APPENDIX B. BEST PROSPECT SECTORS FOR U.S. EXPORTS TO SOUTH AFRICA (US$ millions, unless otherwise noted) A. Rank: 1 B. Name of Sector: Aircraft and Parts C. ITA Code: AIR est. est. 1993 1994 1995 D. Total Market Size 1500.0 1635.0 1782.0 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 650.0 708.5 772.3 H. Total Imports from U.S. 339.9 370.5 403.8 I. Exchange Rate 3.3 3.6 3.7 Comments: The U.S. has always dominated the South African aircraft market. American aircraft products enjoy an extremely high reputation in South Africa, as their products are of a high quality. South Africa imports approximately 60 percent of its aircraft and parts from the United States. France is the U.S.'s major competitor in this market. The United Kingdom and Germany are lesser competitors. No real trade barriers exist for this sector.Import duties range from O to 20 percent. It is important to note that light aircraft are used extensively to reach outlying areas of South Africa, i.e. ranches, mining sites and neighboring countries in Africa. U.S. products enjoy an excellent reputation in market segment. With South African air routes opening up, more large aircraft are needed to cater for the increase of passengers. The most promising subsector includes airplanes of unladen mass exceeding 2,000 kg, but not exceeding 15,000 kg. The estimated market size of this subsector is 200 m USD. A. Rank: 2 B. Name of Sector: Industrial Chemicals C. ITA Code: ICH est. est. 1993 1994 1995 D. Total Market Size 1810.0 1954.8 2111.2 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 1408.0 1520.6 1642.3 H. Total Imports from U.S. 137.9 148.9 160.8 I. Exchange Rate 3.3 3.6 3.7 Comments: South Africa's receptivity to U.S. imports does not differ from any other country in this sector, provided the country supplies the desired chemical and the price is competitive. In this market the U.S. competes with approximately 80 local manufacturers of which 5 are major players. Additionally, Germany, the United Kingdom, and Japan also suppliers of these products. South Africa imports about 30 percent of all basic chemicals. Most domestic suppliers of chemicals are subsidiaries or agents of international companies. Certain chemicals require import permits. Customs duties range from O to 25 percent. The most promising subsectors include water treatment chemicals and pollution control chemicals. The estimated market sizes of these subsectors are 80 m USD and 60 m USD respectively. A. Rank: 3 B. Name of Sector: Computers & Peripherals C. ITA Code: CPT est. est. 1993 1994 1995 D. Total Market Size 900.0 972.0 1049.8 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 550.0 594.0 641.5 H. Total Imports from U.S. 139.6 146.6 153.9 I. Exchange Rate 3.3 3.6 3.7 Comments: Although American companies lost their market share because of past sanctions, U.S. computers and peripherals have high status in South Africa. Currently, Far Eastern countries, such as Taiwan, are the main suppliers to this market, particularly in the low-end computer hardware segment. No local production of computer hardware exists in South Africa. Only assembly of no- name clones with components imported from the Far East. There are no restrictions or quotas on computer imports into South Africa. Customs duties range from 10 to 15 percent and 5 percent surcharge on FOB prices. The market for PCs is changing. The new trend involves selling computers directly to the public instead of channeling through dealerships. A number of U.S. based firms have entered this sector and are importing established brand name products at highly competitive prices. The most promising subsector includes digital ADP machines with central processing input-output units. The estimated market size of this subsector is 300 m USD. A. Rank: 4 B. Name of Sector: Computer Software C. ITA Code: CSF est. est. 1993 1994 1995 D. Total Market Size 420.0 462.0 508.2 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 270.0 297.0 326.7 H. Total Imports from U.S. 220.0 242.0 266.2 I. Exchange Rate 3.3 3.6 3.7 Comments: In this sector, America leads the rest of the world with its technology and skills; thus, U.S. products enjoy a high profile and are highly rated in South Africa. Approximately, seventy- five percent of PC software originates from the United States; most of the balance comes from Germany. Other competitors in this sector include the United Kingdom and France. Very little competition exists from local suppliers. There are no restrictions or quotas on computer software imports into South Africa. Intellectual value is exempted from duty; a 15 percent duty is imposed on diskettes only. The most promising subsector is that of PC Software with an estimated market size of 