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Country Commercial Guides for FY 2000: South AfricaReport prepared by U.S. Embassy Pretoria, released July 1999 Note* |
IV. MARKETING U.S. PRODUCTS AND SERVICES1. Distribution and Sales Channels
Approximately 90 percent of South Africa's population is found in areas surrounding the cities of Johannesburg, Cape Town, Durban, Pretoria and Port Elizabeth, which represent the country's major areas of economic activity and consumer markets.
1.1 Gauteng. Previously known as "PWV" - the "Pretoria - Witwatersrand - Vereeniging" area of the Southern Transvaal - stretches from Pretoria, the country's administrative capital in the North, to Vereeniging in the South, with Johannesburg and the Witwatersrand (the industrial and mining belt) straddling the center. Gauteng is the powerhouse of the South African economy, generating approximately 37 percent of the country's GDP, equivalent to 26 percent of the aggregate GDP of the 14 countries comprising SADC, and 9 percent of the continent's GDP. The service sector (including trade, finance, insurance, real estate and business services) is the main contributor to the provinces gross geographic product (GGP), followed by manufacturing.
1.2 Johannesburg. Johannesburg, the commercial and financial hub of South Africa, is located in the center of Gauteng. Industry in the Johannesburg area emphasizes steel, petrochemicals, and manufacturing. As the country's transportation hub, it is the center for all rail and road connections and has the country's major international airport. Johannesburg is 456 miles from Durban and 954 miles from Cape Town.
1.3 Durban. Bounded by the Indian Ocean to the east, the Durban Metropolitan Area (DMA) is the second largest urban area in South Africa and home of the largest and busiest port on the African continent. The triangle of Durban-Pietermaritzburg-Pinetown is the manufacturing core of Natal, and the region contributes approximately 20 percent to national manufacturing statistics. Key industries in the Metropolitan Area include: manufacturing (petrochemicals, textiles, clothing, food processing, and motor components); transport (port and airport); and commerce and services (trade, catering, financial and tourism). Emerging sectors include professional and scientific equipment and nonferrous metals. The past five years has seen a number of multinational companies establishing manufacturing operations in the region. Companies such as Dow, Rohm and Haas, Bayer, Toyota, Borregaad, Hoechst, T&N, and Tridelta have brought over USD 3.5 billion of foreign direct investment into the area. These companies, in a trend that is likely to continue over the next few years, view the DMA as a major center in their global sourcing operations (see the profile on KZN - Region of Opportunity - Appendix G).
1.4 Cape Town. Over the years, the importance of manufacturing and construction has declined as the region's comparative advantages have moved towards agriculture, transport, and commerce. The Western Cape has excellent road, rail and air links, and Cape Town itself has a well-equipped, modern harbor. Cape Town's location along the coast as well as the region's rich farmland, have led to growth in the food processing industry. Cape Town is the country's insurance capital and the home base for most multinational oil companies. Other strong industries include textiles, clothing, footwear, wood and furniture products, chemicals, plastics, machinery, and technology-based industries. Northwest of Cape Town is Saldanha Bay, developed specifically to handle iron ore exports. The port also has potential to handle commercial shipping.
1.5 Port Elizabeth. The Port Elizabeth-Uitenhage Metropole holds a population of approximately 1.4 million people, and is fast gaining the reputation as the "best kept secret" in South Africa for investment. The Metropole is home to some of the largest automotive and component manufactures in the country, and the stage has been set for further investment in the region with an entertainment resort earmarked for the city's beachfront. The Port Elizabeth region is homogenous in its political profile and is thus freeing the economy of any political disruptions. Labor stability has improved dramatically, with labor disruption in the workplace decreasing by 93% thus enhancing the commitment by the labor movement to sustained and viable economic growth. The region is also sufficiently supplied by a large skilled and semi skilled workforce. Crime statistics indicate that the Port Elizabeth region is the safest metropolitan area in Southern Africa.
The Port Elizabeth airport is currently planning to increase its capacity to cater for international flights, which will improve the regions' ability to compete in terms of international trade. Port Elizabeth also has a highly efficient port that operates as a national gateway to the eastern seaboard. The national harbor authorities currently rate the Port Elizabeth port as the most efficient in the Southern African sub-continent region.
