South Africa Market Environment That Can Accommodate Business Investments - Report Example

Introduction

This paper shall conduct a business feasibility study of South Africa. The study shall carry an analysis of both the business environment and culture in the country to facilitate the completion of an overall opportunity assessment in the market. The study shall begin its analysis by giving South Africa’s overview through outlining its current economic, social, political, and legal systems. The study shall also carry an assessment of human resource management issues, a survey of cultural practices, currency, financial, and trade policies in the country.

South Africa’s Overview

Current Economic and Political Situation

South Africa’s economic progress has been on a constant increase since 1994. Many financial analysts in the region predict of a turnaround in the country’s economy in the coming years. The consistent growth in major sectors of the economy accompanied by an increase in new investment in the country in the recent years has outperformed the Apartheid years. These years were associated with isolation, stagnation, and lack of investment of inflows in South Africa. The countries GDP growth has grown consistently by an average growth rate of 3% from 1996 until the current times. This improvement in GDP is a sign of economic progress in the country as compared to the negative growth rates witnessed in the country the early years of 1990 and 1991. The current low price of the Rand and the increase in agricultural conditions boosts the country’s exports. The increase in the country’s agriculture and manufacturing growth has reduced the import burden the country experienced in its previous years. The reduction in imports and increase in exports in the country ensures the growth in GDP will continue in the coming years. Despite the latest depreciation of the South African rand, the country’s inflation has remained under control. The country’s high inflation rate of 18.6% and 13.9 % in 1986 and 1992 respectively has been replaced by a constant inflation rate of below 7% in the current year. The country’s effort to maintain the inflation rate below the one-digit figure since 1994 shows the government’s determination to observe fiscal and monetary discipline ("South Africa,", 2016).

Despite the recent Xenophobia movements, South Africa’s still enjoys political stability keeping it at par with the emerging worldwide economies such as India and Thailand. South Africa enjoys a stable and peaceful transition in its political structure making it be envied in the region. South Africa’s government has put policies and measures to guarantee future political stability since it the key gets investor confidence. South Africa’s has maintained good foreign relations with the international community. The presence of big and long-term investments in the country by leading European companies and the USA to sustain the developments in the region is a sign that the country has deep involvements with the international community. The international community has an interest in the country’s political stability due to its strategic and geo-political role in the region. The adoption of the new constitution by the country in 1996 has seen the country have separation of powers and observe fundamental human rights. The country has low incidences of political violence due to the successful local government elections it has had over the years. The political stability in the country has sustained the country’s economic growth and development ("South Africa", 2016).

Social and Legal Systems

The country is a meeting point for various cultures in the world. The country has imported European culture from the Dutch and British who colonized them. The country has Bantu-speaking communities and Bushmen who are getting instinct with time due to the intermarriages between the foreign cultures and African native cultures. The country has citizens from the Asian cultures who came from India and Dutch East Indies in the 19th century. The mixture of distinct cultures in the country has made the country have a complex cultural set up with imperfect correlations between skin color and race, and religion and other cultural characteristics. The strategic and geographical location of the nation is a concrete reason for the country having diverse cultures in their set up. Christianity is the most dominant religion in the country due to the influence of the European culture region brought by missionaries and colonial authorities. Islam and Hinduism are also exhibited in the region as majorly Indians in the country practice them. Some Africans in the country have also been converted to Islam.

South Africa’s legal system is adapted from a mixture of English law and Roman-Dutch law. The English law takes precedence in criminal legal procedures, statutory, constitutional, and corporate law. The Roman-Dutch law is mainly applicable to private law disputes such as the succession of property. The state has the authority to run the judicial system in the country. The minister of justice is in charge of the judicial system, which is operated by the attorneys general, public prosecutors, and several judges. The Supreme Court is the highest court in the country’s judicial system followed by several lower level courts. The judicial system has a segment for a traditional law, which is run by chiefs and community elders. The country’s current legal system contains a provision that was missing in the apartheid era laws. The legal system prohibits discrimination of any form and puts emphasis on the observation of human rights. The legal systems of the country ensure harmony and peaceful coexistence among the nationals of South Africa. The country’s legal systems safeguard the economic activity, property environment, and labor relations in the region.