195 m USD. A. Rank: 5 B. Name of Sector: Drug and Pharmaceutical C. ITA Code: DRG est. est. 1993 1994 1995 D. Total Market Size 985.0 1034.3 1086.0 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 218.0 239.8 263.8 H. Total Imports from U.S. 28.5 29.9 31.4 I. Exchange Rate 3.3 3.6 3.7 Comments: South Africa has high regard for the U.S. pharmaceutical industry. Of the 45 foreign-owned pharmaceutical companies in South Africa, nine are American. Local production is taking place in South Africa. Other competition in this sector comes from the United Kingdom, Germany, and Switzerland. By ignoring sanctions, European companies were able to enhance their market share. Certain chemicals require import permits, and customs duties range from O to 25 percent. Consumer resistance to the high cost of drugs is growing. Generic substitutes are not often requested, except for selected government tenders. The new government may create a state-controlled utility which would manufacture a wide range of basic generic drugs. The most promising subsector is that of anti-tuberculosis drugs. This subsectors estimated market size 30 m USD. A. Rank: 6 B. Name of Sector: Medical Equipment C. ITA Code: MED est. est. 1993 1994 1995 D. Total Market Size 265.0 278.3 292.2 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 220.0 231.0 242.5 H. Total Imports from U.S. 19.6 20.6 21.6 I. Exchange Rate 3.3 3.6 3.7 Comments: South Africa has high regard for American products and imports the latest in medical technology from the U.S.. Other competitors in this sector include Germany, the United Kingdom, and Japan. Germany has recently gained market share in the X-Ray imaging segment of this market, with Japan following closely. There is little local manufacture of medical equipment. Medical equipment is free of import restrictions. Duties range from O to 20 percent. Perhaps as a result, private hospitals are one of the fastest growing industry segments, despite South Africa's recessionary climate. Day clinics in particular seem to be a strong growth area. South Africa imports almost all electro-medical equipment, and there is a special need for transportable medical equipment in some rural Black areas where electricity is not available. The medical profession complains about insufficient technical back-up and support; U.S. companies can use these services to a great competitive advantage. The most promising subsectors include intensive care equipment and diagnostic ultrasound equipment. The estimated market sizes of these subsectors are 40 m USD and 30 m USD respectfully. A. Rank: 7 B. Name of Sector: Airport & Ground Support Equipment C. ITA Code: AVG est. est. 1993 1994 1995 D. Total Market Size 450.0 472.5 496.1 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 250.0 263.8 278.3 H. Total Imports from U.S. 100.0 105.5 111.3 I. Exchange Rate 3.3 3.6 3.7 Comments: U.S. avionic products are rated as one of the best in the world, and enjoy a high reputation in South Africa. The U.S.'s major competitors in this sector include France, Germany and the U.K.. Additionally, little local competition exists. No trade barriers exist for products in this sector. Customs duties range from 0 to 20 percent. Currently in South Africa, airports are being upgraded and expanded to cope with the increase of light aircraft traffic. The international Government airport, Jan Smuts in Johannesburg, is expanding and upgrading to accept increasing numbers of flights and passengers. The upgrading of these airports should create business opportunities for equipment, airport design and engineering construction. The most promising subsector is that of flight simulators and parts. The estimated market size of this subsector is 40 m USD. A. Rank: 8 B. Name of Sector: Franchising C. ITA Code: FRA est. est. 1993 1994 1995 D. Total Market Size 1300.0 1430.0 1573.0 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 900.0 990.0 1089.0 H. Total Imports from U.S. 750.0 825.0 907.5 I. Exchange Rate 3.3 3.6 3.7 Comments: Franchises are popular and growing rapidly in South Africa. Competition for the U.S. in this sector mainly comes from the many local franchises operating in this country. No trade barriers exist. The United States is the recognized world leader in franchising and South Africa follows the American example with great enthusiasm. The rapidly expanding franchise sector attempts to capitalize upon the dramatic growth in Black consumers' disposable income, as compared to that of other market sectors. The most promising subsector is that of Fast Food outlets with a estimated market size 250 m USD. A. Rank: 9 B. Name of Sector: Metalworking Machinery C. ITA Code: MTL est. est. 1993 1994 1995 D. Total Market Size 