Under the new form of governance, it will be increasingly important to do business directly with provincial authorities. The nine provinces of the Republic of South Africa are: Northern Transvaal, North-West Province, Gauteng, KwaZulu-Natal, Mpumalanga, Free State, Eastern Cape, Western Cape, and Northern Cape.
2. Use of Agents and Distributors: Finding a Partner
South Africa offers foreign suppliers a wide variety of methods to distribute and sell their products. These include using an agent or distributor; selling through established wholesalers or dealers; selling directly to department stores or other retailers; or establishing a branch or subsidiary with its own sales force. When appointing a South African distributor, U.S. exporters should take care to find out if the distributor handles a competing product. It has happened that major South African corporations whose holding companies market products competing directly with American products have approached some U.S. exporters.
In South Africa's very competitive marketplace, it is essential that the U.S. exporter provide adequate servicing, spare parts, and components, as well as qualified personnel capable of handling service inquiries. In most cases, servicing should be available locally since potential delays often lead purchasers to seek alternative suppliers.
One of the first steps which an exporter may wish to take in locating an agent or distributor in South Africa is to contact the U.S. Department of Commerce and to register for one of the many services specifically designed to meet the needs of U.S. client companies. The Ronald H. Brown Commercial Center of the U.S. Commercial Service in Johannesburg also offers a number of services, including:
Customized Market Research, tailor made to any requirement and undertaken by contract specialists. Provides in-depth information on any aspect of a particular industry sector.
The Market Probe, developed to assist exporters in exploring the potential of their particular market in South Africa. The service provides 8 hours of targeted market research at a set fee, and may address a number of the client's most pressing concerns as well as providing a list of potential agents/distributors.
"Gold Key" service to arrange appointments for those who visit the country in person.
The Agent Distributor Service (ADS), designed to provide a list of qualified potential agents/distributors for U.S. companies. The Commercial Service has found that the most successful ventures entered into by U.S. companies are those where there has been thorough market research prior to engaging on a search for agents or distributors. Once contacts are established, it is often advisable to visit South Africa, since firsthand knowledge of the market and society is an advantage. Such a visit provides an opportunity for a personal appraisal of the prospective agent or distributor. U.S. exporters should carefully investigate the reputation and financial references of a potential agent or distributor and establish a clear agreement delineating the responsibilities of both the exporter and the agent.
2.1 Selling Through an Agent or Distributor. In South Africa, the terms "Agent" and "Distributor" have a very specific meaning: Agents work on a commission basis after obtaining orders from customers; distributors buy and sell products directly to customers. Agents often distribute durable and non-durable consumer goods, as well as some industrial raw materials. They may be particularly appropriate when products are highly competitive and lack a large market. It is common to appoint a single agent capable of providing national coverage either through one office or a network of branch offices. In addition to their role as the local representatives of U.S. exporters, agents should be able to handle the necessary customs clearances, port and rail charges, documentation, warehousing, and financing arrangements.
Local agents representing foreign exporters, manufacturers, shippers, or other principals outside South Africa who export goods to South Africa, are fully liable, under South African import control law, for all regulations and controls which are imposed on the foreign exporters. Local agents are required to register with the Director of Import and Export Control of the Department of Trade and Industry. It is important for a U.S. exporter to maintain close contact with the local agent to track changes in importing procedures and to ensure that the agent is effectively representing the sales interest of the exporter.
Distributors who buy for their own account and carry a wide range of spares often best handle capital equipment, and also handle commodities such as chemicals, pharmaceuticals, and brand new products on an exclusive basis. Leading distributors often have branches throughout South Africa and sell to both wholesalers and retailers. In some cases, the distributor is also the principal with sub-agents or a major user of the products. For example, there are South African distributors of general aviation aircraft who also run charter aircraft companies using the aircraft they distribute, or distributors of helicopters who also operate helicopter services for crop spraying and the transport of passengers and materials.
