers Union (MWU), representing white workers.

South Africa is one of the three leading producers of ferroalloys, ranking

with Norway and Brazil. The ferroalloy industry has a capacity of 1.8
billion tons, earning $500 million annually. The nine ferrochrome smelting
plants operating in South Africa have a total rated capacity of 1.7 million
tons per year and produce about 40 percent of world ferrochrome output.
South Africa also produces ferromanganese, ferrosilicomanganese,
ferrosilicon, and vanadium products. South Africa's Highveld Steel and
Vanadium is the world's largest producer of vanadium pentoxide, having a
total rated capacity of 8,000 tons.

South Africa is now striving towards greater beneficiation, adding value to
minerals through additional local processing, to create export products with
greater export earnings potential. For example, a jewelry manufacturing
industry is being considered. Beneficiation is relatively underdeveloped in
South Africa since the country's efficient infrastructure, low-cost
transport, and proximity to sea ports have historically provided little
incentive for further beneficiation to raw products.

Manufacturing

South Africa's manufacturing sector is large and well diversified; it is the
country's leading branch of business activity. Virtually a spin off from
the mining and agricultural sectors, manufacturing grew from a level of 3.7
percent of GDP in 1910 to 25.6 percent in 1991. The movement from mining
and agriculture to industrial production reflects South Africa's economic
maturity. Today South Africa is a world leader in several specialized areas
of technology, including railway rolling stock, armaments, mining, drilling,
and exploring machinery. Total output of the manufacturing sector in 1990
was $65 billion with an average utilization of production capacity of 85
percent. In 1991 average utilization of production capacity dropped to 80
percent as the recession has made itself felt countrywide in all sectors of
the economy.

The chemical industry is the largest subsector, accounting for an output of
$11.7 billion in 1990, followed by the food industry ($9.0 billion), the
transport equipment industry ($6.2 billion), and the iron and steel industry
($5.5 billion). Currently, 18 percent of employed South Africans are
working in the manufacturing sector. South Africa's manufactured exports,
including beneficiated base metal products, currently account for about 32
percent of total exports.

Since the 1970s, manufacturing growth has weakened in South Africa, falling
from an average annual growth rate of 8.6 percent in the 1960s to a rate of
5.3 percent in the 1970s and 0.1 percent in the 1980s. These low growth
rates have been attributed to the combination of international sanctions,
disinvestment, political problems, inflation, high interest rates, and an
inward economic and industrial policy which over the past ten years focussed
on import substitution and protection. Subsequently, investment funds in
the 1980s went to the property and services sectors such as banking and
insurance.

Important evolutionary changes in the South African economy and industry are
expected to provide a springboard for future economic growth. These factors
include the development of the financial sector and mechanisms for
large-scale development financing, stronger overall export performance and
the evolution of a larger and broader trading sector, the rise of the small
business sector, improvements in inventory management, and recent corporate
streamlining and downsizing to cut costs and improve efficiency.

The government hopes that the new emphasis on promoting export-oriented
production manufacturing, value-added production, and minerals beneficiation

will lead the economy out of the current recession. Foreign sources
continue to supply a significant portion of the country's manufactured and
capital goods requirements. For example, chemicals, plastics, rubber,
textile machinery, scientific equipment, and transport equipment are among
the country's leading manufactured imports. In the area of capital goods,
since the mid-1980s South African firms have been more likely to replace
existing capacity rather than to invest in expanding production. They have
also been reluctant to purchase new plant and equipment because of rising
import costs and the rand's depreciation. Thus, much of the domestic
capital stock has aged and represents outmoded technologies. Many South
African firms look towards the foreign business community for
technology-transfer either through import purchasing, licensing agreements,
or joint ventures. In 1990 the Directorate of Industry and Technology
Development of the Department of Trade and Industry reviewed 780 potential
licensing agreements involving foreign licensors.

Machine Tools: The machine tool sector is comprised of metal-cutting
equipment and metal-pressing equipment. The metalworking sector has, in
recent years, been unwilling to invest in new equipment. Imported machine
tools account for 90 percent of demand in South Africa. There are fewer
than a dozen local manufacturers and more than 120 traders. The recession
in the manufacturing industry has slashed demand for locally produced and
imported machine tools. South Africa's imports of machine tools were $120
million in 1991, a 50 percent decline from the 1990 value of $55 million.
Industry sources speculate that an upsurge in South Africa's manufactured
exports would generate increased demand for machine tools.

Metals and Engineering: The metals and engineering industries, including
basic metals, metal products, machinery, and transport equipment, are large,
sophisticated and versatile, representing a third of all manufacturing in
the country, more than 9,000 companies, and over 470,000 employees. Among
the products manufactured by these industries are railway ties, electric
power transformers, valves, transmission and reticulation equipment, motor
parts and accessories, conveyors, ventilation equipment, offshore oil rigs,
and cranes. Local industry has handled major capital projects such as the
Koeberg nuclear power station and the SASOL synfuel plants.

South Africa is the largest producer of steel on the African continent, well
ahead of Egypt, and is also one of the lowest cost steel producers in the
world. The industry is technologically advanced with sales of basic iron
and steel products averaging $3 billion annually. South Africa's seven
steel producers have a combined nominal capacity of 9.6 million tons of
crude steel, approximately one-third of which is exported. The most
significant producers are ISCOR (South African Iron and Steel Industrial
Corporation) and Highveld Steel and Vanadium, both privately owned. ISCOR
dominates the industry with ten ore mines and four steel mills. ISCOR plans
to expand its value-added, high-technology steel exports such as tin plate,
tin-free steel, high-grade mainline rails, seamless pipes, and wire
products.

The R2.5 billion private "Columbus" stainless steel project, a joint venture
between Anglo American Corporation and Gencor, will be commissioned in three
years. The Columbus project will increase South Africa's stainless steel
production to about 500,000 tons of hot and cold rolled stainless steel from
the current level of 100,000 tons. This amount will place South Africa
fifth among the world's stainless steel producing countries after Japan,
Germany, the United States, and France. The project will also encourage
additional local fabrication industries.

The turnover of the electrical engineering, electronic, and

telecommunications industries is over R8 billion with about 80,000
employees. The industry can meet most of the needs of Eskom for power
generating equipment and basic domestic consumer needs.

Motor Vehicles: The motor vehicle industry produces 40 different models of
passenger cars. Locally assembled cars (right-hand drive) are BMW, Delta
(Opel), Fiat, Ford, Honda, Mazda, Mercedes, Mitsubishi, Nissan, Toyota, and
Volkswagon. Total vehicle sales in 1991 were 308,000, and of that, 198,000
were passenger cars. The local content program (see discussion under
"Investment Restrictions") for the motor vehicle industry has resulted in
extensive diversification of component manufacturing in South Africa. Over
500 different component products are manufactured locally from local
materials such as rubber, steel, and chrome. Motor vehicles and components
are produced for both domestic and export markets.

Clothing and Textiles: South Africa's clothing industry began 25 years ago
with the manufacture of underwear. The sector is extremely labor intensive
and employs over 250,000 workers. The local textile and clothing industries
are capable of supplying an estimated 90 and 60 percent, respectively, of
domestic demand. The textile industry is comprised of vertical mills which
carry out all textile activities from spinning cotton into yarn, to weaving,
dyeing, and finishing. Local production consumes 360,000 bales of cotton.
South African clothing producers buy 70 percent of their fabric from local
mills and import the remainder. South Africa's manufactured textile exports
were R483 million in 1990 compared with R329 million in 1989. Clothing
exports were R180 million in 1990 compared with R134 million in 1989.

The textile and clothing industries have been highly protected from imports
by tariffs and quotas. The textile industry is protected from low-cost
foreign imports by tariffs imposed at each level of activity. The
protective tariffs on clothing and textiles average 22 and 11 percent,
respectively.

Chemicals: South Africa's chemical industry had an early beginning with the
manufacture of explosives for the gold mines. South Africa is home to one
of the world's largest privately owned explosives factories, the
Modderfontein factory. Expansion in the chemicals sector has been steady
due to a concentrated import replacement effort geared towards becoming
self-sufficient in plastics and raw chemicals. South Africa continues to
strive towards self-sufficiency in chemicals either by producing or
processing locally. A feature of the industry is its wide variety of
products, including explosives, fertilizers, pesticides, plastics, mineral
salts, synthetic fibers, and rubber. Nearly 60 percent of the industry's
basic products are of petrochemical origin, and of this at least 75 percent
are produced from South Africa's coal reserves.

The four major South African chemical companies are Sasol (the state-owned
South African Coal, Oil, and Gas Corporation), AECI (African Explosives &
Chemical Industries), Engen, and Sentrachem. AECI is the country's largest
non-fuel chemical company; it produces mining explosives, plastics,
polyethylene, caustic soda, detergent raw materials, electroplating systems,
paper chemicals, titanium dioxide, resins, and gold and aluminium
chemicals. Sasol and Engen mostly produce petrochemicals and synthetic
fuels. Sentrachem concentrates mainly on specialty chemicals. It supplies
raw materials to the plastics processing industry such as high-density
polyethylenes, chlorine, caustic soda, and hydrogen; it can also convert
these into secondary products.

Currently,the industry is developing technology to exploit locally available
raw materials for the production of high performance feeds and fuel

additives for local and export sales. Import control on a wide range of
chemical products was lifted in 1990.

Computers: U.S. computer hardware and software enjoy strong positions in
South Africa. As a result of the disinvestment of the leading American
computer hardware manufacturers during the sanctions period, ownership and
control of the local computer industry rests with five major South African
groups -- TSI, FINTECH, MIT/ICL/SANKORP, SILTEK, and ISM (which markets IBM
equipment). These five groups control about 70 percent of computer sales
and dominate the large-scale and mid-range systems. The personal computer
market is overtraded, and rationalization is under way with smaller
distributors folding. Demand is expected to be strong for laptop and
notebook computers.