310.0 328.6 348.3 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 200.0 212.0 224.7 H. Total Imports from U.S. 18.6 19.3 19.9 I. Exchange Rate 3.3 3.6 3.7 Comments: South Africa imports very few American products in this sector. The major suppliers to this market are the Far East, China, Germany, Spain and Italy. Local manufacturers supply smaller equipment to this market. The major trade barrier that the U.S. faces is the Rand/Dollar exchange rate. Customs duties range from 0 to 25 percent. The recession has also hit this industry and cut the demand for locally produced and imported machine tools. If there is an upsurge in South African manufactured exports, it will generate demand for machine tools. Opportunities exist for American suppliers. The most promising subsectors include forging or die- stamping machines and planing, milling and molding cutting machines. The respective estimated market sizes of these subsectors are 60 m USD and 65 m USD. A. Rank: 10 B. Name of Sector: Telecommunications Equipment C. ITA Code: TEL est. est. 1993 1994 1995 D. Total Market Size 320.0 352.0 387.2 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 109.0 119.9 131.9 H. Total Imports from U.S. 41.5 44.8 48.4 I. Exchange Rate 3.3 3.6 3.7 Comments: South Africa has high regard for American telecommunications equipment, but because of past sanctions, the U.S. was not able to participate in this market. However, interest in U.S. telecommunications equipment is growing as a result of the lifting of the U.S. trade restrictions. Telecommunications services in South Africa are mainly provided by Telkom SA Ltd., a state-owned corporation. However, Germany, France, Japan, and the United Kingdom are the major suppliers of equipment. Most telecommunications equipment is free of import restrictions, although certain items e.g. telephones and two-way radios, require an import permit. Duties range from 5 to 15 percent. South Africa's high regard for American technology and business practices provide opportunities for U.S. exporters, particularly in mobile communications. Demand in this category is expected to boom in the near future. Thus, this is the most promising subsector. Its estimated market size 45 m USD. A. Rank: 11 B. Name of Sector: Textile Machinery & Equipment C. ITA Code: TXM est. est. 1993 1994 1995 D. Total Market Size 190.0 199.5 209.5 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 150.0 157.5 165.4 H. Total Imports from U.S. 4.4 4.6 4.8 I. Exchange Rate 3.3 3.6 3.7 Comments: Up to the present, U.S. products have not made an impact in this sector. Major suppliers to this sector are Switzerland, Germany, and Italy, with lesser amounts from Taiwan and France. Very little local textile machinery production occurs in South Africa. No trade barriers or restrictions exist for this sector. Customs duties range from 5 to 20 percent. Europe is South Africa's traditional supplier, excelling in after-sales service and installation. The South African textile industry is protected because it creates jobs. The most promising subsector is that of textile weaving machines and its estimated market size is 55 m USD. A. Rank: 12 B. Name of Sector: Security and Safety Equipment C. ITA Code: SEC est. est. 1993 1994 1995 D. Total Market Size 175.0 189.0 204.1 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports N.A N.A N.A H. Total Imports from U.S. 4.2 4.7 5.0 I. Exchange Rate 3.3 3.6 3.7 Comments: American products in this sector are well received in South Africa. Local companies produces basic security equipment while the U.S. faces competition from the United Kingdom, Taiwan, Japan, and South Korea for supplying more advanced equipment. No trade barriers exist for this sector. Customs duties range from 5 to 20 percent; import permits are required for certain equipment. Political uncertainty, increasing levels of violence, and a prolonged deep recession have resulted in an escalating crime wave in South Africa, and heightened security awareness. This has created a demand for security and safety equipment for personal and perimeter security. Under sanctions the United Kingdom and Taiwan developed a market, but opportunities exist for American exporters. The most promising subsector includes burglar and fire alarms. The estimated market size for this subsector is 25 m USD. A. Rank: 13 B. Name of Sector: Cosmetics & Toiletries C. ITA Code: COS est. est. 1993 1994 1995 D. Total Market Size 310.0 341.0 375.1 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports N.A N.A N.A H. Total Imports from U.S. 5.8 6.1 6.4 I. Exchange Rate 3.3 3.6 3.7 Comments: South Africans, particularly the Black population, prefer American cosmetics and haircare products. Local manufacturers are