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					                                WELCOME FROM THE MEC
                          GAUTENG – The Smart Province




THE SOUTH AFRICAN
ECONOMY AND ITS
ENGINE ROOM,
GAUTENG
Gauteng has the highest per capita income, the
highest disposable income and accounts for a
third of the country’s GDP
THE BIG PICTURE


S   outh Africa’s economy is the
    largest, most sophisticated
and diverse in Africa – by far.

Over the longer term, the
economy has made a natural
transformation from one that          Miners
was essentially agricultural
based to one that, after the discovery of the mineral wealth in and
around Johannesburg, was largely dependent on minerals and the
extractive industries. Today, while the role of mining and minerals
remains important, the secondary and tertiary sectors generate the
                    .
largest part of GDP Mining and agriculture together account for just
             ,
10% of GDP while manufacturing accounts for just under 20% and
finance just over 20%.

                    % ECONOMIC GROWTH RATE - SA & GAUTENG
              7
              6
              5
              4
              3
              2
                                                               SA
              1                                                Gauteng
              0
                   2000      2001      2002   2003   2004   2005    2006*

  Source: Statistics SA, Gauteng Treasury                          * Estimate figures
                       The South African Economy – And Its Engine Room, Gauteng




SA ECONOMY AT A GLANCE
Area                              1.2 million sq km
Population                        47.8m
Currency                          R1 = 100 cents
Time                              GMT + 2 hrs
Official Name                     Republic of South Africa
Capitals                          Cape Town (Legislative)
                                  Pretoria (Administrative)
                                  Bloemfontein (Judicial)
Head of State                     President Thabo M Mbeki
Main Languages                    11 Official languages
                                  English preferred language of business
Religion                          Predominantly Christian. Freedom of worship
                                  guaranteed by the Constitution
Form of State                     Federal, comprising a central government and nine
                                  provincial governments
Legal System                      Based on Roman Dutch Law and 1996 Constitution
National Legislature              Bi-cameral parliament, elected every five years,
                                  comprising a 400-seat National Assembly and a
                                  90-seat Council of Provinces
Electoral System                  List-system with proportional representation based
                                  on universal adult suffrage
Total GDP 2006                    R1,755bn (at current prices)
GDP per capita 2006               R37,032
Real GDP Growth 2006              4.9%
Inflation (CPIX) 2006             5%
Exports                           Gold, minerals, diamonds, metals and metal
                                  products, foods, automotive components
Imports                           Machinery, transport equipment, manufactured
                                  goods, chemicals, oil
Main Trading Partners             Germany, USA, UK, China, Japan, France
Public Holidays                   12
                        Fixed:    1 January, 21 March, 27 April, 1 May, 16 June, 9
                                  August, 24 September, 16, 25 and 26 December
                      Variable:   Good Friday & Easter Monday
International Dialling Code       27
The South African Economy – And Its Engine Room, Gauteng




And the overall economy has been doing very well. Since the
inauguration of democratic government in 1994, South Africa has
enjoyed a run of unprecedented economic growth. Over a period
of eight consecutive years of positive growth, all the key indicators
of economic health have improved. Budget deficits were reduced
dramatically, foreign debt and government debt have declined
significantly, inflation, once at double-digit rates, has since been
reduced to low single-digit levels, and economic growth has been
consistent and steady. Individual and corporate taxes have been
reduced. So has unemployment. Meanwhile, the stock market has
realized record growth in volume and value. Altogether, it is a record
any government would be pleased to claim credit for.

Uninterrupted growth has its downside. Inflationary pressures
emerge and the national infrastructure becomes overextended in an
economy demanding a modern, efficient road, rail and port system
with the capacity to handle higher levels of manufacturing, tourism
and trade. When the 2010 FIFA World Cup is added to the equation,
the country is challenged to step up performance to the next level.