Aviation: South Africa's aerospace industry contributes roughly
1 percent to the country's gross national product, with the major players
responsible for some 65 percent of that. In aircraft per capita, South
Africa ranks among the first ten countries in the world. Lanseria Airport
near Johannesburg has more aircraft movements a month than any other airport
in Africa. South African Airways (SAA), the state-owned carrier, has
dominated the air since 1934. It is only very recently that two private
carriers began to compete with SAA for domestic passenger and cargo
service. SAA is the world's 40th largest airline.

Total U.S. exports to South Africa in this sector increased from roughly
$48.5 million in 1989 to $72.7 million in 1990. This figure for 1990
represented 40 percent of the South African market. Traditionally, the
light piston and turboprop market in South Africa has been dominated by the
United States. The outlook for sales and general growth in this area seems
bright. As the national air fleet grows older, there will also be greater
repair and refurbishment opportunities. Other promising sales prospects
include corporate jets and helicopters. The Ministry of Transport has
announced a new liberal civil aviation policy that will deregulate tariff
controls, provide for more than one airline per country to operate to and
from South Africa, and allow other local airlines to operate international
flights.

Housing: The current housing backlog is estimated to be 1.2 million homes
for South Africa's black population, while there is a surplus of white
housing units of 83,000. Experts in South Africa forecast that almost 3
million homes will have to be provided by the year 2000 in the urban areas.
Some 3.5 million people are living in informal settlements in the urban
areas of the country. Recently, there has been an explosive growth of
shacks and shantytowns surrounding South Africa's major urban areas. South
Africa's urban population is expected to grow from 13.5 million in 1980 to
at least 35.14 million by the year 2,000. This backlog and demand translate
into the need to build 250,000 dwelling units a year until the end of the
century, or roughly 1,000 units every working day. Presently, only 25,000
dwellings are being built each year.

Most of the black townships and squatter settlements lack the basic
infrastructure and services of water, sewage, and electricity. Efforts to
solve South Africa's housing problem must focus not only on construction,
but on servicing current and prospective sites by building roads and
providing electricity, sanitation, and water. For example, an estimated 66
percent of the country's population have no access to electricity, and in
most black townships there is only one water tap per several thousand
persons.

Health Care: Most black South Africans die of preventable diseases which are

attributable to poor living conditions and inadequate health services. This
situation is compounded by the problems of water supply, housing, and
sanitation. While many of the diseases could be prevented through greater
access to primary health care, the South African Government has geared its
efforts towards capital-intensive technology which focuses on curative
rather than preventative medicine. Those clinics and other preventative
services which do exist in black rural areas are insufficient. More than 75
percent of doctors work in metropolitan areas, 18 percent in small towns,
and 5.5 percent in rural areas.

The recognized need to improve the health care system in South Africa has
led to growth in spending in both the public and private sectors to
construct new clinics in addition to expanding and modernizing existing
health facilities. To address the weaknesses of the current health care
system and its apartheid legacy, the government has proposed privatization
of public facilities. In opposition, the ANC supports a health care system
in which the private sector is incorporated into a national health service,
thus making it responsible to the national government.

Imports account for 65 percent of all medical equipment and supplies used in
South Africa. The prospects for exporting to South Africa in the health
sector look promising in both preventative and curative sectors for the
immediate future. Rising income levels and the uneven distribution of
hospitals will lead to continued demand for high technology equipment.
Likewise, demands for disposables and other therapeutic equipment will also
increase as the number of clinics grow, possibly beyond the point of
domestic production abilities. Specific areas for growth in medical
equipment exports are expected in cardiology equipment, pulmonary apparatus,
electro-medical apparatus, and measuring or checking instruments.

SOUTH AFRICA'S BLACK ECONOMIC SECTOR

Until the late 1970s, discriminatory legislation severely reduced the range
of economic opportunities open to South African blacks. Blacks were
prohibited from forming corporations, owning manufacturing plants, or
entering most skilled professions. Black unemployment has been severe and
is now estimated at more than 40 percent.

Demographic pressures and the growing dependence of the economy on blacks as
consumers and workers, however, led to major changes in the 1980s, such as
the legalization of the black trade union movement and the lifting of
restrictions on blacks' freedom of mobility. Political reforms since 1990,
including the release of political prisoners and the unbanning of political
parties, have accelerated the pace of change. The 1991 repeal of the
Population Registration Act and race-based restrictions on land ownership
and use will create new opportunities for black entrepreneurs. At the same
time, the government's recognition of the importance of job creation and its
ongoing effort to relax restrictions on small business activity will open
new avenues for black business advancement.

Growing demand for skilled black workers, the bargaining power of black
trade unions, and the successes (albeit limited) of black business have
resulted in a slowly rising standard of living for blacks involved in the
formal sector economy. Wage settlements negotiated by black trade unions
resulted in a cumulative wage increase of 81.5 percent between 1985 and
1988. According to one study, the black share of total personal income was
33 percent in 1991. These gains occurred against the backdrop of a stagnant
economy and an uncertain political environment. Despite the economic
progress achieved by some in the black community and the promise of greater

economic opportunities for blacks as the political transition process
unfolds, these gains are not sufficient in the near term to overcome
apartheid's legacy of educational deficiencies, substandard housing and
health care, restricted opportunities, and land dispossession which continue
to hamstring black economic advancement.

The current recession has hit the black community particularly hard. The
South African Reserve Bank estimates that more than 4 million black workers
are employed outside the formal economy in marginal jobs or are unemployed.
Even if the economy could expand at a rate of 3 percent per year until the
year 2000, a total of 6 million black workers would be unemployed or
underemployed. In order to accommodate the number of new workers, the
economy would have to grow at a rate of 5 percent per year, close to South
Africa's potential, and unlikely in the present circumstances.

Black Business Community

Most of South Africa's black business community is comprised of small,
sole-proprieter, single-store, retail outlets. Tradespeople who have
started their own small manufacturing or service shops make up the second
largest group. There are significant medium- to large-scale black
businesses capitalized at R1 million or more and some black entrepreneurs
who have amassed considerable wealth. This group includes construction
contractors, property developers, automobile dealers, and providers of white
collar consultancy services. Most are located in the Johannesburg area.

The largest impediment to the growth of black business is the lack of access
to capital. Black businesses in general are undercapitalized, and South
African banks have not been willing to lend to them, though several have
started small business lending programs. The problem is that most banks
require land as collateral from first-time business borrowers, yet blacks
have historically been denied access to land by apartheid policies. With
the repeal of the Group Areas and Land Acts on June 30, 1991, black business
people are now free to purchase commercial, industrial, agricultural, and
residential property without restriction. The two primary black business
federations are the Foundation for African Business and Consumer Services
and the National African Federated Chamber of Commerce, which are discussed
in detail below.

Foundation for African Business & Consumer Services (FABCOS):
FABCOS is an umbrella organization which provides support services to black
business and consumer organizations with the purpose of helping them move
into the mainstream of the South African economy. FABCOS' goal is to
promote black economic empowerment by stimulating entrepreneurship and
generating new job opportunities. Much of its 1.5 million membership is
from the small and informal business sector. FABCOS member organizations
include: African Builders Association, African Farmers Association, Afro
Hairdressing and Beauty Association, Black Association of Travel Agents,
National Black Consumers Union, National Cottage Industry Association,
National Farmers Union, National Stokvels Association, National Tuck-Shops
Association, Small Retail Association, Southern Africa Black Taxi
Association (SABTA), South African Taverners Association, and South African
Black Insurance Brokers Association.

Recent FABCOS initiatives in the areas of banking, insurance, and food
services illustrate how black and white companies form cooperative
partnerships to serve the black community. FutureBank ("the bank with a new
attitude"), a joint venture between FABCOS and Wesbank (a subsidiary of
First National Bank) opened in March 1992. FABCOS and Fedics, a major white
catering company, formed Fabfoods in late 1991 to develop food outlets in

black communities. Fabfoods opened its first restaurant franchise in
January 1992. FABCOS is also establishing a short-term insurance company
called Business & Personal Insurance, a joint venture between FABCOS,
FutureBank, and two white insurance firms as minority holders and managers.
The target client base is the black business community. The company will be
South Africa's first black-owned insurer.

Further information can be obtained from FABCOS directly at:

FABCOS
P.O. Box 269, Pretoria 0001
Telephone: (27 12) 325-1570
Fax: (27 12) 325-6123

National African Federated Chamber of Commerce (NAFCOC):
NAFCOC's mission is to lobby government authorities on issues affecting
black business and to provide services, training, and information to further
the development of the black business community. NAFCOC was created to
protest the South African Government's restrictions on black participation
in the country's economy. A federation of 18 regional chambers located
throughout South Africa, NAFCOC's forerunners date back to 1945. It
spearheaded the establishment of The African Bank in 1975, South Africa's
first black-owned bank. NAFCOC is a member of the International Chamber of
Commerce.

NAFCOC's current agenda includes promoting greater representation of blacks
in the upper management of major companies, increased ownership of
productive assets by blacks, and greater participation of blacks on the
boards of directors of companies listed on the Johannesburg Stock Exchange.
In addition, NAFCOC is forming sectoral chambers in the areas of transport,
manufacturing, agriculture, retailing, professional services, and building
and construction. The National Federated African Transport Organization
(NAFTO) and the National Industrial Chamber (NIC) are examples of these
sectoral groups.

NAFCOC can be contacted at the following address:

NAFCOC
Private Bag X81
Soshanguve 0152
Telephone: (27 1214) 3204/3209
Fax: (27 1214) 2024

Black Consumer Market

Since South Africa's black population comprises 80 percent of the country's
total population, the size of the potential black consumer market has never
been at question. Black purchasing power has only recently been measured.
It developed strength in the 1980s as a result of wage improvements,
urbanization, and the growth of the black business community. Nonwhite
South Africans now account for approximately 60 percent of all consumer
spending in South Africa.