hampered by the unavailability of some raw materials, and the poor quality of local substitutes. Five local manufacturers cater mainly for the White population. Major suppliers to this sector are the U.S. France, Britain and Germany. American manufacturers are still the dominant players in the ethnic haircare market. High import duties and the exchange rate have reduced imports overall. Haircare and cosmetics represent an ever-increasing percentage of Black consumer monthly household purchases. This will continue to increase due to rural-to-urban population shifts and a growing Black middle class, affirmative action, and a continued emulation of Western fashions and grooming. Thus, the most promising subsector is cosmetics for the ethnic market. The estimated market size of the subsector is 30 m USD. A. Rank: 14 B. Name of Sector: Building Products C. ITA Code: BLD est. est. 1993 1994 1995 D. Total Market Size 130.0 136.5 143.3 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports N.A N.A N.A H. Total Imports from U.S. 34.8 35.5 36.2 I. Exchange Rate 3.3 3.6 3.7 Comments: American products in this sector are well received in South Africa, although not much is imported from the U.S.. A large percentage of the building products are being manufactured in South Africa. Other suppliers include Zimbabwe, Italy, Germany and Taiwan. No trade barriers exist for this sector. Customs duties on some products range from O to 20 percent. The South African building industry has been depressed for some time. The Building Industry Federation anticipates a strong upturn in cement sales for 1993, accelerating through 1994 and 1995. Should their forecast of boom conditions in the black housing sector materialize, there will be opportunities for American companies, especially providers of design and technology for low-cost housing units. Most of the South African Black population live in sub-standard housing, a problem which the new government will have to address. The most promising sub-sectors include building design and construction technology. The respective estimated market sizes of these subsectors are 20 m USD and 18 m USD. A. Rank: 15 B. Name of Sector: Sporting Goods & Recreational Equipment C. ITA Code: SPT est. est. 1993 1994 1995 D. Total Market Size 135.0 144.5 154.6 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 70.0 74.9 80.1 H. Total Imports from U.S. 10.3 10.8 11.2 I. Exchange Rate 3.3 3.6 3.7 Comments: Most sports apparel is manufactured in South Africa, and some sports equipment. American products are however rated very highly in South Africa. Other competition includes the Far East and the United Kingdom. The United States dominates the golf equipment market in South Africa. Most major golf equipment suppliers have South African representatives. No trade barriers exist and customs duties range from 0 to 30 percent. South Africans love sports, but the prolonged recession has reduced spending on sporting equipment and goods. Once South Africa pulls out of the recession, these expenditures will increase. Gyms and health clubs are very popular and are growing rapidly. Since the United States is the leader in this type of equipment, major opportunities exist in this category. The most promising subsectors include health/exercise equipment and water sport equipment i.e. surfboards and sailboards. The estimated market sizes of these subsectors are 30 m USD and 15 m USD respectively. A. Rank: 16 B. Name of Sector: Commercial Fishing Equipment C. ITA Code: CFE est. est. 1993 1994 1995 D. Total Market Size 70.0 73.5 77.2 E. Total Local Production N.A N.A N.A F. Total Exports N.A N.A N.A G. Total Imports 35.0 36.8 38.6 H. Total Imports from U.S. 6.0 6.2 6.5 I. Exchange Rate 3.3 3.6 3.7 Comments: American products in this sector, particularly marine engines, are well received in South Africa. Competition for U.S. companies in this market includes local production, as well as that of Taiwan, the United Kingdom, Denmark, and Spain. No trade barriers exist, and duties range from 5 to 20 percent. South African fisheries yield approximately 1 million tons of fish per year, and has the potential of 5 million tons per year. Market is open to U.S. exporters in this category. The most promising subsectors are marine diesel engines and fish landing nets. The estimated market sizes of the subsectors are 18 m USD and 9 m USD. BEST PROSPECTS FOR U.S. AGRICULTURAL EXPORTS TO SOUTH AFRICA (US$ millions, unless otherwise noted) est est 1993 1994 1995 1. Food Grains Rice and Wheat 123 150 200 2. Forestry Products Lumber 22 25 40 3. Poultry Meat 5 10 20 4. Consumer Products 2 5 8 5. Tree Nuts 3 5 8 6. Planting Seeds 5 7 10 7. Pet Food 0 2 5 8. Vegetable Oils and Products 1 10 20