Exporting and Importing for a Developing Country - South Africa - Essay Example

? Exporting and Importing for a Developing Country Exporting and Importing for a Developing Country Question South Africa, whichis officially referred to as the Republic of South Africa is a nation situated at the southernmost tip of Africa. The country became a sovereign state in 1994 after years of political apartheid. South Africa is segmented into nine provinces and encompasses 2,798 kilometers of coastline. South Africa borders Botswana, Zimbabwe, Namibia, Lesotho and Swaziland and is the 25th largest country across the globe in terms of area. It is also the 24th most populous nation with at least 51 million people. The country is a multiethnic society. South Africa is a developing country, according to the standards of the CIA and the United Nations Conference on Trade and Development (UNCTAD) (CIA, 2013). The country’s economic position is rapidly advancing, particularly as a result of its robust trade initiatives. South Africa’s trade initiatives include major imports from and exports products to numerous countries across the globe. Some of the country’s most notable imports include motor vehicles and vehicle parts, computers and electronics and refined petroleum products. The import product selected for this paper is refined petroleum products. This selection is based on the fact that South Africa’s importation of refined petroleum products encompasses 7.4% of its entire imports. Petroleum products are vital materials that come from crude oil and are processed in oil refineries. Petroleum is converted into petroleum products that consist of an array of fuels (UN, 2010). Question 2 The Republic of South Africa is based on a constitutional democracy. The government structure encompasses three structures namely; local, provincial and national governments. South Africa is a sovereign and democratic state, which is segmented into nine provinces. Each state has its individual provincial legislature. All segments of government in South Africa derive their powers, as well as functions, from the Constitution of South Africa. The National Assembly is the supreme law-making institution of the Republic of South Africa (CIA, 2013). The National Assembly makes law applicable throughout the country and the same is also true for all legislative policies developed by the Cabinet of the National Government. Although there are sections of executive legislative competence for the National Assembly, it shares its legislative power with the country’s provincial legislatures. The South African parliament consists primarily of two houses, namely, the National Council of Provinces (NCOP) and the National Assembly. The South African National Assembly is elected into office for five years and is made up of no fewer than 350 members and no more than 400 members. Members of these houses are elected in keeping with the country’s electoral system, which centers on a roll of voters who are above the age of 18 years (USTR, 2012). This results in a system characterized by proportional representation. On the other hand, the local government encompasses municipalities whose objectives include the provision of democratic and accountable government for the country’s local communities, promoting socioeconomic development and ensuring equitable provision of services to all communities. The link between the national and local government is the provincial government. South African provincial governments are subject to policies and laws established at the national level (CIA, 2013). However, provincial governments have the power to pass their individual policies and laws in the framework so as to suit the specific needs of the provinces. Provincial legislatures are allowed to establish their own constitutions in accordance with the provisions of the South African Constitution. A number of challenges plague the marketing of products in South Africa. Firstly, South Africa is a low yield environment, which means that the traditional income of most South Africans is quite low. This makes investors uneasy of entering the South African market. In addition, the problem of rising inflation causes a major challenge to the marketing of products in the country. According to the CIA (2013) South Africa’s inflation rate was 5.7% as of 2012. The increase in inflation causes a major increase in prices of various items in the market, including the price for production of different goods and services. As a result of the rising rate of inflation, the cost of producing and marketing products and services is significantly high in South Africa. Question 3 South Africa is presently facing major challenges in improving its local infrastructure for economic development and getting products to the market. Infrastructure refers to the basic services, installations and facilities required for the proper functioning of a society. This includes transport and communications systems, power and water lines and public institutions such as prison, schools and post offices. Inadequate infrastructure is a major obstacle towards South Africa’s achievement of its full potential of economic growth. The shortage of effectively operative infrastructure in South Africa, especially in terms of its transport and communications systems is a major impediment to the growth and development of the country’s economic systems (USTR, 2012). Great economic activity, for instance, access to markets is greatly hampered by inadequate transport, communication and power infrastructure in the country. Inadequate transport deters timely supply of products to the market, particularly perishable products. For instance, poor road networks condemn farmers to grow what they can consume and the additional products they can carry to the market. President Zuma has thus launched a plan to spend $97 billion on infrastructural development over three years’ time in order to upgrade the country’s ports, roads and transportation networks. This is primarily aimed at enhancing the country’s access to its unique products. South Africa is one of the world’s biggest producers of grapefruit, green maize, castor oil seeds, sisal, pears, apricots, fiber crops and chicory roots. In addition to agricultural products, South Africa is also well endowed with natural resources such as coal, gold, phosphate rock, flouspar, manganese, diamond and chromium. South Africa’s poor infrastructure also hampers optimal exploitation of its resources (UN, 2010). Question 4 As of the year 2010, the adult literacy rate in South Africa was 88.7%. The country boasts of a three-tier