While the distribution of income among the races remains lopsided, with
whites representing 13 percent of the population and 54 percent of total
personal income, the black share of personal income has increased from 26
percent in 1970 to 36 percent today. In the early 1970s, blacks earned as
much as 90 percent less than whites in jobs requiring similar skills. The
wage gap has narrowed to 14 percent. While average wage increases of 17.5
percent in 1990 stayed just ahead of the inflation rate, wage gains among

blacks were relatively greater than those among whites.

The percentages of sales to nonwhite consumers out of total retail sales in
selected sectors is estimated to be 66 percent for food items, 64 percent
for clothing, 30 percent for transportation, and 22 percent for insurance.
Urbanization and the provision of electricity to black townships is creating
new demand in product ranges formerly dominated by white purchasing. As
blacks acquire urban homes with property rights and increased income, they
will begin to purchase microwaves, vacuum cleaners, dishwashers, and frozen
foods. Black consumers are already purchasing more consumer durables such
as color televisions, hi-fi stereos, refrigerators, washing machines, floor
polishers, and electric sewing machines than white consumers. This
situation is largely due to the fact that most white consumers buy only
replacement items of these products, whereas blacks are first-time
purchasers.

Some marketing experts in South Africa envision a new integrated market
developing as blacks take advantage of the freedom of mobility and spread
over a wider geographic area. They suggest that advertisers must create
cross-cutting, nonracial ad campaigns which will appeal to all ethnic
groups. Others maintain that markets are unavoidably divided along ethnic
lines, partly due to language barriers, and that a consumers "melting pot"
will not occur. For more information on this issue, refer to the section on
advertising in this publication.

INFRASTRUCTURE

Transportation

In April 1990, the South African Transport Services (Sats) became Transnet,
effectively commercializing the government's transportation operations.
Transnet maintains five divisions: Spoornet (rails), Portnet (ports),
Autonet (roads), Petronet (pipelines), and South African Airways, all of
which operate as separate companies. Transnet can be contacted at the
following address:

Transnet
P.O. Box 72501
Parkview 2022
Telephone: (27 11) 488-7100
Fax: (27 11) 488-7126

Air: South Africa has excellent passenger and air freight connections with
the United States and Western Europe. South African Airways (SAA), which is
government owned, provides three weekly flights from New York City to
Johannesburg and daily flights from London. Frequent service is also
available to and from most European capitals. SAA offers a comprehensive
network of routes throughout the Republic and excellent regional services
throughout southern Africa. Recently, SAA has signed landing rights
agreements with many other African countries. Thirty-two airlines currently
fly into South Africa, including Air France, Alitalia, British Airways, El
Al, Iberia, Lufthansa, Swissair, Sabena, TAP Air Portugal, and Varig.
Airports which service international flights are Johannesburg and Cape
Town. In addition, there are 18 smaller government-run airports.

Rail: Spoornet owns and operates the country's 36,499 km rail network. In
1989 it carried 5 million passengers, down from 24 million in FY 1985,
resulting in a decline in the number of station destinations from 1,300 to
255. During FY 1990-91, Spoornet carried 173,600 metric tons of cargo.

Spoornet's freight rates vary widely depending on the class of good and the
distance traveled. Spoornet operates both passenger and freight service.
Its freight service operates three business units: refrigerated transport,
abnormal loads, and general freight services.

Roads: There are 229,690 km of roads in South Africa, 80,796 km of which are
paved. The former road division of SA Transport Services is now operated by
Autonet. While in the past competition by road carriers was restricted in
order to protect the railways, most restrictions were abolished allowing
Autonet to operate independently from Spoornet.

Ports: South Africa ranks among the world's top 12 sea-trading nations and
accounts for about 5.5 percent of global seaborne trade. The country's
principal harbors are located at Durban, Richards Bay, Cape Town, Saldanha
Bay, Port Elizabeth, East London, and Walvis Bay. The South African
Government owns all the harbors through Portnet.

Cape Town is the main port of export for fruit and wool to Europe.
Throughout the 1980s, the cargo handled at Cape Town remained roughly
constant at 4.5 million tons annually. Available facilities include 7,786
meters of commercial berthage, 82,006 square meters of shed space, 140 wharf
and 3 container wharf cranes, 2 floating cranes,
and fuel facilities.

Durban is Africa's biggest cargo port, handling 26 metric tons annually, and
it is South Africa's largest container terminal, handling an estimated
500,000 containers per year. Available facilities include 101,219 square
meters of covered storage, 189 wharf cranes of 3- to 15-ton capacity, an
80-ton capacity heavy lift crane, 3 floating cranes, 6 wharf container
cranes, and 2 road rail transfer cranes. Durban is also the site of the
South Africa Sugar Association's sugar terminal.

East London operates the largest grain silo on the South African coast and
is the major maize export harbor. It is the nation's only river port, and
although it handled an average of 2.7 million tons of cargo annually in the
1970s, tonnage fell to a projected 400,000 tons in the 1990-91 fiscal year.
Available facilities include 2,102 meters of commercial berthage, 12,510
square meters of shed space, and 40 cranes.

Port Elizabeth is a major port for the export of manganese ore. It also
handles significant amounts of fruit and car components. Throughout the
1980s its total cargo fluctuated between 3.5 and 6.5 million tons and was estimated at 4.5 million tons from March 1989 to March 1990. Available
facilities include 1,460 meters of commercial quays, 8 cargo sheds, and 51
wharf cranes, including 3 container wharf cranes.

Richards Bay is the fastest growing of South Africa's ports and handles
roughly 52 percent of all cargo handled by Portnet. The majority of cargo
handled at Richards Bay includes coal, steel, and other bulk commodities.
Available facilities include 2 quays for bulk coal cargoes, 4 quays for
multipurpose bulk-handling, and 13 wharf cranes.

Saldanha Bay is 110 km northwest of Cape Town and is the largest port on
Africa's west coast. It was built to export iron ore from Sishen in the
Northwest Cape, but it also handles lead and copper concentrates. Imports
make up a very small percentage of cargo handled. Available facilities
include two quays with a total length of 991 meters and two ships loaders
with a combined loading rate of 8,000 tons per hour.

Walvis Bay, located along the Namibian cost, is still administered by

Portnet. A joint technical committee was formed in September 1991 to
investigate the possibility of a transitional period of joint
administration, once incorporated into Namibian territory. Available
facilities include 1,564 meters of quayage for commercial shipping, 20 wharf
cranes, and 10,212 square meters of shed accommodation.

Energy

Most of South Africa's domestic energy requirements are met by coal and, to
a lesser extent, uranium. The country lacks sufficient domestic petroleum
or natural gas resources. Its average electricity costs are lower than most
industrialized countries, including the United States.

Eskom, the state power utility, supplies over 95 percent of the country's
electrical energy needs by engaging in all forms of electrical generation,
including coal, oil, hydroelectric, and nuclear. Eskom runs 25 power
stations, generating 35,673 megawatts of power. It operates some of the
world's largest coal-fired plants, which generate over 4,000 megawatts each,
and runs Africa's only nuclear power station at Koeberg near Cape Town.
Being one of the ten largest utilities in the world, Eskom supplies
electricity directly to municipalities, mines, industry, railways, and
neighboring countries (Botswana, Mozambique, Namibia, Swaziland, and
Zimbabwe). Eskom is exploring the potential for establishing a regional
electric grid to connect the entire southern African region. According to
Eskom, only 30 percent of South African homes and less than 10 percent of
homes in the southern African region currently have electricity. Eskom
plans to electrify 3 million homes in South Africa over the next five years
under its "Electricity for All" program. Eskom can be contacted at the
following address:

Eskom
Megawatt Park, Sandton
P.O. Box 1091
Johannesburg 2000
Telephone: (27 11) 800-8111/5410
Fax: (27 11) 800-2033

South Africa's petrochemical complex, Sasol (the South African Coal, Oil,
and Gas Corporation), is a world leader in oil-from-coal technology (coal
gasification). Sasol is a three unit operation with Sasol I in Sasolburg
and Sasol II and III in Secunda. In addition to converting coal to oil,
Sasol produces more than 150 hydrocarbon-based products ranging from candles
and crayons, to abrasives, insecticides, paints, adhesives, detergents, and
plastics. Sasol uses 32 million tons of coal per year and is estimated to
provide about 4 million tons of fuel per year, mostly to the gasoline
market.

South Africa has four crude oil refineries whose current combined
distillation capacity is about 21.5 million tons: 10 million tons for the
Shell-BP refinery at Durban, 2.35 million tons for the Gencor facility
(formerly Mobil) at Durban, 4.5 million tons for the Esso-Caltex refinery at
Cape Town, and 3.79 million tons for the Sasol plant at Sasolburg in the
interior. Increased consumption is forecasted both for South Africa's
domestic market and the neighboring countries which rely on South Africa to
meet their petroleum requirements. South Africa's refining capacity is
expected to expand to meet this rise in consumption.

The Mossgas project is a scheme to develop and convert the natural gas
condensate deposits at Mossel Bay into synthetic fuel. The project's
operator is Soekor, the state-owned oil prospecting company formed in 1965.

In March 1992, the project delivered its first sea-to-shore gas to a
synthetic fuel plant. The natural gas produced by the project will be
converted into gasoline, diesel oil, and kerosene. The Mossgas project is
surrounded by controversy due to its extreme expense and serious questions
regarding its financial and economic viability.

The National Energy Council coordinates energy products of national interest
undertaken by public-sector or industrial enterprises, particularly
investments involving nuclear power or synthetic crude. The Atomic Energy
Corporation is responsible for the management and exploration of uranium
fields, enrichment for fuel purposes, management of radioactive wastes, and
utilization of radioactive isotopes.

Communications

Telecommunications: In April 1991, the Department of Posts and Telegraphs
(SAPT) was divided into two separate successor companies with separate
managing directors: SA Postal Services (SAPS) for postal operations, and
Telkom SA for communications operations. The position of Postmaster General
has been eliminated. The change commercializes South Africa's post and
communications operations by taking it off of government subsidies. Saps
and Telkom will remain state-owned companies.

