Globalisation and South Africa

GLOBALISATION AND SOUTH AFRICA

AIM Student 431
May, 14th, 2012

Index
Introduction page 3
Definition of Globalization in own words page 4
South Africa as an emerging country and globalization page 5
Trade agreements the South African government made since 1994 page 6
Globalization, the economy and foreign direct investment page 7
Globalization and Technology in South Africa page 8
Conclusion page 9
Bibliography page 10

Introduction
South Africa is known internationally as the rainbow nation because of its diversity. The country has eleven official languages and many different cultures. It is a third world country with first world ambitions and ideals. The country went through plus minus forty years of apartheid that meant the white minority ruled the black majority. Apartheid did not allow the majority black citizens many rights. After the abolishment of apartheid South Africa as a country through the leadership of President Nelson Mandela had to be rebuilt.
Many thought that the country will fall into a civil war but the nation got together and became Africa’s biggest economy in only eighteen years of democracy. The government embraced globalization and it was good for the nation building, the economy and the ordinary man in the street. What globalization does is to improve the economy of a country through investment and trade. In the case of South Africa globalization is good as it improved the cost of living in South Africa. It allows for cheaper products being imported into the country from international markets like China and India and makes it affordable to buy these products. Mostly all international brands like Coke, MacDonald’s, KFC, Samsung, and Sony to name but a few are available to South Africans. The foreign exchange market and commodities are being traded to improve the economy. Globalization and economics goes hand in hand and to show the good impact globalization had on South Africa and its economic markets. The following themes will be discussed to show the positive impact of globalization in South Africa. The first discussion point will be South Africa as an emerging country and the good of globalization. Trade agreements the South African government made since 1994, globalization, the economy and foreign direct investment and technological advancement and South Africa.

Definition of Globalization in own words
Globalization is the sharing of ideas, trading of goods and services and transferring of skills and technology between countries all over the world. It allows for the freedom of movement from one country to another by people to ply their trade and share their technical experience in developing countries.

South Africa as an emerging country and globalization
When the ANC government took control of the country in 1994, the country was on the verge of bankruptcy. Due to international sanctions imposed on the country because of apartheid and the internal civil unrest against the rule of Nationalist government, the country was in trouble financially as well as economically. In order to get the country back from the brink of bankruptcy and economically sound, the South African government embraced globalization and entered into trade agreements with countries around the world. The country also had to make it easy for investors to invest in the country. These decisions made by the government to embrace globalization had the desired positive effect of increased economic growth, job creation and the improvement of the lifestyle of South Africans.
“At the start of 2000, then President Thabo Mbeki vowed to promote economic growth and foreign investment by relaxing restrictive labour laws, stepping up the pace of privatisation, and cutting unneeded governmental spending. His policies face strong opposition from organised labour. From 2004 onward economic growth picked up significantly;” http://en.wikipedia.org/wiki/South_african_economy
South Africa as a country is ideally situated at the tip of the Africa continent. The country is seen as the window into Southern Africa and Africa. The country has the infrastructure, technology and the labour force to be able to produce and compete in international markets. The country has a huge mining sector as it is rich in minerals and is the number one platinum producer in the world. As an emerging economy South Africa is one of the big five emerging economies namely Brasil, Russia, India, China and South Africa who together forms (BRICS).
“South Africa’s economic growth needs to increase and we have the opportunity to not only reduce unemployment, but develop our status as the “Gateway into Africa”. – Top500 Companies (2012) – Chris Pouroullis – Chairman Manhattan Corporation