3. Franchising
Franchising as a mechanism to expand business was, until the early 1990s, not widely used in South Africa. Traditionally, business concepts that allowed for multi-unit operations have been expanded as company-owned business units operated with employed management. Recent years have seen the popularity of franchising increase significantly, emerging in South Africa as an effective way to conduct and grow successful businesses. Franchising also plays an important role in furthering the development of small and medium businesses. Business format franchising in particular, is a proven business concept offering potential opportunities for interested exporters.
According to the Franchise Association of Southern Africa (FASA), franchise systems have grown by at least 33 percent in number over the past twelve months, with service-orientated franchises making the greatest impact. There are currently some 300 reputable franchisors in South Africa, 150 of whom are members of the Association. FASA's members currently account for almost 10,000 franchise outlets with sales estimated at more than USD 6.8 billion during 1996/7.
By far the largest franchise sector in South Africa is the fast food sector, representing approximately 29 percent of the franchise industry. Over the past eighteen months, however, there has been major growth in non-food retailers, with the service industries showing the greater prominence. In addition, there are many other industries that exhibit promise for future growth, such as automotive, educational training, building and home services, business services, health and beauty services, printing, real estate, and leisure services. In a report on franchising, the Department of Trade and Industry (DTI) suggests that certain enterprises in the informal sector could also be considered as a potential franchise option. It notes that the operation of spaza stores, shebeens, and flea markets, for example, could be greatly improved through the mechanism of franchising. Additional information can be obtained from the Franchise Association of Southern Africa (FASA).
Franchise Association of Southern Africa (FASA) Postnet Suite 267 Private Bag X30500 Houghton 2041 Tel: (27 11) 484-1285; Fax: (27 11) 484-1291 Contact: Mr. Nic Louw (Executive Director) Internet: www.fasa.co.za E-Mail: fasa@faso.co.za
4. Direct Marketing
Although South Africa's foreign exchange controls and import documentation requirements have been relaxed (refer to Sections VI and VIII), it is recommended that overseas firms contract with a South African agent or partner who would be responsible for marketing the product, holding stock, fulfilling purchasing transactions, and remitting revenue to the U.S. company. Companies interested in learning more about South Africa's mail order sector may contact the South African Direct Marketing Association.
South African Direct Marketing Association
P.O. Box 977
Auckland Park, 2006
South Africa
Tel: (27 11) 482-6440; Fax: (27 11) 482-1200
Contact: Mr. Davy Ivins (Executive Director)
5. Joint Ventures/Licensing
Exchange control regulations stipulate that the South African Reserve Bank's (SARB) Exchange Control Section must approve the payment of royalties. When a licensing agreement involves no manufacturing, the request for exchange control approval is sent directly to SARB. When a company is interested in entering into a foreign licensing agreement to manufacture a product in South Africa, the South African licensee must submit an application to the Industrial Development Branch of the Department of Trade and Industry. The application should include a draft licensing agreement and a questionnaire, known as Form MP 337. The Department of Trade and Industry, in turn, will make a recommendation to the SARB. Additional information on licensing regulations can be obtained from the Directorate of Technology Promotion.
Department of Trade and Industry
Directorate: Technology Promotion
Private Bag X84
Pretoria
South Africa 0001
Tel: (27 12) 310-9839
Internet: wwwdti.pwv.gov/dtiwww
Royalty fees are based on a percentage of total ex-factory sales, with a maximum of 4 percent for consumer goods and 6 percent for intermediate and final capital goods. Down payments will not be approved unless actual costs of transferring tangible technology items are incurred. Minimum or annual payments are not acceptable to SARB. Exchange approval will normally be granted for an initial period of five years. Contract conditions involving obligatory purchasing and pricing agreements or requiring the licensee to sole source articles from the licensor are prohibited.
6. Steps to Establishing an Office
The Companies Act of 1973, which is administered by the Registrar of Companies, regulates the formation, conduct of affairs, and liquidation of all companies. The act makes no distinction between locally-owned or foreign-owned companies. Companies may be either private or public. Foreign companies establishing subsidiaries in South Africa must register the subsidiary in accordance with the act. The South African Government contact is the Registrar of Companies.