Telkom and Saps govern the use of all telecommunications services in the
country and have the sole authority to provide commercial telecommunications
services. At the present time, therefore, it is illegal for any other
entity to provide commercial services in competition with these
government-owned and managed entities. Telekom is responsible for approving
and licensing equipment that can be connected to its network, and it also
controls the radio spectrum. Its address is:

Telkom SA Ltd.
General Manager for Product Development
Private Bag X74
Pretoria 0001
Telephone: (27 12) 293-1112
Fax: (27 12) 215-317

The types of telecommunications services offered in South Africa include
telephones, telexes, telegrams, teletexes, data transmission, and videotex.
Its overhead carrier system is the largest in the world. By 1990,
investment in South Africa's telephone system was approximately $3.6
million. South Africa has telephone service to 211 countries, of which 84
can be dialed directly. Calls are handled via undersea cables, landlines,
and satellites. The SAT-1 undersea cable connecting South Africa and
southern Europe is due to be replaced with a fiber-optic line and be
operational by 1993. More than 3 billion services are connected to the
telephone network. National direct dialing is available in most parts of
the country. Cordless and cellular phones are gaining popularity. Mobile
service is now available in Johannesburg, Durban, and Cape Town.

Telex service is available to 197 countries from South Africa. Due to the
rise in the usage of fax machines, telex service has decreased. Telegram
services are available to all foreign destinations, and 872 post offices in
South Africa have access to telegram services. Teletex service was
introduced in 1984 and can access 13 countries. There are 2,282 teletex
services available in South Africa. Telegram and teletex services are also
suffering from the increased use of fax machines and other data transmission
services. Telegram usage decreased by approximately 8 percent and telex by
22 percent in 1990.

An estimated 50,000 data modems operate in the country via the public
telephone network, leased lines, and the public switched data network
(SAPONET). Overseas service is available to 32 countries, and 90,000
messages were transmitted in 1990. The public videotex system in South
Africa is known as BELTEL and supports CEPT, Prestel, and ASCII standards.
There are approximately 11,121 users and 45 gateways to private computers
registered on BELTEL. An electronic directory enquiry system, INNOBEL, has
been available on BELTEL since 1989.

Transnet owns South Africa's largest private communications network, which
provides telephone, telex, and data transmission services to more than
50,000 Transnet employees throughout the country. Eskom, the national
electric company, also runs a similar but smaller communications network.
These entities would be competitive players in a deregulated market.

Radio: Radio broadcasting is administered by the South African Broadcasting
Corporation (SABC), established by parliament in 1936, but not
government-owned. SABC broadcasts 23 internal radio programs in 11
languages and 1 external radio service, which offers service in seven
languages. SABC's short-wave external service is Radio RSA, begun in 1966
and funded by the Department of Foreign Affairs. Domestic radio services
are broadcasted in the African languages of Ndebele, Norhtern Sotho,
Southern Sotho, Swazi, Tswana, Tsonga, Venda, Xhosa, and Zulu. Radio
services to South Africa's black populations grew 41 percent in 1991, in
contrast to a 14 percent growth rate for stations broadcasting in English
and Afrikaans.

The SABC radio network, the largest and most sophisticated in Africa,
consists of 600 FM and medium-wave transmitters for domestic relay,
high-power short-wave transmitters for international broadcasting, and
transmitter control centers and studios throughout the country. SABC radio
broadcasts are estimated to have more than 12 million daily listeners.

Television: The total number of television viewers in South Africa is
estimated to be 8 million. There are an estimated 3.2 million licensed and
1 million unlicensed television sets in South Africa. The government has
recently approved the use of private satellite dishes for television
reception.

SABC began television broadcasts in January 1976. It currently administers
all of its television broadcasts through two programming stations: TV1 and
CCV. CCV, which stands for contemporary community values, was created for
the new post-apartheid South African market and is the result of a merger of
former channels TV2, TV3, and TV4. CCV purports to occupy the
cross-cultural middle-ground and have a mixed-race audience. It broadcasts
in English and several African languages. TV1 broadcasts in English and
Afrikaans. Approximately 40 percent of SABC's television programs are
purchased from overseas. Programs in foreign languages are dubbed into
English, Afrikaans, Xhosa, Zulu, South Sotho, North Sotho, or Tswana.
Presently, SABC is striving towards de-politicizing its image as an agent of
the national government and ruling political party. SABC can be contacted
at:

South African Broadcasting Corporation
Private Bag X1
Auckland Park 2006
Telephone: (27 11) 714-9111
Fax: (27 11) 714-3106

M-Net is South Africa's first over-the-air pay television service. Begun in
1986 by private investors, it is a public company listed on the Johannesburg
Stock Exchange. M-Net's programming focus is high-quality movies, sports,
documentaries, and educational programs. Most broadcasts are in English.
M-Net presently has an estimated 615,000 household subscribers and plans to
extend its services in the southern African region. BOP-TV, another
independent television channel, is broadcast from Bophuthatswana. BOP's
transmissions are restricted to Bophuthatswana and Soweto.

TRADE REGULATIONS

South Africa is a contracting party to the Generalized Agreement on Tariffs
and Trade (GATT), implementing a two column GATT tariff structure of general
and most-favored-nation (MFN) rates. U.S. products qualify for the MFN
rates; similarly, South African shipments to the United States receive U.S.
MFN treatment. Presently, only 20 percent of South Africa's tariff rates
are GATT-bound. South Africa follows the Harmonized System (HS) of import
classification.

Southern Africa Customs Union

South Africa, Botswana, Lesotho, Swaziland, and Namibia form the Southern
Africa Customs Union (SACU). Free movement of goods is permitted among
these countries, a common external tariff is imposed, and customs revenue is
shared among them based on a periodically adjusted formula. The South
African Government administers SACU, collects the duties, and returns the
funds to member countries.

Tariffs

The dutiable value of goods imported into SACU is calculated on the f.o.b.
price in the country of export, in accordance with the GATT Customs
Valuation Code. Many goods enter duty free, while those requiring duty
generally pay at a rate between 5 and 25 percent. Rates of tariff
protection generally range from 15 to 60 percent, with luxury goods tariff
as high as 60 percent and passenger vehicles at 100 percent. Goods not
exceeding a value of R200 are not liable for customs duty and do not have to
be entered on a bill of entry.

A South African producer may petition the Department of Trade and Industry
for tariff protection if his company has a 60 percent share of the South
African market and he thinks he is threatened by import competition. In the
summer of 1991, the government introduced a new streamlined (three week)
procedure to hasten the approval of requests for tariff and dumping
protection.

Import Control

South Africa has protective import policies which evolved to support the
country's past import substitution/replacement program. The Minister of
Trade and Industry may, in the national interest and under the Import and
Export Control Act of 1963, prohibit, ration, or regulate imports.

The government is trying to simplify the tariff system. The government also
has plans to liberalize its import policies by reducing tariffs and the
import surcharge. The Ministry of Finance, the South African Reserve Bank,
and the Industrial Development Corporation support the elimination of import
surcharges by 1993 and across the board tariff cuts. These proposed
reductions are part of the country's new economic program toward

export-oriented production. However, any significant tariff reduction will
require government consideration of its own revenue needs as well as
protectionist sentiments amongst the local business community. The move to
simplify the tariff system by reducing the number of separate tariff items
has met with limited success in reducing tariff barriers; although some
tariffs have been reduced, others, due to the combining of formerly separate
listings, have actually risen.

Import Permits

Some goods imported into South Africa require an import permit which the
South African importer obtains from the Director of Imports and Exports.
Products requiring permits include consumer goods (foodstuffs, clothing,
fabrics, footwear, and books), wood, paper products, motor and aviation
fuels, refined petroleum products, various chemicals, and raw wool.
Products which do not require permits include raw materials and other
products for industrial purposes, and new spare parts, assemblies and
materials imported as original equipment for the manufacture of motor
vehicles. The list of goods requiring import permits is specified each year
in the annual Import Control Program. Further questions about import
permits should be directed to:

Director of Imports and Exports
Department of Trade and Industry
Private Bag X192
Pretoria, 0001
Telephone: (27 12) 310-9791
Fax: (27 12) 322-0298

Import Surcharge

The import surcharge was originally imposed as a means to restore the
country's deteriorating balance of payments. The surcharge is levied on the
customs value (f.o.b.) of the imported goods. An across-the-board reduction
of one-third in the rates of surcharge was effected in March 1990 when the
rate was cut from a range of 10 to 60 percent to a range of 7.5 to 40
percent. Another reduction took place in March 1991 when the rates of 10
and 7.5 percent were reduced to 5 percent. The government hopes to
eliminate the surcharge entirely by 1993 if the country's balance of
payments is strong enough.

A break down of the rates and their product categories is below.
0% agricultural implements and inputs, manufacturing inputs, and essential
foods.
5% goods used by both consumers and manufacturers, for example, flour,
yeast, medicines, paint, tires, metal pipe and tubing, computers, etc.;
luxury foods, fruit, coffee, tea, spices.
15% capital goods, for example, aircraft, vehicles, earthmoving equipment,
software, kitchenware, appliances, etc.
40% luxury consumer goods, for example, televisions, tape recorders, video
machines, antiques, jewelry, etc.

Value-Added Tax

A value-added tax (VAT) of 14 percent went into effect in March 1993,
replacing the 10 percent VAT. VAT is payable on nearly all imports. Goods
imported for use in manufacturing or resale by registered traders may be
exempt from VAT. The valuation of imported goods for VAT is based on the
f.o.b. value plus 14 percent of that value, plus any non-rebated customs
duty (tariff plus surcharge).

