South Africa Seeks Investment - From China, Brazil, India & Russia

South Africa has targeted some of the world's fastest growing economies, such as China, to reach a minimum target of R115 billion ($15 billion) in foreign investment projects by 2013, Trade and Industry Minister Rob Davies said on Tuesday.

"Targeted potential sources of FDI (foreign direct investment) will include China, India, Russia, Brazil, Japan, the USA and Middle East," Davies said in his budget vote speech to parliament.

"We anticipate that the work programme will translate over the next three years into an investment pipeline of 115 billion rand (worth) of projects," he said.

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Ernst & Young Leads Africa Expansion

Global accounting giant Ernst & Young says it expects rapid business growth in Africa with its initiative to expand the firm’s practices across the continent.

The African Investment Programme is intended to grow the firm’s practices in Africa both in terms of revenue and resources over the next three years.

Philip Hourquebie, CEO of Ernst & Young Africa, said: “It is a quantum leap aimed to confirm Ernst & Young as a market leading African firm.

“We have the support and backing of the global firm.”

Ernst & Young Sub-Saharan Africa achieved revenue of nearly 270m for the 53 weeks to July 3 last year, amounting to 18% growth in local currency terms.

The African Investment Programme comes in the wake of Ernst & Young’s successful integration into one area in 2008 of 87 countries from across Europe, the Middle East, India and Africa into one unit.

That move was seen as one of the biggest changes in the professional services industry since the demise of accounting firm Arthur Andersen.

Rivals PricewaterhouseCoopers, Deloitte and KPMG have not yet come up with their full integration plans or devised alternative plans to fully interpret their business across geographies.

Jim Turley, global chairman and CEO of Ernst & Young, said that continued growth on the African continent would create “needs and opportunities for our services”.

Assurance and tax services led the service-line growth in SA, achieving a 20% revenue increase, reflecting the firm’s involvement in some of the largest deals over the period.

Turley said the firm was investing aggressively in human resources to back up its ambitious business plans.

Other accounting firms had put on hold plans to recruit as a result of the economic slowdown, but “we have continued to recruit”, he said.

Hourquebie said the African Investment Programme would be three-pronged.

First, the firm would be prioritising its investment in financial services, public and utilities sectors.

“We also need to focus attention on the oil and gas, mining and metals, and the telecommunications sectors,” he said.

Second, in terms of geographies, the firm would be investing in expanding its growth in Nigeria, west Africa, Angola and SA, he said. As Zimbabwe stabilised, the investments would be made in that practice.

“Lastly, our advisory, transactions and tax service lines would be the primary beneficiaries of the investment with limited attention going to our assurance service line,” Hourquebie said.

South Africa's Mineral Wealth the "Highest in the World"

According to a Citigroup report:

South Africa is the world's richest country in terms of its mineral reserves - worth $2.5 thousand billion - according to research by the American banking group Citigroup, reports Bloomberg. The Citigroup report, which was compiled by its mining analyst, Craig Sainsbury, says that Russia comes second after South Africa, and Australia third.

Of South Africa's $2 500bn worth of reserves, $2 300bn resides in the platinum group metals.

In dollar values Guinea, South Africa, India, the Ukraine and Kazakhstan are the countries that under-produce the most in terms of their reserves, says Sainsbury.

Read the article

Tidbits from IMF Regional Economic Outlook - South Africa is in good shape

"Dominating prospects for the middle-income countries is South Africa, which is projected to expand by some 2½ percent in 2010, rising to 3½–4 percent in 2011 and beyond, compared to an average growth of nearly 5 percent in 2004–08".

"South Africa is by far the largest and most sophisticated market in the region. By market capitalization, its equity market is among the 20 largest in the world (including advanced economies) and foreign investors trade actively in a large and liquid local debt market. South African companies (both private and public) as well as the government have been able to borrow routinely in international capital markets. Reflecting this, South Africa relies more than its neighbors on portfolio and other more volatile forms of investment and was more exposed to the global financial cycle, accounting for two-thirds of the growth in private capital inflows to the region between 2002 and 2007 and experiencing a larger reversal than the rest of the region during the crisis".

Facts and Figures (as percent of GDP):

• Government Debt = 31.5 %
• External Debt to Official Creditors = 1.8 %
• External Current Account = -4.0 %
• Trade Balance = 0.1 %
• Overall Fiscal Balance = -6.1 %
• Domestic Saving = 18.4 %
• Total Investment = 19.3 %
  

Read the IMF's Regional Economic Outlook - Sub-Saharan Africa

O.R. Tambo Airport Upgrade - a Sign of Things to Come

From Airports Company of South Africa:

President Jacob Zuma today officially opened the new Central Terminal Building (CTB) at O.R. Tambo International Airport. The revamp of Africa's biggest and busiest international airport under the management of Airports Company South Africa (ACSA) saw the completion of the CTB at a cost of R2,2 billion.

"The construction of this facility placed emphasis on the creation of spaces specially designed to ensure efficient and pleasant airport experiences for all our users," says Chris Hlekane, General Manager of O.R. Tambo International Airport. In addition to the CTB, other completed facilities at O.R. Tambo International Airport include the International Pier, international departures terminal upgrade, and the second multi-storey parkade with parking for 5 200 vehicles. There is now a total of 17 500 car parking bays on-and-off the airport precinct. In addition, there are seven new aircraft parking stands, bringing the total to 105, the Gautrain Rapid Rail link and added storage fuel tanks with a capacity of 60 million litres. Since 2006 the total investment is approximately R5 billion on all projects including the CTB.