                                         Fortunately, South Africa
                                         should be up to the challenge.
                                         Commodity prices should
                                         remain buoyant as global
                                         demand for gold, platinum, coal
                                         and other mineral resources
                                         is expected to remain strong.
                                         Continued rising consumer
                                         spending, combined with
                                         massive infrastructure spending
                           The South African Economy – And Its Engine Room, Gauteng




                                 GDP - SA & GAUTENG
    Rbn                            At current prices
  2,000
  1,800
  1,600
  1,400
  1,200                                                                SA
  1,000
                                                                       Gauteng
    800
    600
    400
    200
      0
           2000     2001     2002     2003     2004 2005      2006
   Source: Statistics SA


                            GDP PER CAPITA SA & GAUTENG
                                   At current prices
   Rands
  70,000
  60,000
  50,000
  40,000                                                                SA
  30,000                                                                Gauteng
  20,000
  10,000
       0
             2000     2001     2002     2003    2004   2005     2006

 Source: SA Reserve Bank, Stats SA, Budget Review

in preparation for 2010, will keep inflationary pressures alive.
However, the Reserve Bank has consistently responded quickly and
decisively to changing inflation scenarios and used interest rate
changes effectively to stem inflation or stimulate the economy.
The South African Economy – And Its Engine Room, Gauteng




MACROECONOMIC POLICY
With a stable political and economic
environment in place, government in 2006
introduced the Accelerated and Shared
Growth Initiative - South Africa (ASGISA)
as a blueprint for reducing constraints to
investment. Among the constraints that could
discourage the levels of investment needed
to reduce unemployment and poverty are:
- infrastructure bottlenecks
- lack of capacity, especially at the local level
- skills shortages, especially in the public sector
- labour market rigidity
- currency stability
- over-regulation

These constraints are already being addressed. Infrastructure
spending is rising rapidly. Business and labour legislation is under
review. Black Economic Empowerment (BEE) codes have been
revised. Restrictions on foreign workers have been eased. Through
sound monetary and fiscal policies, currency fluctuations have been
substantially reduced. Skills shortages and lack of delivery capacity
are longer term problems but are being addressed.

It has long been government’s stated official policy to welcome and
encourage foreign direct investment. Its record on monetary and
fiscal policy, the ASGISA initiative and the revision of the BEE codes,
among other actions, validate government’s policy statements. All
the actions were designed to create a more favourable business
environment in South Africa.
                   The South African Economy – And Its Engine Room, Gauteng




FOREIGN TRADE
Foreign trade is an important part of
the South African economy, normally
                                  .
amounting to about 50% of GDP Total
trade has been expanding steadily with
economic growth over the past decade.
For the past few years the country has
run a trade deficit. Economic growth,
infrastructure spending and a stronger currency have contributed
to greater demand for imports and made exports more expensive.
Fortunately, record levels of foreign investment in the equity markets
have kept the current account deficit within acceptable levels. With
continued heavy spending on infrastructure, the trade and current
accounts are likely to remain in deficit for the next several years.
Continued global economic growth is expected to keep commodity
prices high which will ameliorate the expected deficit.

South Africa’s main trading bloc is the European Union. On country
terms the main trading partners are Germany, USA, UK, China
and Japan. Since the demise of apartheid, trade with other African
countries has burgeoned, with South Africa enjoying a huge surplus
of about six to one.

Manufacturing accounts for over 60% of exports while minerals have
declined to about 30%. Exports consist mainly of minerals (platinum,
gold and coal), base metals, other precious metals and diamonds,
intermediate commodities and, increasingly, fully assembled
automobiles and components. Imports are dominated by petroleum
products, machinery, raw materials, chemicals and consumer
goods.
The South African Economy – And Its Engine Room, Gauteng




THE BUDGET
South Africa’s budget process has been rated as the third most
transparent in the world, just after France and Britain and ahead
of the US. Over the past dozen years, budget deficits have been
reduced steadily and substantially. In 2006 and 2007, the South
African Minister of Finance, blessed with substantial revenue
overruns, was able to present a budget surplus.