Excise Tax

Specific excise duties are levied on alcoholic and nonalcoholic beverages,
tobacco and tobacco products, mineral waters, some petroleum products, and
motor vehicles. Ad valorem excise duties are levied on office machinery,
photographic film, and luxury consumer goods such as cosmetics, home
entertainment products, and motorcycles.

Customs Information

Various rebates and relief of duties exist for cases in which the imported
commodity will be used in a subsequent domestic production process. The
importer should consult the Import Control Act to determine whether the
potential imports are eligible for rebate or relief of customs duty and
surcharge.

The government regularly updates its import regulations. The Commerce
Department's South Africa Desk Officer can answer questions regarding
tariffs and surcharges on specific commodities. The specific HS product
number is required before the officer can service a request. For a
comprehensive listing of customs tariffs and surcharges for individual
goods, the importer should consult the Customs and Excise Tariff Book
published by Jacobsen's Publishers, P.O. Box 1878 Posbus, Pretoria 0001;
telephone (27 12) 346-3280, Fax (27 12) 346-3684.

Further information on South Africa 's import policy and tariffs should be
directed to:

Commissioner
Customs and Excise Administration
Department of Finance
Private Bag X47
Pretoria 0001
Telephone: (27 12) 284-308
Fax: (27 12) 325-7992

Documentation

Basic documents required for shipments to South Africa include:
1) a commercial invoice which shows the price charged to the importer in
addition to the cost of placing goods on board ship for export;
2) bill of lading; 3) insurance documents; and 4) a packing list. Other
special documentation may be required by the importer. At least three
copies of the invoice should go forward under separate cover to the
consignee prior to the arrival of the goods.

For detailed information concerning the proper preparation of a commercial
invoice, U.S. firms can consult the Exporter's Encyclopedia, published by
Dun's Marketing Services. Reference copies of this publication are
available in major commercial and public libraries. U.S. Department of
Commerce district offices are also available to assist. A list of district
offices appears at the back of this publication.
The South African Declaration of Origin Form DA-59, certifying the country
of origin, description of goods, weight, etc., is required for shipments of
specified goods which may be subject to countervailing duties. Form DA-59
(see page 83) is required for stainless steel tableware, kitchen items or
other household articles, and mugs and cups of a diameter not exceeding 70
mm; iron or steel except stainless steel, not enamelled; motor vehicle air

filters, motorcycle oil or petrol filters, and parts for motor vehicle
filters; and reception apparatus for radio telephone or radio broadcasting
apparatus.

Generally, South African Customs will notify the importer if a Form DA59 is
required for a specific product. When required, exporters or suppliers must
provide at least one original signed copy attached to the original
commercial invoice. A chamber of commerce certification or a U.S. customs
stamp are not required. The form can be obtained from any South African
consulate in the United States (see "Sources of Information" section).

Warehousing

South African regulations require that all goods must be landed and entered
into the country within seven days after arrival of the importing ship,
unless the Secretary of Customs provides an exemption. If this procedure is
not followed, the Customs officials may transfer the goods to a state
customs warehouse where charges are assessed at R2 per 100 kilograms each
week. After three months the goods may be sold at public auction.

Goods may be stored in bond without payment of customs duties, except
dumping or special duties, in any bonded warehouse or in an unbonded
warehouse with the approval of the Secretary of Customs.

Barter/Countertrade

The South African Government has no laws, regulations, or published policies
regarding barter/countertrade. It views countertrade as a second-best
alternative to be engaged in only when normal trade cannot be conducted.
While there is no specific approval process for countertrade transactions,
South African traders must obtain prior approval from the Reserve Bank
before concluding a barter transaction. Further information about
countertrading with South Africa can be obtained from the local association:

Countertrade Association of South Africa
P.O. Box 6296
Pretoria, 0001
Telephone: (27 12) 344-2926
Fax: (27 12) 344-0382

Used Goods

The South African Government strictly regulates the importation of all used
equipment. Importers must apply to the Department of Trade and Industry for
a permit to import any used goods. There is a market for used machinery,
machine tools, and computer equipment. However, most other used goods are
prohibited. Imports of secondhand clothing are only allowed as charitable
donations to South African churches or welfare organizations. Exceptions
may be granted under Section 2 of the Import and Export Control Act of 1963
if the goods and their intended use are fully documented. Exceptions are
not granted for used clothing. Further information should be obtained from:

The Used Machinery Association in South Africa
Contact: Mr. Fred Thompson
c/o Thompson Machine Tools (Pty) Ltd
P.O. Box 1532, Benoni 1500
Telephone: (27 11) 845-2030
Fax: (27 11) 54-5217

Temporary Import of Samples

The ATA Carnet ("Admissions Temporaire-Temporary Admission") is a special
international customs document designed to simplify customs procedures for
goods being temporarily imported into participating countries. The ATA
Carnet may be used in any country which is a signatory to the Customs
Convention of ATA. A carnet is valid for up to one year. The carnet
eliminates the extensive customs procedures often required for temporary
imports. Perishable and consumable goods are not eligible for carnets.

Carnets may be used for goods intended for display or use at exhibitions,
fairs, meetings, and similar events; professional equipment such as
equipment for the press, cinematographic equipment, engineering,
topographical, surgical, electrical, archaeological, and entertainment
equipment for demonstration or temporary use; and commercial samples
imported for the purpose of being shown or demonstrated in South Africa

It is the obligation of the holder of the carnet to ensure that the customs
authorities of South Africa will accept an ATA carnet for the import in
question. Applications for a carnet should be forwarded to:

U.S. Council of the International Chamber of Commerce
1212 Avenue of the Americas
New York, New York 10036
Telephone: (212) 354-4480
Fax: (212) 575-0327

In South Africa carnets are issued by the South African Chamber of
Business:

South African Chamber of Business
(Carnet Division)
P.O. Box 91267
Aukland Park
2006 Johannesburg
Telephone: (27 11) 482-2524
Fax: (27 11) 726-1344

If an A.T.A. Carnet is not used, South Africa does have its own regulatory
provisions for the temporary importation of goods, provided the duty is
covered pending reexportation.

Samples of no commercial value, catalogs, price lists, and trade
publications of firms or persons having no established place of business in
South Africa or no representative holding stocks in South Africa may be
admitted duty free. Publications and advertising matter relating to fairs,
exhibitions, and travel in countries outside South Africa are also admitted
duty free.

IMPORT FINANCING

Quotations and Terms of Payment

American exporters should offer quotations based on the f.o.b. value at the
port of export. As a general rule, such quotations should also include a
statement of the actual charges for freight and insurance plus any
additional charges to the port of delivery. Quotations are usually in terms
of the currency of the country of origin. The terms of payment for imported
goods vary according to the type of buyer and the buyer's access to
capital. Large organizations such as the government or mining companies

tend to transact business on a sight-draft basis, while small companies tend
to operate on documents against acceptable terms. Payment between 80 and
120 days after acceptance is most common, but terms may vary between 30 and
180 days. For larger orders of capital equipment, longer terms are often
required.

Letters of Credit

Letters of Credit or documentary credits (DC) -- as they are called in South
Africa -- are the customary way to finance imports into South Africa.
Documentary credits are documents issued by a bank on behalf of an importer
in favor of a beneficiary, usually the exporter. The most commonly used
documentary credits are irrevocable credits and confirmed irrevocable
credits. If the exporter is concerned about the reliability of the importer
only, he should use an irrevocable DC. If the exporter is also concerned
about the standing of the issuing bank and/or the standing of the importer's
country, he should use a confirmed irrevocable credit.

In South Africa all credits issued are subject to exchange control
regulations and where necessary, a South African import permit. South
African exchange control regulations stipulate that payment of imports can
only be effected by authorized banks against submission by their customers
of documentary proof that the goods were imported into South Africa as
evidenced by invoices and shipping documents stamped by South African
customs.

An exception is when South African banks have opened documentary import
letters of credit in favor of foreign exporters. Payment in those instances
may be effected against presentation by the exporter of invoices and
shipping documents to the foreign negotiating bank before the goods have
arrived in South Africa (but after they have left the United States).

If credit is available, payment will take place upon presentation of the
documents. The method of payment can be by teletransmission or by airmail
depending on the reimbursement clauses. The advising bank should, if
possible, be the same bank as the exporter's bank. If the exporter's bank
is unknown, however, the South African bank will advise the credit through a
correspondent bank known to it in the United States and, if possible, in the
exporter's city.

Foreign Exchange for Import Payments: Please refer to the "Foreign Exchange"
section of this publication for additional information about South Africa's
currency and exchange regulations.

Export-Import Bank of the United States

The Export-Import Bank of the United States (Eximbank) may not support any
export to private purchasers in South Africa unless the Secretary of State
certifies that the purchaser has endorsed and proceeded toward the
implementation of specified fair labor principles (listed in the "Investing
in South Africa" section). South African firms that are majority-owned by
non-white South Africans are exempt from the fair labor certification
requirement. Eximbank may insure or provide credits for U.S. exports to the
South African Government (as of February 20, 1992).

South African purchasers of U.S. exports interested in obtaining
certification must submit to the United States Embassy or a United States
Consulate in South Africa a completed fair labor standards questionnaire.
The questionnaire is available from the U.S. Embassy and Consulates in South
Africa. The South African purchaser will be notified by the Department of

State if certification is granted. Certification is effective for one
year. A certified purchaser must submit a new questionnaire prior to the
expiration of the one-year certification period in order to continue to
receive Eximbank support. Consult the Federal Register, Volume 57, No. 79,
April 23, 1992 for additional information. Specific questions regarding
certification should be directed to the U.S. Department of State, Office of
Southern African Affairs, telephone (202) 647-9866.

Air Shipments

The South African Reserve Bank amended the payment procedures for imports
consigned by air in March 1992. The new regulations allow the South African
importer to obtain foreign exchange to meet import payments for goods
consigned by air on a cash-on-delivery basis
before the goods are cleared through customs.

