Fdi Trade Agreements of South Africa Involving Europe

South Africa

Introduction

The republic of South Africa is a country located at the southern tip of the African continent. The Indian and Atlantic Oceans border it as well as the countries of Namibia, Botswana, Zimbabwe, Mozambique, Swaziland and Lesotho. South Africa is a member of the Commonwealth of Nations with the largest economy in Africa. South Africa is the most socially, economically, and infrastructurally developed country on the continent .

South Africa has a history that is different than other African nations due to the early immigration of European Unionropeans in 1652. The infrastructure of South Africa made its mineral wealth available and important to Western interests throughout the late nineteenth century. Ethnically, South Africa is extremely diverse. South Africa has the largest Caucasian, Indian and racially mixed communities in Africa. Black South Africans account for about 80% of the population .

Government & Politics

South Africa has three capital cities. Cape Town is the legislative capital. Pretoria is the administrative capital. Bloemfontein is the judicial capital. South Africa has a bicameral parliament (like the US) with ninety members in the National Council Provinces and four hundred members in the National Assembly .

South Africa is a constitutional democracy. The president is elected by parliament and the constitution is the supreme law of the land. The constitution provides for an independent corruption watchdog, public protector, and for independent commissions on human right, gender equality the restitution of land rights .

Monetary System, Policy and Exchange Rate

The Rand is the currency of South Africa. It is divided into 100 cents and is the currency of the Common Monetary Area between South Africa, Namibia, Swaziland and Lesotho. The Rand was introduced in 1961 and comes in coin and bank note form. The one and two cent rand coins were discontinued in 2002 due to inflation. They were no longer of any value .

Since December of 1971, there have been many changes in regards to the value of the Rand. It was linked to the British pound in 1972. Then in October of 1972, the Rand was fixed to the US Dollar. In 1979, it was “freed” and allowed to float. Unfortunately, the lack of political stability of South Africa caused the Rand to depreciate, sharply, against the US dollar and other major currencies. Despite the actions taken by the government, the increase in violence of South Africa as well as the poor confidence in the government led foreign investors to bail out .

The Rand was stable in 2007 but is back to its volatile state. It is on a depreciating trend due to the uncertain global economic outlook, weak domestic growth, and a large current account deficit. Economists don’t expect significant slippage in 2008 against the relatively weak dollar, but anything is possible. Rand is R7.9 = US1 .

Economic Background

South Africa has a two tiered economy (24th largest in the world) ; one that rivals other developed countries and one that has only the most basic infrastructure. South Africa is a productive and industrialized economy that exhibits many characteristics associated with developing countries. South Africa has a division of labor between formal and inform sectors and an uneven distribution of wealth and income. South Africa’s primary sector, which is based on manufacturing services, mining and agriculture, is considered well developed .

South Africa got its formal economy start in 1652 with the arrival of the Dutch settlers. As the colonies increased some were set free to pursue commercial farming. These moves lead to the dominance of agriculture in the South African economy .

The British gained control of the colony at the end of the 18th century. In 1870 diamonds were discovered and gold deposit areas (some of the largest in the world) were found in sixteen years later in 1886. These discoveries moved the economy from agriculturally based to that of a resource based economy. In 1902 after the 2nd Boer War, South Africa moved into a period of industrialization. During this movement, the South African Trade Union was organized .

After the organization