Trade agreements the South African government made since 1994
Globalization is good for South Africa as it allows for the free trade between countries and investment by foreign firms. These investments are needed to grow the South African economy. The government entered into trade agreements with countries internationally like the USA, Germany, Japan, the European Union as well as other African countries. The government knew what isolation and sanctions do to a countries economy as they were the ones that were the main drivers behind the sanctions.
“South Africa has signed many agreements with its trading partners in the past few years. And the country is the beneficiary of a number of trade arrangements – among them the African Growth and Opportunity Act and the Generalised System of Preferences. South Africa has also concluded agreements with the European Union, the Southern African Development Community and Zimbabwe.” http://www.sars.gov.za/home.asp?pid=912
Regionally South Africa joined its neighbours in the Southern African Development Community (SADC). The SADC is made up of southern African countries and currently consist of 15 members. The main aim of the SADC is for economic growth of the region as well as political stability. The country became a member state of the African Union and President Thabo Mbeki was instrumental in the forming of the New Partnership for Africa’s Development (NEPAD). As can be seen by these two agreements the government is investing in the development of not only South Africa but Africa as a whole.
“The first is the Millennium Africa Recovery Plan (MAP), led by South African President Thabo Mbeki and unveiled at the World Economic Forum in Davos in January 2001. The second initiative is the Omega Plan, crafted by the President of Senegal, Abdoulaye Wade, and presented to the Summit of Francophone African leaders in Cameroon in January 2001. MAP and the Omega Plan were then combined to give birth to a third initiative the New African Initiative (NAI) that then led to NEPAD in 2001.” http://www.nepad.org/about
In 2010 South Africa became part of the BRICS countries. The BRICS countries are Brazil, Russia, India, China and South Africa. These countries are seen as leading emerging economies in the world. By becoming a member South Africa are also trading with these countries.
“BRIC, to be known as BRICS now that South Africa has become a member, is a powerful bloc of emerging economies which, according to the International Monetary Fund, will account for as much as 61% of global growth in three years ' time. South Africa brought into BRICS "not only South Africa but a larger African market of a billion people," Nkoane-Mashabane said, noting that trade between BRIC and Africa had grown significantly over the last decade.” http://www.southafrica.info/global/brics/brics-080411.htm#ixzz1uglGSh1P
Globalization, the economy and foreign direct investment
“Investment by foreign firms in developing countries has hugely positive results. Its value goes far further than the much-needed provision of employment in those firms’ own plants and suppliers, and helps to change the range of productive activities taking place in their new host country. If this potential is handled well by the host government, increased foreign direct investment can transform the future of an entire country, and the life chances of all citizens” – Bernstein A (2010) – The case for business in developing economies.
One of the by-products of globalization is foreign direct investment (FDI). FDI takes the form of direct investment as well as portfolio investment. Direct investment allows for companies to invest 10% or more in companies that are not from the same country. Portfolio investment is for the trading on the stock markets. South Africa allows for inbound as well as outbound FDI. The benefit of FDI to the South African economy is significant as it allows for job creation thereby reducing unemployment and poverty. It allows for more taxes being paid to the government meaning more revenue. The reduction in prices because of more competition between companies, so that the ordinary person will be able to afford to buy more essential goods and services. All of this improves the lives of ordinary South African citizens.
“In recent years there have been some significant instances of FDI in South Africa, including the purchase of a controlling share in ABSA by Barclays PLC, the purchase of a significant share in Standard Bank by the Industrial and Commercial Bank of China and the purchase of Vodacom shares by Vodafone. All these transactions resulted in large inflows of foreign exchange,” Mohr P (2010) – Understanding the Economy.
South African companies are instrumental in improving other African countries through outbound FDI. South African companies like MTN, Nedbank, Standard Bank and Eskom are investing in African countries. These companies are ambassadors of South Africa in Africa and by them investing in Africa they are improving the lives of others by job creation and poverty alleviation in the countries that they invest in.
Internationally, open economies with an export base perform much better in terms of economic growth than do closed economies. Increasingly, production is becoming globally integrated, and South Africa forms a vital part of international supply chains. Therefore, dismantling barriers to trade, especially those faced by South African exporters, is a critical component of any economic strategy that promotes sustainable growth. http://www.southafrica.co.za/about-south-africa/economy
Globalisation and Technology in South Africa
Globalization is not a new phenomenon but through the advancement of technology its impact on the world has had greater significance in today world. Satellite television and the internet have made it possible to find out what is happening around the world by a click of a button. Companies can have board meetings and everyone attending might not be in the same room or even country and by the use of Skype you can have a meeting If South Africa did not embrace globalization the country would have been left behind technologically.
Through globalization South Africa was able to keep up with technology and was even able to become leaders in certain fields. The country is also busy with a lot of research and development on how to improve the existing technology that is available.
The CSIR is one of the largest scientific and technology, R&D and implementation organizations in Africa. The organization undertakes and applies directed research and innovation in S&T to improve the quality of life of South Africans. http://www.southafrica.co.za/about-south-africa/science-and-technology/

Conclusion
By arguing the themes above it is evident that globalization is good for South Africa. It played an important role in bringing the country back from bankruptcy and isolation. It also brings foreign investment into the country which in turn creates jobs and more revenue for the government through taxes. Due to globalization and what comes with it the ordinary South African has benefited as life became easier due to reduced prices of goods and services and job creation. There are also negatives in that not everyone will reap the benefits of globalization. Some industries will suffer like the garment industry and others will prosper like the mining, banking, cell phone and tourism industries. Another problem is that when a global event takes place like the 2010 economic crisis happens it affects all the countries in the world. However the good far outweighs the bad and South Africa is a testament to the fact that globalization is good.

Bibliography 1. Top500 Companies (2012) – Chris Pouroullis–Chairman Manhattan Corporation 2. Bernstein A (2010) – The case for business in developing economies. 3. Mohr P (2010) – Understanding the Economy. 4. http://en.wikipedia.org/wiki/South_african_economy 5. http://www.southafrica.info/global/brics/brics-080411.htm#ixzz1uglGSh1P 6. http://www.southafrica.co.za/about-south-africa/economy 7. http://www.southafrica.co.za/about-south-africa/science-and-technology/

Bibliography: 1. Top500 Companies (2012) – Chris Pouroullis–Chairman Manhattan Corporation 2. Bernstein A (2010) – The case for business in developing economies. 3. Mohr P (2010) – Understanding the Economy. 4. http://en.wikipedia.org/wiki/South_african_economy 5. http://www.southafrica.info/global/brics/brics-080411.htm#ixzz1uglGSh1P 6. http://www.southafrica.co.za/about-south-africa/economy 7. http://www.southafrica.co.za/about-south-africa/science-and-technology/