The documentation required for this transaction is a copy of the relative
air waybill bearing an original stamp with the words "For Exchange Control
Purposes Only" and dated and signed by a member of the South African
Airfreight Forwarders Association. Inquiries may be addressed to:

Airfreight Forwarders Association
The Secretary
Private Bag X8, Aukland Park 2006
Telephone: (27 11) 974-5375
Fax: (27 11) 974-5821

FOREIGN EXCHANGE

The South African Reserve Bank (SARB) is responsible for the administration
of exchange control. In addition, SARB is the sole marketing agent for gold
bullion. SARB's Exchange Control Department, acting as the agent for the
South African Treasury, together with the commercial banks, controls all
foreign currency transactions. Commercial banks act as authorized dealers
of foreign exchange on behalf of SARB. All transactions, unless otherwise
authorized by the Exchange Control Department, between residents and
nonresidents of South Africa must be accounted for through the authorized
dealers. Please refer to the section on investment in this publication for
additional information on foreign exchange controls affecting foreign
investors. Further questions on exchange control rules can be addressed to:

South African Reserve Bank
Exchange Control Division
P.O. Box 3125, Pretoria, 0001
Telephone: (27 12) 313-3911
Fax: (27 12) 313-3197

Currency: Commercial Rand the Financial Rand

The monetary unit of South Africa is the rand (R), which is divided into 100
rand cents (c). South Africa maintains two types of currency, the
Commercial Rand and the Financial Rand, for which different rates of
exchange are quoted.

Commercial Rand: The commercial rand is used for current transactions
involving the normal commercial flow of goods and services to and from South
Africa, foreign loans, and remittances of dividends and interest payments.
International trade finance, therefore, uses the commercial rand for import
payments and export receipts.

Financial Rand: The financial rand system was created to control the outflow
of funds from South Africa and serve as an incentive to bring foreign or
nonresident capital into the country. It therefore is used for foreign
capital flows into and out of South Africa. Nonresidents buy "finrands" at
a significant discount to the Commercial Rand. Recently, this discount has
fluctuated around 16 to 25 percent. Investors, therefore, essentially "buy"
16 percent more value for their dollar investment when entering South Africa
using financial rand. Nonresidents may use finrands to invest in South
African banking funds, purchase shares of private companies or companies
quoted on the Johannesburg Stock Exchange, or invest in land and buildings.
Nonresidents investing in private manufacturing enterprises may use
financial rand to purchase a factory building and plant and equipment, to
provide working capital, and to cover initial training and other
establishment costs. Should the nonresident or foreign investor wish to
remove capital invested in South Africa, the disinvestment can only be done
via the financial rand market. The "selling" of financial rand costs the
firm the discounted difference between the two rates at the time of the
sale. More information about the use of the financial rand is given in this
publication's discussion of foreign investment.

Common Monetary Agreement

South Africa, Lesotho, Swaziland, and Namibia are members of the Common
Monetary Agreement (CMA) under which they apply uniform exchange control
regulations to ensure monetary order in the region. Funds are freely
transferable among the four countries, and Lesotho, Swaziland, and Namibia
have free access to South African capital markets. CMA was formed in 1986
as a result of the renegotiation of the Rand Monetary Agreement, which was
originally formed in 1974 by the same member countries.

Foreign Exchange for Import Payments

In general, SARB's Exchange Control Department is not prepared to provide
foreign exchange in payment of imports prior to the date of shipment or
dispatch of the goods to South Africa. When South African authorized
dealers open documentary import letters of credit in favor of foreign
exporters, payment is effected against presentation by the exporters of
invoices and shipping documents to the foreign negotiating bank before the
goods have arrived in South Africa.

Foreign currency payments for imports may not be made against any documents
other than:
(a) received for shipment bills of lading;
(b) on-board bills of lading;
(c) air waybills of lading;
(d) parcel post receipts;
(e) carriers' receipts or railroad bills of lading giving title to the
good and evidencing dispatch to a port for shipment to South
Africa; or
(f) arrival notifications issued by Ellerman and Bucknall (Pty)
Limited, Safmarine Limited, and the Transatlantic Shipping Agency
(Pty) Limited.

Foreign exchange may be provided for advance payments not exceeding
33 1/3 percent of the ex-factory cost of capital goods to be imported
provided the authorized dealer is satisfied from the production of
documentary evidence supplied by the overseas manufacturer that the order
would otherwise be refused and that such payment is normal in the trade
concerned.

Foreign exchange may also be provided on a cash-with-order basis to cover
the cost of permissible imports within the limit of R5,000, but authorized
dealers must satisfy themselves by the subsequent production of the usual
documentary evidence that the exchange provided has been used for the
purposes stated and that the goods have been imported into the Republic.

Authorized dealers must in due course insist upon the presentation to them
of original bills of entry import or local parcel post receipts as evidence
that goods, in respect of which transfers have been effected in terms of the
above rules, have been received in South Africa. Such documents will also
be boldly stamped "Exchange Provided." The date of the exchange transaction
should be inserted under the stamp and, in the event of a part payment, the
amount concerned should be stated. Customers are advised to retain the
stamped documents for at least two years for inspection purposes.

Licensing and Royalty Agreements

Exchange control regulations in South Africa stipulate that the payment of
royalties must be approved by SARB. When a licensing agreement involves no
manufacturing, the request for exchange control approval is sent directly to
SARB.

When a company is interested in entering into a foreign licensing agreement
to manufacture a product in South Africa, the South African licensee must
submit an application to the Industrial Development Branch of the Department
of Trade and Industry. The application should include a draft licensing
agreement and a questionnaire, known as Form MP337. The Department of Trade
and Industry, in turn, will make a recommendation to the SARB. For more
information on licensing regulations contact:

Directorate of Industrial Development
Department of Trade and Industry
Private Bag X84
Pretoria 0001
Telephone: (27 12) 310-9791
Fax: (27 12) 322-0298

Royalty fees are based on a percentage of total ex-factory sales, with a
maximum of 4 percent for consumer goods and 6 percent for intermediate and
final capital goods. Down payments will not be approved unless actual costs
of transferring tangible technology items are incurred. Minimum or annual
payments are not acceptable to SARB. Exchange approval will normally be
granted for an initial period of 5 years. Contract conditions involving
obligatory purchasing and pricing agreements or requiring the licensee to
sole source articles from the licensor are prohibited.

BANKING AND CREDIT

South Africa's well-developed banking system resembles the British system
rather than the American. The South African banking system is composed of
three key elements: SARB, private sector banks (commercial banks, merchant
banks, and general banks), and building societies.

SARB functions as the government's central bank and the country's sole
marketing agent for gold. It maintains government accounts, holds the
commercial banks' reserve accounts, manages South Africa's gold and foreign
reserves, and issues bank notes. SARB's total assets amount to an estimated
R30 billion.

South Africa has 47 private sector banks (16 commercial, 21 general, and ten
merchant) with over 2,000 branches. Distinctions between commercial,
general, and merchant banks are rooted in legal definitions which limit a
bank's activities according to types of transactions and clientele. These
legal distinctions have eased in recent years, and the bank holding
companies in South Africa typically own several banks geared to various
clienteles.

Major banking groups in South Africa include Standard Bank Investment
Corporation (SBIC), First National Bank of Southern Africa (formerly
Barclay's), Bank Holding Corporation of South Africa (Bankorp), and Nedbank
Group. In 1991, Allied Group, UBS Holdings/Volkskas Group, and Sage
Holdings merged to form the largest banking group in South Africa called the
Amalgamated Banks of South Africa (ABSA) with holdings of more than R50
billion.

Commercial banks offer a range of banking services, including check cashing,
term deposits, overdraft loan advances, and foreign exchange transfers.
Merchant banking in South Africa follows the London model. Services include
short-term deposits, financing of trade transactions, purchase and sale of
public bonds, foreign exchange, negotiation of foreign loans, acquisition
and merger advice, and portfolio investment planning. General banks are
similar to commercial banks and provide general loans, installment purchase
credit, and merchandise leasing.

Building societies, similar to American savings and loans, specialize in
housing finance. The major building societies are the Permanent Building
Society, Allied, UBS Holdings, Natal Building Society, and Saambou.
Traditionally, the building societies were structured as mutual societies
and owned by depositors rather than shareholders or parent companies.
Presently, four of the five largest building societies have "gone public" by
converting to equity companies. The Permanent Building Society ("the Perm")
is the only major building society which has not converted to an equity
basis.

South Africa's former four discount houses were reduced to deposit-taking
institutions in 1989 when they lost their preferential discount from SARB.
The discount houses included Discount House of South Africa (DHSA), National
Discount House (NDH), Securities Discount House (now Securities Investment
Bank), and Interbank. The latter three are under the umbrella of the Sechold
group.

In addition to the private banks discussed above, the South African
Government owns several banks and bank-like institutions that play
relatively more specialized roles in the monetary system. The Corporation
for Public Deposits (CPD) and the Public Investment Commissioners (PIC) are
deposit-taking institutions that administer various governmental and
quasi-governmental funds. The CPD operates under the auspices of SARB and
is responsible for the investment of various short-term funds, such as
accounts of the state fuel fund, provincial administrations, transport and
communications services, and certain agricultural control boards. The PIC
operates under the auspices of the Minister of Finance and has a function
similar to the CPD, but for long-term deposits and governmental and
parastatal pension funds.

Consumer Credit

Consumer credit is widely used in South Africa. Consumers have access to a
wide range of credit instruments, which include credit cards with a

predetermined credit limit and personal loans from banks. Durable goods are
usually financed through time-payment plans. Several banks specialize in
time-payment credit, and some even maintain branches in automobile dealer
showrooms. Consumers can use personal checks, credit cards, or transmission
accounts at banks. Many of the hypermarkets have facilities for credit
transfers. Retailers in small towns and rural areas still extend
traditional credit to their customers.