Over 80% of South Africa’s tax revenue comes from personal
and corporate income tax and a 14% value added tax (VAT).
The biggest allocations for spending go to education and social
welfare and most of that is distributed through the provinces.
                                              ,
Capital expenditure, now at about 6% of GDP will increase over the
near term to address infrastructure bottlenecks and to meet the
requirements for the 2010 FIFA World Cup.



                    PROVINCIAL BUDGET ALLOCATIONS 2007/8
                                Total: R202.1bn
    Eastern Cape
       Free State
        Gauteng
   KwaZulu-Natal
        Limpopo
    Mpumalanga
      North West
   Northern Cape
   Western Cape
                 0.0            10.0   20.0         30.0   40.0   50.0
                                              Rbn
 Source: Budget Review 2007/8
                     The South African Economy – And Its Engine Room, Gauteng




 METROS AT A GLANCE 2005
                  Population       Operating      Capital   Main Economic
                                     Budget       Budget    Activity
                        Millions        Rbn         Rbn
 City of Cape Town           2.7        17.5         3.5    Tourism, trade,
                                                            manufacturing
 Ekurhuleni                 2.3          10.0         1.0   Manufacturing,
 (East Rand)                                                mining, metals
 eThekwini                  3.6           9.6         2.7   Tourism,
 (Durban)                                                   manufacturing,
                                                            transport
 City of                    3.9          14.5         2.0   Finance, trade,
 Johannesburg                                               manufacturing
 Nelson Mandela             1.1           3.0        7.3    Manufacturing,
 (PE)                                                       automotives,
                                                            metals
 City of Tshwane            2.4           7.2        1.6    Gevernment,
 (Pretoria)                                                 research,
                                                            automotives
Source: SA Cities


GAUTENG – SOUTH AFRICA’S ECONOMIC HUB

A Diverse, Modern Economy
Although the stated vision is to make Gauteng the ‘smart province’,
it might be more accurate to say the vision is to make the smart
province even smarter. Here are a few of the reasons that Gauteng
already is the preferred investment destination for both foreign and
domestic businesses:
- Provincial GDP accounts for one third of South Africa’s GDP   ,
- Gauteng’s GDP is greater than any other country in SADC
   (Southern Africa Development Community) and is the fourth
   largest in Africa.
The South African Economy – And Its Engine Room, Gauteng




- Gauteng has the highest per capita
  income, the highest disposable
  income and the highest literacy rate
  in the country.
- Gauteng is the centre of finance and
  industry with a highly sophisticated
  and diverse economy including
  transport and communications,
  business services, call centres, manufacturing, mining, ICT.
- Gauteng has the most literate and skilled labour pool in South
  Africa.
- Three of the country’s metropolitan municipalities are located
  in Gauteng: City of Johannesburg, the provincial capital and
  largest city in the country, is the most advanced financial centre
  in Africa and home to the Johannesburg Securities Exchange
  (JSE). Ekurhuleni is Africa’s leading manufacturing centre. City of
  Tshwane is the administrative capital of South Africa.
- Gauteng is home to outstanding universities, technical colleges
  and research institutions.

Since 1994, Gauteng’s average annual economic growth rate has
exceeded that of the country as a whole. In 2005 the Gauteng
economy grew at a 5.4% rate compared to 5.1% for South Africa.
The provincial economy is expected to grow by 6% in 2007 and to
reach its objective of achieving an 8% growth rate by 2014.