Cultural Practices

South Africa’s locals mainly feed on meat, cereals, and a wide variety of starches making farming be part of their lifestyle. Food in the country plays a vital in the family life of all individuals in the society. The country has various ceremonial occasions for food custom. Food is considered as a precious gift that the black communities embrace through rites of passage and celebrations in appreciation. The celebrations include activities such as the slaughtering of animals and brewing of cereal beer. The cultural practice of farming of black Africans and white settler farmers in the country is a contributing factor of the vast commercial agricultural production. The citizen’s of the country embrace mining making it the largest industry. The country enjoys long-term profits from the mining of gold, diamond, platinum, coal, and other metals. South Africa’s native cultural practices embrace etiquette making their character be associated with politeness and respect. The etiquette among the locals plays a role in the attraction of tourist and traders in the region. South African is a famous tourist destination in the region due to the diversity of its cultural practices ("South Africa", 2016).

Human Resource Management Assessment

South Africa’s human resource management assessment begins with its organization's strategy and planning. There is a short supply of the organizational development skills at the departmental level. Due to this shortage, most of the departments in the country lack proper structures that can support sufficient human resources operations. The human resource planning in the country is still in its developing stage as indicated in the report given by the Forum for South African Directors-General. The forum identified weaknesses in the organizational design practices within the country’s departments. The organizational structure of most entities in the country focuses on the creation of posts instead of dealing with jobs and functions. From the human resource, assessment done by the Forum of South African Directors-General, it is evident that the country is a shortage of skills. The shortage of skills impacts the human resource section of every entity in the nation. The shortage of skills in the South African market makes firms unable to achieve growth and evolution despite the vast opportunities the country presents. The shortage of skilled labor in the region is caused by tertiary education system producing unqualified people and the migration of the graduates to more developed economies ("Key issues facing Human Resources Management | Leader.co.za", 2016).

The country faces labor market challenges despite its effort to develop an entrepreneurial culture. The country faces high unemployment rate since many big organizations are constantly reducing their staff. The fully established entities in the market are not creating high-level employment despite their goals to compete in the global markets. Diversity plays a role in the human resource challenges in the country. The top-level executive jobs are not diversified since the whites, and other foreign cultured people mostly dominate them. The human resource management systems in the country are heavily dependent on the effectiveness of the information system and the quantity data that is saved in the systems.

Financial and currency policies

South Africa is in an economic crisis. Recently, the country’s budget growth forecast has been reduced from 1.7% to 0.9%. The South African rand has fallen by 2.25% to hit an all-time low of $0.0639. The cut of the country’s budget are measures designed by the government to prevent the country from going into a recession. The current financial and currency policies initiated by the country are structured to tackle the economic crisis in the nation. The government uses fiscal and monetary policies to solve the issues of currency and finance in the country. The government through its fiscal policies initiates a reduction in its spending, considerate tax raises, and a job freeze in civil jobs. The tax increases have a large impact on the property sales, sugary drinks, fuel, tobacco, alcohol, environmental levies, and capital gains. The government targets to raise an extra 18 billion rand to save the current situation in the economy. The government spending was cut through the privatization of some state assets. The fiscal policy of the country intends to reduce government borrowing while generating more revenue to raise the value of the Rand against the dollar.

South Africa’s monetary policy is initiated to achieve and maintain the stability in prices and interest rates to facilitate the balance in economic growth and development in the country. The prices stability in the country reduces the uncertainty and risk levels in the economy. Reduction of these factors creates a favorable environment for employment creation and economic growth. The monetary policy of the country attempts to keep the inflation rate low to protect the purchasing power of its citizens. The majority of the South Africans are poor and have to be defended against rising prices of commodities and services in the economy. The monetary policy in the country is initiated by the South African central bank within a flexible interest rate and inflation rate framework ("South Africa,", 2016).

Trade Policy

The trade policy in South Africa includes the phasing out of non-tariff barriers and incorporation of import surcharges and export subsidies. The country’s trade policies reduced the average protection of the local industries. South Africa’s trade policies encourage the import substitution to facilitate the growth of the local industries. The countries trade policies have undergone reforms that include macroeconomic policies. The macroeconomic policies include growth, employment, and the redistribution of resources. South Africa’s government has strived to control the importation of agricultural products through the deregulation of the agricultural marketing. The progress of the trade policy in the country has improved the transparency tariff structure to include specific, compound, mixed, and formula duties. The country has a multilateral trade reform that has negotiated free trade agreements in the new regional and bilateral systems existing in the South African region. The trade policies in the country include formulas that perpetuate the country’s dependency on customs revenue as a source of government revenue ("South Africa,", 2016)

Conclusion

From the analysis, it is evident that South Africa has a market environment that can accommodate business investments. The country’s current social, political, and legal systems encourage a sound business climate necessary for investments in most sectors of the economy. The country’s economy has been stable over the past few years, but its current financial crisis may act as a hindrance to the business environment. The country has initiated financial and currency policies that are structured to face the economic crisis in the nation. The trade policy in the country seems to favor the business activities in the country.