The ratio of credit to cash sales has steadily risen through the 1980s.
Down payment and length of credit terms range from 15 percent down and 18
months to pay for most consumer durables such as household furniture,
domestic appliances, watches, jewelry, and televisions, to 25 percent and 30
months for passenger cars.

Black-Owned Banks

The African Bank Ltd.: Established in 1975 as South Africa's first
black-owned bank, The African Bank Ltd. began offering shares to all South
African citizens in 1991. African Bank's activities concentrate on
providing savings and loans services to small black businesses located in
rural areas. The bank plans to expand its rural client base and eventually
introduce checking account facilities. In 1991, the bank took over the assets and liabilities of the Venda Development Corporation's Sibasa Savings
Bank and the savings bank outlets of the Lebowa Development Corporation.
Presently, African Bank has a chain of 33 outlets most of which are located
in the northern Transvaal region. The African Bank can be contacted at:

The African Bank
P.O. Box 61352
Marshalltown 2107
Telephone: (27 11) 836-2331
Fax: (27 11) 838-2845

FutureBank Ltd.: FutureBank was formed in 1991 as a joint venture between
the Foundation for African Business & Consumer Services (FABCOS) and Wesbank
(a subsidiary of First National Bank) to provide financial services to urban
black entrepreneurs and the informal business sector. Futurebank can be
contacted at:

FutureBank
P.O. Box 1789
Joubert Park 2044
Telephone: (27 11) 339-5551
Fax: (27 11) 339-5330

Development Agencies

Development Bank of Southern Africa (DBSA): DBSA was created in 1983 by the
South African Government to fund development projects in the "independent"
black homelands of Transkei, Ciskei, Venda, and Bophuthatswana. It
mobilizes and provides loan finance and technical assistance for major
development projects. The bank also pursues project financing in
neighboring southern African countries such as Lesotho and Swaziland. DBSA
membership is open to any country in southern Africa. It functions as a
"banker's" bank, providing soft loans to governments, local authorities,
development corporations, and nongovernmental organizations, which in turn
make loans to individuals in bank-approved projects. DBSA's financial
resources include share capital contributions from its members and loans
obtained from financial markets. Grant aid from the South African
Government comprises an important source of DBSA's funding. In 1990-91 DBSA

disbursed R991 million in project financing, a 36 percent increase over the
previous year. The bank is expected to expand its role as a financier of
development projects in post-apartheid South Africa. Further information
about DBSA financing and projects can be obtained from:

Development Bank of Southern Africa
P.O. Box 1234
Halfway House 1685, Midrand
Telephone: (27 11) 313-3911
Fax: (27 11) 313-3086

Independent Development Trust (IDT): IDT was created by the South African
Government in 1990 to address the economic imbalances and backlogs created
by the apartheid system. IDT was allocated R2 billion to support projects
which improve the quality of black housing, education, and primary health
care; these sectors receive 45, 30, and 20 percent of the funds,
respectively. Further information about IDT projects can be obtained from:

Independent Development Trust
P.O. Box 23
Auckland Park 2006
Telephone (27 11) 482-2180
Fax: (27 11) 726-7970

Foreign Banks

The Deposit-Taking Institutions Act of 1990 eliminated legal restrictions
discriminating against foreign-owned financial institutions. These
institutions now receive the same national treatment as investors in other
sectors. Foreign banks may, with prior authorization from the Registrar of
Deposit-Taking Institutions, establish operations in South Africa and may
hold all the issued shares in the newly established bank.

There are 32 foreign banks represented in South Africa, including Bank of
Lisbon, French Bank of Southern Africa, the South African Bank of Athens,
and Banque Commerciale Zairoise; and at least ten more have submitted
applications to establish operations in the country. Key areas of business
for foreign banks include trade finance, letters of credit, foreign exchange
activities, and services to offshore investors.

Further information about banking regulations can be obtained by contacting
the following:

Registrar of Financial Institutions
Private Bag X238
Pretoria 0001
Telephone: (27 12) 325-2550

INVESTING IN SOUTH AFRICA

Investment Climate

While South Africa faces an uncertain economic future and is in the midst of
a major political negotiation process, it does offer several inducements for
foreign investors. There are substantial markets with significant growth
potential, a free market tradition, excellent infrastructure, access to
other markets in Africa, liberal repatriation of profits, lower labor costs,
and availability of cheap power and abundant raw materials. The Government
of South Africa encourages foreign investment and treats it the same as

domestic enterprise. Only a few areas of economic activity are reserved for
domestic ownership.

U.S. firms are adopting a wait-and-see attitude towards investing in South
Africa. Since the lifting of U.S. sanctions on July 10, 1991, several U.S.
firms have announced new trade and distribution arrangements with South
Africa. U.S. firms recognize that having operations in South Africa will
not be "business as usual." Companies will be expected to address key
concerns of the black community such as equality in the workplace, upward
mobility, and technical and managerial training.

Among the issues which create a difficult investment climate in South Africa
are the ongoing violence, the economic recession, and the political
negotiations. There is universal agreement that a strong economic recovery
is vital to a peaceful political transition. South Africans hope foreign
capital will contribute to future economic growth. Even the African
National Congress now welcomes American firms to visit South Africa to
explore investment opportunities.

American Chamber of Commerce

There is an active American Chamber of Commerce (AMCHAM) in South Africa.
The chamber is developing a trade and investment support unit to assist
other U.S. firms seeking business opportunities in South Africa and the
southern African region. AMCHAM's address is:

American Chamber of Commerce in Southern Africa
60 5th Street, Lower Houghton
P.O. Box 62280, Marshalltown 2107
Telephone: (27 11) 880-1630/788-0265
Fax: (27 11) 880-1632

Signatories Association

The Signatories Association represents those American companies with
operations in South Africa which continue to subscribe to a code of
corporate conduct originally initiated as the Sullivan Principles in 1977.
The objectives of the principles are to address labor conditions in the
workplace and racial discrimination, and to promote corporate social
responsibility towards victims of apartheid. Today the companies call
themselves the "Signatories." The Administrative Manager of the Signatories
Association can be reached at the same contact address as AMCHAM.

U.S. Fair Labor Principles

The Comprehensive Anti-Apartheid Act of 1986 (CAAA), in Sections 207 and
208, requires that U.S. companies with operations in South Africa of 25 or
more employees must adhere to a specified Code of Conduct also known as the
Fair Labor Principles. These principles are:
o Desegregating the races in each employment facility;
o Providing equal employment opportunity for all employees without
regard to race or ethnic origin;
o Assuring that the pay system is applied to all employees without
regard to race or ethnic origin;
o Establishing a minimum wage and salary structure based on the
appropriate local minimum economic level which takes into account
the needs of employees and their families;
o Increasing by appropriate means the number of persons in
managerial, supervisory, administrative, clerical, and technical
jobs who are disadvantaged by the apartheid system, for the purpose

of significantly increasing their representation in such jobs;
o Taking reasonable steps to improve the quality of employees' lives
outside the work environment with respect to housing,
transportation, schooling, recreation and health; and
o Implementing fair labor practices by recognizing the right of all
employees, regardless of racial or other distinctions, to
self-organization and to form, join, or assist labor organizations,
freely and without penalty or reprisal, and recognizing the right
to refrain from any such activity.

In addition, the CAAA expresses the sense of the Congress that U.S.
nationals should take reasonable measures to extend the scope of their
influence outside the workplace by:
o Supporting the unrestricted rights of black businesses to locate in
urban areas;
o Influencing other companies in South Africa to follow the standards
of equal rights principles;
o Supporting the freedom of mobility of black workers to seek
employment opportunities wherever they exist, and making provision
for adequate housing for families of employees within the proximity
of workers' places of employment; and
o Supporting the rescission of all apartheid laws.

All U.S. nationals who own or control entities in South Africa employing 25
or more individuals are required to register with the U.S. Department of
State and to report to the Department by February 15 of each year the steps
they have taken to implement these Fair Labor Principles as set forth in the
CAAA. U.S. firms which fail to meet these requirements will be denied all
U.S. Government export marketing support. U.S. nationals who fail to
register or to report are subject to civil and criminal penalties.
Additional information is available from the Department of State, Office of
Southern African Affairs, (202) 647-9866.

Investment Regulations

In South Africa, direct investment transactions include establishment of
subsidiaries or branches; overseas acquisition of a controlling interest in
a South African firm; increases in the holding of loan and share capital in
existing subsidiaries by foreign companies; and retained profits by local
subsidiaries.

Foreign investors generally receive the best of national treatment and are
subject to the same laws as domestic firms, with a few exceptions. Foreign
or external companies operate under the same laws, rules, and regulations
that apply to domestic firms. There is no specific investment approval
process. A foreign company may either register a local branch office or
incorporate a subsidiary in South Africa. The registration requirements for
both forms of operating in South Africa are discussed in the section below.

Registration and The Companies Act

The Companies Act of 1973, which is administered by the Registrar of
Companies, regulates the formation, conduct of affairs, and liquidation of
all companies. The act makes no distinction between locally owned or
foreign-owned companies. Companies may be either private or public.
Foreign companies establishing subsidiaries in South Africa must register
the subsidiary in accordance with the act. The South African Government
contact is:

Registrar of Companies

P.O. Box 429
Pretoria 0001, South Africa
Telephone: (27 12) 325-2350

Private Companies: A locally registered private company, identified by the
words "Proprietary Limited" in its title, is a common form to carry on
operations as a subsidiary of another company. Private companies may have
up to 50 shareholders, cannot offer shares to the public, and are not
required to have a minimum subscription. Private directors need not lodge
with the Registrar a written consent, and they need not be South African
nationals or residents of South Africa. The registration of a company is
established by filing the following information with the Registrar of
Companies: a certified copy of the Memorandum and Articles of Association;
the registered address; the name and address of the company's local auditor;
and a share capital duty receipt. Private companies are not subject to the
statutory meeting and reports requirements of public companies and do not
have to lodge their annual financial statements with the Registrar.