Given Gauteng’s dominance in the South African economy, it is
not surprising that the two economies are similarly structured.
Finance (21%) and manufacturing (19.7%), along with trade (12.8%)
and government services (15.7%), account for over two-thirds of
                          The South African Economy – And Its Engine Room, Gauteng




                      % UNEMPLOYMENT BY PROVINCE 2006
                SA Total Unemployed: 4.4m, 25.5% (official definition)

             Eastern Cape
                Free State
                 Gauteng
            KwaZulu-Natal
                 Limpopo
             Mpumalanga
               North West
            Northern Cape
            Western Cape
                             0          10.0         20.0   30.0    40.0
  Source: Statistics SA/ Labour Force Survey March 2006


                 .
Gauteng’s GDP Nationally, those four sub-sectors also account
                               .
for just over two-thirds of GDP The province’s primary sector
– agriculture and mining – contributes less than 4% to GDP whereas
the primary sector nationally contributes about 10%. Like the national
economy, Gauteng’s economy has evolved over time from a heavy
dependence on agriculture and mining to one dominated by finance,
trade and services.

ECONOMIC SECTORS
Just about every conceivable economic activity can be found in
Gauteng’s modern, integrated economy. And the economy is
broad based, spread throughout the various regions. For example,
Johannesburg is dominated by finance and business services.
Mining dominates the western areas and manufacturing the eastern.
Coal, iron and steel are predominant in the Vaal region in the
southern part of the province and Pretoria’s economy is based on
government services, motor vehicle industries and transport.
The South African Economy – And Its Engine Room, Gauteng




                  % CONTRIBUTION TO GDP BY MAIN SECTORS - SA
                      At Current Prices - Total GDP: R1,755bn



                   Primary     10.1%
                   Secondary   23.4%
                   Tertiary    66.5%

 Source: Statistics SA


              % CONTRIBUTION TO GDP BY MAIN SECTORS- GAUTENG
                      At Current Prices - Total GDP: R579bn


                   Primary      3.2%
                   Secondary   24.3%
                   Tertiary    61.4%
                   Other       11.1%

 Source: Statistics SA




MINING
Once the heart and soul of the ‘City of Gold’, mining, while still an
important component of the provincial economy, makes up only a
                   ,
small part of GDP less than 3%. Nevertheless, most of South Africa’s
gold production comes from Gauteng and diamonds and coal are
also still mined there.
                         The South African Economy – And Its Engine Room, Gauteng




                     % EMPLOYMENT IN THE MINING SECTOR
                         SA: 450,998; GAUTENG 92,951
                      N. of Employees       %
     Eastern Cape               1,234      0.3
     Free State                53,013     11.8
     Gauteng                   92,951     20.6
     KwaZulu-Natal              7,692      1.7
     Limpopo                   61,014     13.5
     Mpumalanga                57,236     12.7
     North West               148,260     32.9
     Northern Cape             26,434      5.9
     Western Cape               3,164      0.7

Source: Department of Minerals & Energy



                          WORLD GOLD PRODUCTION 2005
                                %
     South Africa           11.7%
     Australia              10.4%
     Canada                  4.7%
     China                   8.9%
     Russia                  7.0%
     USA                    10.4%
     Indonesia               6.6%
     Peru                    8.3%
     Rest of the World      32.0%

Source: Department of Minerals & Energy
The South African Economy – And Its Engine Room, Gauteng




                          SA’S MINERAL RESERVES 2005
                   % of World Reserves Numbers: World Ranking


                 Chrome                                         1
                    Coal        8
                    Gold                          1
                    Lead        7
              Manganese                                              1
 Platinum Group Metals                                                   1
       Titanium Minerals                 2
                 Uranium            5
               Vanadium                      1
              Vermiculite                         2
               Zirconium                 2


                            0           20       40       60    80           100
                                                      %



AGRICULTURE
Because it is the smallest of the nine provinces, Gauteng’s
agriculture sector is limited in size and geared primarily toward
supplying the province’s dense population. Maize is the main
agricultural product of the province.