"In less than 50 days the airport will serve as the gateway to South Africa for hundreds of thousands of 2010 FIFA World Cup fans and millions of future tourists. The upgraded facilities are the all-important first impression of not only O.R. Tambo International Airport, but also South Africa," says Hlekane. "It was therefore vital that we provide a world-class African airport with cutting-edge international transport facilitation abilities, technologies and design."

The upgrades undertaken were specifically designed to create lightness and openness in the terminal buildings, enabling passengers to quickly navigate and move between terminals. The revamp of O.R. Tambo International Airport means that the airport can now efficiently handle 28 million passengers a year. It has been an enormous undertaking that makes flying, both locally and internationally, an efficient, seamless and memorable experience. For this enhanced travel experience domestic passengers pay ACSA only R57 per departure.

"This is a significant and fitting end to 15 years of transformation and a lot of hard work and dedication," says ACSA Chairperson, Sindi Zilwa. "It is a tribute to the contributions of many people and an accolade to the memory of Oliver Reginald Tambo, one of the most important founding fathers of our new, democratic, South Africa. O.R. Tambo International and the other nine airports can compete proudly with the best facilities in the world, to market South Africa as a preferred destination for investment and tourism."

In addition to O.R. Tambo International Airport being ready for the 2010 FIFA World Cup, key airports in the ACSA network are fully prepared and ready to run 24 hours a day to ensure the smooth flow of operations. Cape Town International Airport has a new Central Terminal Building, a 400-vehicle multi-storey parkade, five new aircraft parking stands and greatly improved access roads. In Durban the newly-constructed King Shaka International airport, with the capacity to handle 7,5 million passengers per year, is ready to open on 1 May 2010. Port Elizabeth, Upington, Kimberley, East London and Bloemfontein have all undergone runway upgrades and terminal refurbishing and final sign-off will take place by May 2010.

South Africa and opening up the communications network

South Africans will have universal access to broadband by 2019, Communications Minister Siphiwe Nyanda said in his budget speech in Parliament on Tuesday.

"We have finalised the broadband policy whose vision is to ensure that South Africans have universal access and services to broadband by 2019," Nyanda said. "The benefits accruing from the policy will include the provision of multimedia and e-government throughout the country."

The growth of broadband would "expand markets" and have widespread benefits for the South African economy, Nyanda said.

"The implementation of the broadband policy will impact on the growth of the economy through expanding markets, increasing business efficiency and promoting competition."

Nyanda said the roll-out of effective ICT services would ensure that government services were available to all South Africans, irrespective of where they were in the country.

"South Africans will be able to see a single face of government and be able to connect with all levels of government and different departments using a single platform," he said.

"ICT offers a possibility of e-government where government offers a seamless and integrated platform for interaction."

ICT could contribute to the scientific interpretation of outputs in the agricultural sector, water management, including numeracy and literacy training of communities, he said.

"We are in discussions with the department of rural development and land reform to ensure that we participate in the agrarian reform and food security programme through technology intervention in our sector.

"This will also contribute to our involvement in growing the second economy." Nyanda said he "intended" to introduce legislation in the current parliamentary session "aimed at further strengthening the ICT policy framework".

The new masters of management

Developing countries are competing on creativity as well as cost. That will change business everywhere:

"Just as Henry Ford and Toyota both helped change other industries, entrepreneurs in the developing world are applying the classic principles of division of labour and economies of scale to surprising areas such as heart operations and cataract surgery, reducing costs without sacrificing quality. They are using new technologies such as mobile phones to bring sophisticated services, in everything from health care to banking, to rural communities. And they are combining technological and business-model innovation to produce entirely new categories of services: Kenya leads the world in money-transfer by mobile phone, for example."

Read The Economist's Special Report

The Investment Case for Africa

Daniel Broby, "The Case for Investment in New Emerging Markets—Africa and the Middle East" from CFA Ireland on Vimeo.

Riskowitz Capital: Four Key Investment Tenets

1. We are conservative value investors:

It is always our aim to buy securities in companies for less than intrinsic value. By working out what a company is worth and comparing it the market price, large long-term gains can be realized at a lower level of risk.

Hence we emphasize margin of safety in all our investments. It is not sufficient for a security to be trading at a small fraction below what we think it is worth. There must be a large enough discount so that if our intrinsic value estimate is over-stated we still face minimal capital loss.

2. We believe investing is most intelligent when it is most business-like:

Through a professional research-oriented approach, we invest only where the odds are in our favor. We try to remain intelligent in our stock picks and ignore fads or popular talk. Rather, we approach each investment as if we were buying the entire company.

3. We take no large risks:

We do not sell short, use leverage or trade on margin. There is no risk of capital loss greater than the amount we invest. The biggest risk any investor faces is the permanent loss of capital. It is almost impossible to recover from this situation, and any investment mechanism that increases the probability of loss is too risky.

4. We believe that price is what you pay; value is what you get:

This is probably the most important investment tenet out there. The best investors can easily distinguish between price and value, and hence pay little attention to short-term market fluctuations.

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