Public Companies: Public companies are formed to raise funds by offering
shares to the public; therefore, there is no limit on the number of
shareholders in a public company. Public companies are required to file
annual financial statements and reports with the Registrar of Companies.
For public companies which issue a prospectus, proof must be submitted to
the Registrar that each director has paid full price for the shares, and the
number of shares issued equals the stated minimum subscription. For public
companies with share capital, the following must be forwarded to the
Registrar: a director's statement that capital is adequate for business
operation; particulars of the directors and officers; and proof that the
annual duty has been paid. A public company may not commence operations
until receipt of the Registrar's certification.

Close Corporations: Close corporations are a form of business organization
unique to South Africa. They can only be organized by natural citizens of
South Africa and are limited to a maximum of ten persons. Close
corporations are subject to fewer registration and operating regulations
than companies.

Local Branch Offices: Foreign companies may establish a local branch office
in South Africa by registering the branch as an "external company" with the
Registrar of Companies. Any nonresident or foreign company must register
within 21 days of establishing an office in South Africa. Government
approval is not required for registration, and there is no requirement that
a certain percentage of share capital be held locally. The branch company,
within six months after the end of its financial year, must file annual
financial statements with the Registrar. Branch profits remitted to a
foreign firm's headquarters are not subject to withholding tax.

Exchange Control Affecting Investors

Exchange control regulations apply to resident individuals or companies,
including branches and subsidiaries resident in South Africa. In practice,
South Africa seeks to maintain a favorable foreign investment climate and
most currency transactions are carried out freely after permission is
granted by the SARB Exchange Control Department.

Use of the Financial Rand: Any nonresident interested in investing in South
Africa does so by purchasing financial rand. Please refer to the section on
currency for more information about the financial rand.

The process of introducing foreign funds into South Africa via the financial

rand involves obtaining approval from SARB's Exchange Control Department;
forming and registering a South African company; transferring foreign funds
to the South African commercial bank handling the transaction; the
conversion of the funds to rand; the issue of shares in relation to the
funds introduced and the endorsement of the share certificates by the bank;
and the release of the converted funds to the investor upon documentary
proof of utilization.

Applications for financial rand must be accompanied by the following: a
brief background of the venture, nature of its products or service,
employment offered/created, and forecasted turnover; details of
shareholder's names, domiciles, and equity holdings; latest audited
financial statements and current pro-forma balance sheets on a before/after
basis showing the changes resulting from the investment; a pro-forma balance
sheet (in the case of a new company) reflecting its equity structure; a
fully detailed schedule showing how funds to be introduced will be spent and
including information regarding what sums will flow abroad as payments for
imported plant and goods or services.

Repatriation Rules: Repatriation of capital investments are made using the
financial rand. There are no restrictions.

Dividends and Branch Profits: Traditionally, South Africa's policy is to
allow the unhampered transfer of current earnings of capital invested in the
Republic by nonresidents, subject to a nonresident shareholder's tax. The
transfer of dividends and the profits of South African branches of foreign
parent companies is through the commercial rand. Repatriation of profits
does not require SARB approval. There are no restrictions on these
transfers provided they are made out of trading profits and are financed
from available cash resources without resort to excessive local borrowings.
There is no formally established period within which dividends must be
repatriated to a foreign parent company if the local company has no South
African loans outstanding. If a company has outstanding loans, permission
to repatriate dividends must be obtained from SARB.

Management Fees: Management fees paid to a foreign affiliate by a South
African company require the permission of the SARB's Exchange Control
Department.

Investment Restrictions

Local Borrowing Restrictions on Non-Residents: The principal exception to
national treatment is that the Reserve Bank limits local borrowing by South
African companies which are 25 percent or more foreign controlled. The
permissible level of local borrowing is calculated on a sliding-scale
formula based on total effective investment and the percentage of
foreign-owned equity.

The formula below is used to calculate the amount which can be borrowed
based on the amount of foreign capital in the local company.

50% + ( % of South African Interest x 50%)
% of Foreign Investment

Thus, a company which is 40 percent South African and 60 percent foreign
owned can borrow [50% + (40/60 x 50%)] 83.33 percent of its effective
shareholders' funds. Effective shareholders funds are normally the
aggregate of the company's issued share capital, share premium account,
unappropriated profits, reserves created out of profits, and approved
shareholders' loans.

Exemptions to this restriction may be granted to companies operating in
sectors key to economic development. The Reserve Bank will consider
requests for local borrowings in excess of this formula if the finance
required will result in technology transfer, the creation of employment
opportunities, increased exports, or import substitution.

Foreign Financial Institutions: Foreign financial institutions are discussed
under the "Banking and Credit" section of this publication.

Insurance Industry: Foreign firms are subject to strict controls,
but not limited in ownership.

Local Content Requirements: The current Phase Six of the local content
program for the automotive manufacturing sector (cars and light commercial
vehicles) sets a value-based minimum local content level of 50 percent for
domestically built vehicles. Previously, the program required all
manufacturers to attain 66 percent local content measured by weight. Phase
Six induces companies to reach a local content value of 75 percent by 1997.

The program's rebates and penalties are managed on a company-by-company
basis. A 40 percent excise duty is levied on the wholesale selling price of
a vehicle, of which 2.5. percent is non-rebatable. Manufacturers are
rewarded with a 50c rebate for each additional rand of local content or
exports, above a minimum (yet to be specified), up to a limit of 75 percent,
at which point they achieve a full excise rebate.

A program for the development of the television manufacturing industry has
an import tariff rebate incentive for companies which achieve local content
of 40 percent. The government is considering a similar program for the
audio industry. The local content preference available for government
purchases is discussed in the "Marketing and Distribution" section of this
publication.

Investment Incentives

The factors listed below are considered to be among the incentives which
make South Africa an attractive climate for foreign investors.
o The financial rand enables foreigners to invest in South Africa at
a discounted rate, guaranteeing a minimum of 16 percent (as of
April 1992) rate of return;
o Guaranteed transfer of profits;
o Special incentive programs for exporters;
o Operation can be wholly owned;
o Minimum of regulations, those in place are wholly transparent;
o Well-developed physical, financial, and commercial infrastructure;
o Entry point to markets of the southern Africa region;
o Growing domestic consumer market; and
o No nationality requirement on managerial staff.

Regional Industrial Development Program

Initiated in 1991, the Regional Industrial Development Program is a new
package of incentives to promote industrial development. The program
includes a scheme to reimburse the relocation costs of approved foreign
undertakings up to a maximum of R1 million per project. The incentives
apply in full (100 percent) to most of the country, 60 percent to the
metropolitan Cape Town area, and excludes the PWV
(Pretoria-Witwatersrand-Vereeniging) region and the city of Durban.

The incentive package has two parts: 1) a tax-free establishment grant paid
over two years in eight quarterly cash payments based on 15 percent of a 70
percent valuation of fixed assets and a 35 percent valuation of current
assets, and 2) a tax-free profit/output performance incentive calculated
over the next three years, which will be paid out only if the company
reaches certain performance targets. To qualify for an establishment grant,
an industrialist must maintain an operational equity component of 35 percent
or more of total assets. Additional information and applications can be
obtained from:

Office for Regional Development
Department of Trade and Industry
Private Bag X86
Pretoria 0001
Telephone: (27 12) 310-9791
Fax: (27 11) 322-0298

Industrial Development Corporation

The Industrial Development Corporation (IDC) is a South African
Government-owned financial institution that offers a variety of financing
facilities to the private sector for the establishment of new industries and
the expansion or modernization of existing industries. IDC will form
partnerships with local and foreign suppliers of know-how and capital to
develop new manufacturing industries. IDC's primary objectives are to
create employment opportunities; encourage the training and better
utilization of labor; and promote export production, value-added
manufacturing, import substitution, and regional development.

IDC offers finance in the form of medium-term loans for property, plant and
equipment, and working capital; suspensive sale and lease finance for plan
and equipment; and ordinary and preference share capital for new projects in
which IDC shares responsibility for a venture by underwriting the risk
capital required and taking up equity to ensure the venture is adequately
financed. IDC prefers minority participation in such a venture and prefers
not to participate in the management of any undertaking.

IDC's special finance schemes include export finance facilities for the
export of capital goods, a venture capital scheme for high technology
industries, factory buildings for lease, and import finance. The import
finance scheme involves credit and guarantee facilities for local
industrialists to finance the importation of capital goods and services.
Impofin (Pty) Limited is a wholly-owned subsidiary of IDC which can conclude
line-of-credit agreements with banks in most of the supplier countries to
South Africa to enable South African importers to purchase plant and
equipment on extended credit terms. Contact the following address to obtain
more information about IDC programs:

Industrial Development Corporation
Industrial Finance Division
19 Fredman Drive, Sandown
P.O. Box 784055,Sandton 2146
Republic of South Africa
Telephone: (11) 883-1600
Fax: (11) 883-1655

Export Subsidies

General Export Incentive Scheme (GEIS): GEIS, begun in 1990 and administered
by the Department of Trade and Industry, is aimed at encouraging the export

of manufactured products with high value-added local content. GEIS divides
exports into four categories: primary products, beneficiated primary
products, material intensive products, and manufactured products. GEIS
payments to exporters are based on total export value, the degree of
processing involved, and the percentage of value added in South Africa. The
maximum value of the tax free cash incentive is 25 percent of the f.o.b
value. GEIS will remain in effect until March 1995 when the government
plans to begin phasing out export subsidies entirely.

Excluded from GEIS are ferrous ores and nonferrous concentrates, base
metals, gold and precious metals, maize, petroleum products, second- hand
goods, reexports, and motor vehicles and motor components.

Export Marketing Assistance Schemes (EMA): EMA, begun in 1990, provides
incentives in the form of cash assistance for primary market research, and
trade fair and trade mission participation; customs tariff and surcharge
rebates; and tax-exempt export development finance.

Additional information about the South African Government's export promotion
programs can be obtained from:

Directorate: Export Trade Promotio