PESTEL analysis of South Africa
This detailed PESTEL analysis of South Africa aims to address some of the political, economic, social, technological, environmental, and legal factors that affect South Africa today. South Africa is one of the most powerful countries in Africa and plays a considerable role in the global economy and politics.
Political environment in South Africa
South Africa is a parliamentary republic with the president being both the head of state and the head of government. The president appoints a Deputy President and Ministers to form the Cabinet to administer the state affairs. Up until 1994 the country was ruled by an apartheid government (BBC, 2019). However, a lot of things have changed since the country’s first fully democratic election in 1994.
Pretoria is the administrative capital of South Africa, while Cape Town is the legislative capital. Similarly, Bloemfontein is the judicial capital of the country. The neighbouring countries of South Africa are Botswana, Mozambique, Swaziland, Lesotho, Namibia, and Zimbabwe. South Africa has coasts on both the South Atlantic and Indian Oceans.
The South African political environment is often clouded by corruption, mismanagement, political intolerance, popular protests, and violence. These problems often slow down economic development and progress. Therefore, winning the support and confidence of general public and investors in light of the political challenges becomes one of the most important jobs of the president of South Africa.
Economic environment in South Africa
The next element to address in the PESTEL analysis of South Africa is the country’s economic environment. South Africa is the 42nd largest economy in the world in terms of nominal GDP (Statistics times, 2020). The GDP stands at around 282 billion USD. However, it was higher in 2019. This shows the impact of global lockdown on the country’s economy in 2020.
South Africa has a system of mixed economy in place. It is one of the five BRICKS economic giants. BRICKS stand for Brazil, Russia, India, China, and South Africa. South Africa exports gold, diamonds, platinum, cars, metals and minerals, machinery and equipment to a number of countries, notably China, the UK, the United States, Germany, India, and Saudi Arabia. Some of the top imports of South Africa are machinery and equipment, chemicals, petroleum, scientific instruments, and food materials.
Corporate income tax in South Africa for both resident and non-resident companies is a flat 28% (PwC, 2020). However, small businesses pay a lower rate of tax. Similarly, there are some special rates for certain industries e.g. mining and long-term insurance. Individual income tax starts at 18% and goes up to 45% depending on the amount an individual earns.
Social environment in South Africa
Nelson Mandela’s South Africa is often referred to as the ‘rainbow nation’. Archbishop Desmond Tutu first coined the term to describe South Africa’s multicultural diversity. There are 11 official languages in the country and Christianity, Islam, and indigenous beliefs are the major religions. The current population of the country is around 59.7 million (Worldometer, 2021). Life expectancy is estimated to be almost 64 years (O’Neill, 2020).
However, there are some big challenges South Africa faces today. For example, unemployment is high and the public health system is ailing. Social mobility and economic growth are often halted by poor and inadequate infrastructure. South Africa remains a divided society with growing tensions between immigrants from other parts of Africa and the local communities.
However, putting these challenges aside, South Africa offers these days good business opportunities in industries such as building and construction supplies, eye care, beauty and cosmetics, automotive, telecommunications, education and utility services. People in general in the country desire for better education for their children, rewarding employment opportunities and faster economic growth that offer great opportunities for both local and international organisations.
Technological environment in South Africa
South Africa is one of the most technologically advanced countries in Africa. It has made an enormous progress in mobile software, security software and electronic banking services (The International Trade Administration, 2020). A number of international tech and social networking companies already operate in South Africa often through subsidiaries. Amazon, IBM, Microsoft, Facebook, LinkedIn, Intel, Dell, Novell, and Apple are some of the companies that can be considered in this regard.
Online shopping is on the rise in South Africa. Consequently, there are great opportunities for online retailers. Likewise, due to a number of high-profile cyber-attacks and other online vulnerabilities, demand for IT security products and software is high as well. It is worth mentioning that South African companies sell a lot of ICT products to growing African markets.
Environmental factors in South Africa
South Africa is one of the most popular tourism destinations in the world. Unsurprisingly, the readers of Telegraph (a British newspaper) rated Cape Town ‘the World Best City’ in 2016. Indeed, according to many sources, Cape Town is regularly voted as one of the top holiday destinations in the world for families, couples and solo travellers.
Abundant wildlife, scenic beauty, impressive coastlines, brilliant penguin-filled beaches, whale watching, and vivacious coral reefs have all contributed to the development of South Africa as a tourist destination. However, the country faces some environmental challenges such as water pollution, air pollution, land degradation, solid waste pollution, and deforestation.
Legal environment in South Africa
Legal environment is the last element to discuss in the PESTEL analysis of South Africa. South Africa encourages Foreign Direct Investment in all sectors of the economy. However, there are some restrictions on foreign shareholders in some sectors e.g. mining, defence, insurance, broadcasting, telecommunications, and banking. Employees receive fundamental protection in South Africa. The Employment Equity Act 1998 (EEA) aims to achieve equality in the workplace by promoting equal opportunity and fair treatment in employment (Kleitman, 2020).
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Last update: 03 February 2020
BBC (2019) South Africa country profile, available at: https://www.bbc.co.uk/news/world-africa-14094760 (Accessed 02 February 2020)
Kleitman, Y. (2020) Doing business in South Africa, available at: https://content.next.westlaw.com/Document/I2ef128301ed511e38578f7ccc38dcbee/View/FullText.html? (Accessed 02 February 2020)
Mobius, M, (2017) South Africa: Key Issues and Challenges, available at: http://emergingmarkets.blog.franklintempleton.com/2017/03/16/south-africa-key-issues-and-challenges/ (Accessed 29 June 2018)
O’Neill, A. (2020) Life expectancy in South Africa from 1870 to 2020, available at: https://www.statista.com/statistics/1072248/life-expectancy-south-africa-historical/ (accessed 03 February 2021)
PwC (2020) South Africa – Corporate: Taxes on corporate income, available at: http://taxsummaries.pwc.com/ID/South-Africa-Corporate-Taxes-on-corporate-income (Accessed 01 February 2021)
Statistics Times (2020) List of Countries by Projected GDP, available at: http://statisticstimes.com/economy/countries-by-projected-gdp.php (Accessed 02 February 2020)
The South African (2017) These are the seven biggest business opportunities in SA right now, available at: https://www.thesouthafrican.com/these-are-the-seven-biggest-business-opportunities-in-sa-right-now/ (28 June 2018)
The International Trade Administration, (2020), South Africa – Information Technology, available at: https://www.export.gov/article?id=South-Africa-information-technology (Accessed 02 February 2021)
Worldometer (2021) South Africa Population, available at: https://www.worldometers.info/world-population/south-africa-population/ (accessed 02 February 2020)
Photo credit: Premium Times Nigeria
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.