MANUFACTURING
Gauteng has the largest manufacturing base in the country with
almost half of all factories located there. As with the national
economy, manufacturing has not grown as fast as the tertiary
sector and now is the second largest contributor to the province’s
    ,
GDP after financial services. Still, manufacturing provides more
employment than any other economic sector.
                   The South African Economy – And Its Engine Room, Gauteng




Food products, automotive
components and assembly,
industrial chemicals, iron
and steel production, metal
fabrication and refined
petroleum products have been
the mainstay of the Gauteng
manufacturing sector but, as
the ‘smart’ province evolves into a Global City Region (GCR), hi-tech
manufacturing, along with ICT products and transport equipment,
look to be the fastest growing sub-sectors.

The main destinations of goods manufactured in Gauteng are
Europe, the Far East, the US and other African countries. South
Africa’s largest international airport – OR Tambo Internatinal Airport
- is located in Gauteng and the province is also the hub of both
the national road and railroad systems. Gauteng is therefore the
gateway for trade to Africa and provides direct transportation links to
the major ports in South Africa and Mozambique.

SERVICES
Like the national economy, services now dominate the
Gauteng economy. Building, construction, trade, catering and
accommodation and especially financial services are the major sub-
sectors and are growing steadily to accommodate an expanding
economy and a growing tourism industry. As described in the
section on Business Services in Doing Business in Gauteng, the
financial services sector in South Africa is of world class standards
and one of the great strengths of the national economy. That sector
is centred mainly in Gauteng and provides the investor traditional
The South African Economy – And Its Engine Room, Gauteng




                   banking services as well as ready sources for
                   raising finance for business expansion.

                   THE GAUTENG BUDGET
                Like the rest of the provinces, Gauteng depends
                heavily on the central budget for its revenue. Of net
                provincial revenue, 95% comes from the central
                government in the form of equitable share (75%) or
                conditional (25%) grants. Gauteng is the second
                largest recipient of central government transfers
                after KwaZulu-Natal. A large portion of Gauteng’s
                conditional grant funds are earmarked for the
Gautrain Rapid Rail Link.

Five percent of the Gauteng budget revenue comes from provincial
sources such as gambling taxes, vehicle licenses and hospital fees.

On the expenditure side, two-thirds of the budget is devoted to
education (36%) and health (30%). The province also makes
transfers to local governments within the province. Some 80% of
infrastructure spending goes to public transport, roads and works
(60%) and housing (20%).

Overall, the Gauteng budget is geared to support the basic strategic
objectives of the province:
- to reduce high levels of unemployment and poverty.
- to enhance broadbased economic growth
- to invest in strategic infrastructure
- to promote Gauteng as a preferred destination for investment,
  tourism, business and sport.
                         The South African Economy – And Its Engine Room, Gauteng




- to consolidate Gauteng as a major economic hub of Africa and as
  an internationally recognized global city region.

                              GAUTENG BUDGET 2007/8
                                  Sources of revenue
                               Total Revenue: R 39.98bn


       National Allocation
       94.6% - 37.84 Rbn
       Gambling & Betting Taxes
       1.3% - 0.50 Rbn
       Vehicle Licenses
       2.9% - 1.17 Rbn
       Other Sources
       1.2% - 0.47 Rbn


 Source: Gauteng Provincial Government


                              GAUTENG BUDGET 2007/8
                                Spending Breakdown
                              Total Expenditure: R40,3bn


      Education 36.1% - 14.5 Rbn
      Health 29.9% - 12.1 Rbn
      Housing 6.5% - 2.6 Rbn
      Public Transport,
      Roads & Works 16% - 6.5 Rbn
      Social Development
      3.5% - 1.4 Rbn
      Other 8% - 3.2 Rbn

Source: Gauteng Provincial Government
The South African Economy – And Its Engine Room, Gauteng




 GAUTENG BUDGET 2007/8
 Spending on special projects
 Total Spending: R5.17bn
                                        Rm
 GPG Precinct                           44
 Cradle of Humankind                    32
 Gauteng Online                         200
 Provincial IT Infrastructure           100
 Blue IQ                                93
 Gautrain                           4.500
 Alexander Renewal Project              125
 Road Safety Projects                   38
 Dinokeng                               40
Source: Gauteng Provincial Government