Republic of South Africa R.S.A Country IT Assessment IB8710 D. Truex Kyai Mullei

MNC that specializes hardware and software components considers opening a manufacturing plant in Africa. The corporation has a two- pronged strategy of tapping both domestic and export markets. Scenario: Q & A session with shareholders and new-market researchers

“Why Sub-Saharan Africa and why South Africa? Aren’t countries like Morocco, Egypt and Algeria and Tunisia larger economies and much closer to traditional markets like the E.U. and the U.S?”

Statistics for 2003 R.S.ANorth Africa ClassificationLow/middle income GDP ($)160 billion216 billion Industry/services as % of GDP 95% ($152 bn)80% ($172 bn) Tele density/ telephone costs to U.S. (3 mins) 41.5% $ % $.10 High Tech exports as % of GDP 5% (7.6 bn)4% (8.64 bn) FDI (foreign direct investment $) $819 million$4.1 billion * Aircraft Departures146,000138,000 /

“We know parts of Africa are politically volatile and this has an effect on their immediate neighbors. What are the risks associated with our investment in South Africa?”

Zimbabwe (25 year old multiparty democracy-stable) Lesotho (new constitutional monarchy – SA military intervention in 1998 helped restore civilian rule) Angola (new multiparty democracy – stable, historical involvement of SA military in civil war, no disputes) Botswana ( 40 year old multiparty democracy – stable) Swaziland (30 year old monarchy – stable) Mozambique (15 year old democracy – stable) Namibia (15 year old democracy – stable, historical occupation by SA between WWI and 1988) **All countries are members of Southern African Development Community (SADC) of which South Africa represents 65% of combined 226 billion dollar GDP **Above countries combined military exp: $945 million South Africa : $2.6 billion (Nuclear Power, major tech grade weapons exporter) map.africa-atlas.com/ pictures/physical-africa.jpg SOUTH AFRICA’S NEIGHBORS

“Give me some demographics. What are we working with? Literacy, income levels, economy, culture…? ”

SOUTH AFRICAN DEMOGRAPHICS Population -42 million (life expectancy 45 years) -72% Black, 13% White, 8% mixed, -Urbanization 56% * - HIV/AIDS 15% prevalence (15-49yrs) - Literacy English (86%) - unemployment 31% (high crime environment.) - population below poverty line 50% -Gini coefficient 0.77 (10% of population -controls 60% of the wealth) - GDP/capita $1390 (2002) - Hofstede MAS/ UAI (strong/ weak ) -Hofstede PDI / IND (medium/ strong) The cultural relativity of organizational practices and theories, Gary Hosftede, Journal of International Business Studies, Fall 1983

“Our investment will require a world class communications infrastructure to succeed. From personal experience, the infrastructure in most African countries is wanting. Is South Africa any different?

SOUTH AFRICA COMMUNICATION INFRASTRUCTURE Statistics - mainlines 4.8 million/ cellular 18.6 million - internet code (.za) - internet accounts 3.5 million* (27% users in Africa) - internet penetration 7.3% (1.5 % in Africa) - internet use (growth) % (198% in Africa) - medium level in digital access index (0.45) – sub Saharan Africa average (0.15) - 350,000 wired computers in education (2001) - 288,000 Internet Hosts -2 submarine cables*, 3 Earth Satellite Stations

SOUTH AFRICA COMMUNICATION INFRASTRUCTURE Statistics - mainlines 4.8 million/ cellular 18.6 million - internet code (.za) - internet accounts 3.5 million* - internet penetration 7.3% - internet use (growth) % - medium level in digital access index (0.45) – sub Saharan Africa average (0.15) - 350,000 wired computers in education (2001) - broadband accessibility 3.7 out of 7 World Bank index - Only Sub Saharan country with 3G service secure servers computer- cables-big.jpg

“What is the government commitment to the IT industry ? Will we be operating in an environment that protects our copyrights?

GOVERNMENT ICT POLICY / SUPPORT -$11 billion spent on ICT expenditures in % of GDP spent on ICT ($264/capita) - Corporate Income tax reduced by 29% (2005 Budget) -BASED ON WORLD BANK INDEX Govt. online services availability 3.6 out of 7 - Laws relating to IT use 4.0 out of 7 - Govt. prioritization of ICT 4.5 out of 7

“What type of companies are located there that would benefit from our products? Can the domestic economy sustain demand for high tech products?

Johannesburg Stock Exchange (top 10 in the world market cap $120 billion 2002) South Africa an exporter of hardware/ software ( 6% of GDP) Linked with London Stock Exchange and 19 other exchanges in Africa High Tech presence in SA –NEC South Africa –IBM South Africa –Mecer (domestic) –Sahara Computers (domestic) –Pfisterer Group (domestic) –Siemens South Africa –Cisco South Africa SOUTH AFRICAN ECONOMY

QUESTIONS?