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433369666-The-Case-for-Investing-in-South-Africa

South Africa's investment proposal

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FINANCE AND INSURANCE<br />

• <strong>The</strong> f<strong>in</strong>ance and <strong>in</strong>surance sector, which accounts<br />

<strong>for</strong> 6.4% of overall GDP, is one of the largest and<br />

fastest grow<strong>in</strong>g. It recorded GDP growth of 4.7%<br />

per year over the period 2000 to 2018.<br />

• <strong>The</strong> sector is well developed and comparable to<br />

those <strong>in</strong> developed economies. It encompasses<br />

all types of f<strong>in</strong>ancial <strong>in</strong>termediation, <strong>in</strong>clud<strong>in</strong>g<br />

commercial and retail bank<strong>in</strong>g, <strong>in</strong>vestment<br />

asset management, <strong>in</strong>surance and pension fund<br />

management activities.<br />

• <strong>South</strong> <strong>Africa</strong> has highly developed f<strong>in</strong>ancial markets<br />

and a well-function<strong>in</strong>g, strongly regulated f<strong>in</strong>ancial<br />

<strong>in</strong>dustry. <strong>The</strong> major banks are Standard Bank, Absa<br />

Group, FirstRand, Nedbank and Capitec, some of<br />

which provide commercial, retail and <strong>in</strong>vestment<br />

bank<strong>in</strong>g services throughout the cont<strong>in</strong>ent. <strong>The</strong><br />

proliferation of technological <strong>in</strong>novations has led to<br />

an <strong>in</strong>creas<strong>in</strong>g number of players offer<strong>in</strong>g valueadd<strong>in</strong>g<br />

compet<strong>in</strong>g services and products <strong>for</strong> both<br />

the ma<strong>in</strong>stream and underserviced segments of the<br />

population.<br />

• <strong>The</strong> <strong>in</strong>surance segment accounts <strong>for</strong> around 80%<br />

of total direct premiums generated on the <strong>Africa</strong>n<br />

cont<strong>in</strong>ent. Life <strong>in</strong>surance is dom<strong>in</strong>ant, account<strong>in</strong>g<br />

<strong>for</strong> 75% of the <strong>in</strong>surance sector.<br />

SELECT INVESTMENT OPPORTUNITIES IN FINANCE AND<br />

INSURANCE:<br />

• <strong>The</strong> f<strong>in</strong>ancial services segment provides significant growth<br />

opportunities, particularly <strong>in</strong> the lower ends of the consumer market.<br />

Despite a highly concentrated bank<strong>in</strong>g <strong>in</strong>dustry structure, smaller<br />

banks have been tak<strong>in</strong>g advantage of this potential.<br />

• Black economic empowerment legislation cont<strong>in</strong>ues to drive demand<br />

<strong>for</strong> private equity funds, creat<strong>in</strong>g growth opportunities <strong>for</strong> <strong>in</strong>vestors <strong>in</strong><br />

this area.<br />

• Demand <strong>for</strong> asset management services is grow<strong>in</strong>g on the back of<br />

changes <strong>in</strong> tax legislation and an expand<strong>in</strong>g middle class<br />

• Increas<strong>in</strong>g penetration rates of the non-life <strong>in</strong>surance sub-sector<br />

and enhanced life densities are expected to drive robust growth <strong>in</strong><br />

<strong>South</strong> <strong>Africa</strong>’s <strong>in</strong>surance sector, represent<strong>in</strong>g a significant <strong>in</strong>vestment<br />

opportunity.<br />

• Insurance solutions such as pay-per-use <strong>in</strong>surance (<strong>for</strong> example, on<br />

car <strong>in</strong>surance), <strong>in</strong>surance comb<strong>in</strong>ed with f<strong>in</strong>anc<strong>in</strong>g (<strong>for</strong> example, microloans<br />

to purchase solar panels).<br />

• Specialised data provision and data management services.<br />

COMMUNICATIONS<br />

• <strong>The</strong> communications sector accounts <strong>for</strong> 1.9% of<br />

GDP and is a key enabler of other bus<strong>in</strong>ess services<br />

sectors <strong>in</strong> the <strong>South</strong> <strong>Africa</strong>n economy. It is also one<br />

of its fastest-grow<strong>in</strong>g sectors.<br />

• <strong>The</strong> sector encompasses telecommunications (key<br />

players be<strong>in</strong>g fixed-l<strong>in</strong>e operator Telkom, and mobile<br />

ICT companies MTN, Vodacom, Cell C and Telkom),<br />

national postal services (predom<strong>in</strong>antly state-led)<br />

and associated courier activities.<br />

• <strong>The</strong> liberalisation of the domestic telecommunications<br />

market, particularly due to the Electronic<br />

Communications Act of 2005, facilitated the<br />

proliferation of new entrants and <strong>in</strong>creased<br />

competition <strong>in</strong> the sector.<br />

• <strong>The</strong> country’s telecommunications sector is<br />

among the largest on the <strong>Africa</strong>n cont<strong>in</strong>ent. It is<br />

also deemed to be one of the most complex and<br />

technologically advanced telecommunications<br />

systems.<br />

• Domestic telecommunications are at the <strong>for</strong>efront<br />

with respect to the adoption of technological<br />

<strong>in</strong>novations compared to regional peers, result<strong>in</strong>g <strong>in</strong><br />

the local <strong>in</strong>dustry’s grow<strong>in</strong>g penetration of regional<br />

markets.<br />

• Saturation of the domestic mobile market and shifts<br />

from voice and SMS to data have created significant<br />

growth opportunities <strong>in</strong> 4G Long-Term Evolution<br />

(LTE) services.<br />

• Release of high-demand broadband spectrum,<br />

aimed at reduc<strong>in</strong>g data costs and encourag<strong>in</strong>g<br />

<strong>in</strong>vestment, is imm<strong>in</strong>ent.<br />

SELECT INVESTMENT OPPORTUNITIES IN<br />

COMMUNICATIONS:<br />

• Commencement of the spectrum licens<strong>in</strong>g process is<br />

imm<strong>in</strong>ent, open<strong>in</strong>g up <strong>in</strong>vestment opportunities <strong>in</strong> the digital<br />

and telecommunications <strong>in</strong>dustries. Investment <strong>in</strong> advanced<br />

telecommunication applications: Internet of Th<strong>in</strong>gs (IoT) applications<br />

such as telematics and smart devices; <strong>in</strong>ter-device communications<br />

technology.<br />

• Big data tools <strong>for</strong> report<strong>in</strong>g and analytics.<br />

• Resell<strong>in</strong>g of global cloud plat<strong>for</strong>ms.<br />

• Bus<strong>in</strong>ess franchis<strong>in</strong>g opportunities <strong>in</strong> Voice over Internet Protocol<br />

(VoIP) solutions.<br />

• e-Services across <strong>in</strong>dustries (e.g. technology/applications <strong>for</strong><br />

e-government and e-health).<br />

• Data centres, LTE-A data-only mobile network play.<br />

• Opportunities <strong>for</strong> consolidation or <strong>in</strong>vestment <strong>in</strong> fibre <strong>in</strong>ternet service<br />

providers (ISPs).<br />

• Frontier ICT technology skills development.

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