education system that starts with primary school, followed by high school and ultimately tertiary education provided through universities and colleges. South Africa’s education system provides learners with 12 years of formal education. The country’s public universities are segmented into three types: comprehensive universities that offer vocational and theoretically oriented degrees; traditional universities that provide theoretically oriented degrees and universities of technology that provide vocational oriented degrees and diplomas. Under apartheid, blacks in schools were subjected to discrimination through insufficient funding and a different syllabus. After apartheid, the South African government sought to enhance the country’s education level, for instance, in 2004, the country began reforming its higher education system by merging small universities with large institutions and renaming its higher education institutions “university” so as to redress its education imbalances (CIA, 2013). In 2010, public spending on education was 19.20% and has been increasing since then. The improved education levels have resulted in significant rises in skilled labor. Between 1995 and 2003, South Africa’s labor force consisted primarily of unskilled labor or individuals. This was primarily because the number of formal jobs reduced significantly while the number of informal jobs rose in number as the rate of unemployment worsened. Like most African countries, South Africa has been faced with massive brain drain in the last 20 years (USTR, 2012). This has been quite damaging for the country and region’s economy. Question 5 South Africa’s monetary system is decimal based. The primary unit of the country’s currency is referred to as the Rand. In addition, the South African financial services sector is supported by a robust legal and regulatory framework, and consists of a number of domestic and foreign institutions that offer an array of services including retail, commercial and merchant banking, insurance, investment and mortgage lending. Foreign banks are highly represented in South Africa. In addition, the country’s electronic banking facilities are quite extensive, with nationwide networks of an array of automatic teller machines (ATMs), as well as internet banking facilities (UNCTAD, 2012). The South African Financial Services Board is mandated with the oversight of the country’s financial markets and institutions such as fund managers, insurers and broking operations, not including banks, which fall under the mandate of the South African Reserve Bank. In terms of global debt structure, the greatest proportion of South Africa’s international public debt is a consequence of official creditors. The percentage of South Africa’s international public debt owed to official creditors is between 80 and 90 percent. This figure is also quite massive when considered on the basis of weighted averages (UN, 2010). In order to deal with the management of national debt and allow people to invest in the country, the South African government can implement a virtual fund mechanism for debt relief. This is an innovative system of managing debt relief that involves the establishment of a virtual fund mechanism. Through this system, South Africa’s existing budget classification will be adapted to tag sufficient savings from debt relief. This system allows for easy identification and tracking of the quantities released by debt relief, as well other related expenditures. Since the system relies on normal government standards for allocating, reporting and auditing, the virtual system is advantageous since it is full on-budget by reassuring citizens and donors about the utilization of debt relief resources. When citizens receive such surety, they will be willing to invest in the country. Question 6 USTR (2012) provides that South Africa is also eligible for African Growth and Opportunity Act (AGOA) thus it qualifies for the apparel and textile benefits (USTR, 2012). Additionally, South Africa and the US co-signed a Trade and Investment Framework Agreement (TIFA). South Africa continues to receive a wide array of imports from diverse countries. South Africa is a major international trader, for instance, it is the US’ 36th largest goods trading partner. For instance, in 2011, services trade with South Africa, both exports and imports totaled $5 billion (USTR, 2012). South Africa imports a variety of products from the global market. South Africa’s goods import from the US totaled $7.3 billion. Some of the major goods imports from the US include vehicles, machinery, mineral fuel and electrical machinery. Agricultural products imported to South Africa include vegetable oils, dairy products, poultry meat and wheat. Other imports delivered to South Africa include private commercial services such as business, technical and professional services, license fees and royalties. South Africa has encountered both successes and struggles in its receipt of imports. One of the greatest struggles is that of rising demand, especially for commercial services. Since the county is rapidly developing, demand for commercial services, particularly technical services continues to rise. The country struggles to ensure that its importation of commercial services meets its growing needs. On the other hand, variable import quotas and tariffs also pose a major challenge to South Africa’s importation (CIA, 2013). The infrastructural and logistical gaps inherent between South Africa and her trade partners also hamper the country’s receipt of imports. Another major struggle is the issue of standards and their implementation, particularly at South African ports since standards differ from one country to another. However, a major success is improved investment, which has enhanced South Africa’s trade capacity especially in terms of receiving imports. References Central Intelligence Agency (CIA). (2013). The world factbook: South Africa. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/sf.html Office of the United States Trade Representative (USTR) (2012). South Africa. Retrieved from http://www.ustr.gov/countries-regions/africa/southern-africa/south-africa United Nations (UN). (2010). Division for Africa, least developed countries and special programmes. Retrieved from http://unctad.org/en/Docs/aldcmisc20101_en.pdf United Nations Conference on Trade and Development (UNCTAD) (2012). Economic development in Africa, Report 2012: Structural transformation and sustainable development in Africa. Retrieved from http://unctad.org/en/PublicationsLibrary/aldcafrica2012_embargo_en.pdf Read More