Registrar of Companies
PO Box 429
Pretoria 0001
Tel: (27 12) 310-9791; Fax: (27 12) 328-3051
6.1 Private Companies. A locally registered private company, identified by the words "Proprietary Limited" (Pty) in its title, is a common form to carry on operations as a subsidiary of another company. Private companies may have up to 50 shareholders, but cannot offer shares to the public or transfer them, and are not required to have a minimum subscription. Private directors need not lodge with the Registrar a written consent, and they need not be South African nationals or residents of South Africa. The registration of a company is established by filing the following information with the Registrar of Companies: a certified copy of the Memorandum and Articles of Association; the registered address; the name and address of the company's local auditor; and a share capital duty receipt. Private companies are not subject to the statutory meeting and reports requirements of public companies and do not have to lodge their annual financial statements with the Registrar.
6.2 Public Companies. Public companies, designated by the word "Limited" or letters "Ltd" in its title, are formed to raise funds by offering shares to the public; therefore, there is no limit on the number of shareholders in a public company. Public companies are required to file annual financial statements and reports with the Registrar of Companies. For public companies that issue a prospectus, proof must be submitted to the Registrar that each director has paid full price for the shares, and the number of shares issued equals the stated minimum subscription. For public companies with share capital, the following must be forwarded to the Registrar: a director's statement that capital is adequate for business operation; particulars of the directors and officers; and proof that the annual duty has been paid. A public company may not commence operations until receipt of the Registrar's certification.
6.3 Close Corporations. Close corporations, designated by the letters "CC" after their names, are a form of business organization unique to South Africa. They can only be organized by natural citizens of South Africa and are limited to a maximum of ten persons. Close corporations are subject to fewer registration and operating regulations than companies.
6.4 Local Branch Offices. Foreign companies may establish a local branch office in South Africa by registering the branch as an "external company" with the Registrar of Companies. Any nonresident or foreign company must register within 21 days of establishing an office in South Africa. Government approval is not required for registration, and there is no requirement that a certain percentage of share capital be held locally. The branch company, within six months after the end of its financial year, must file annual financial statements with the Registrar. Branch profits remitted to a foreign firm's headquarters are not subject to withholding tax. The legal liabilities of a branch are not limited to only its South African assets.
7. Selling Factors/Techniques
7.1 Selling Through Established Wholesalers. Consumer goods requiring maintenance of stocks and industrial raw materials often are exported to South Africa through established wholesalers.
7.2 Selling Through Retailers. Many U.S. exporters of consumer goods sell directly to South African retail organizations, such as consumer corporations, department stores, chain stores, and cooperative groups of independent retailers, which assume the functions of wholesale buying, selling, and warehousing.
7.3 Consumer Retail. Retail trade outlets in South Africa offer the full spectrum available in the United States. These range from the neighborhood convenience drugstore (called a cafe), to the small general dealer, specialty stores handling a single product line (for example, clothing, electronics, furniture), exclusive boutiques, chain stores (groceries, clothing, toiletries, household goods), department stores, cash and carry wholesale-retail outlets, to co-operative stores serving rural areas. About 90 percent of the consumer trade inventories of these stores are domestically sourced. A major phenomenon in South Africa has been the evolution of hypermarkets, which sell large quantities of almost all consumer goods on a self-serve basis. The hypermarkets, located in suburban shopping centers, have disrupted the traditional distribution chain by purchasing directly from manufacturers and bypassing the wholesaler, and with low margins achieving high turnover, thereby placing price pressure on all competing outlets.
8. Advertising and Trade Promotion
South Africa has a sophisticated advertising industry. Advertising agencies provide a full range of services and the majority of the larger agencies are subsidiaries of prominent international agency groups. Major media outlets include television, radio, newspapers and magazines, outdoor advertisements, cinema and the Internet. The deregulation of the airwaves has introduced more competition through a further independent television channel and independent radio stations.
In line with global trends, the impact of recently introduced anti-tobacco legislation will detrimentally affect future advertising expenditure and the profitability of agencies handling tobacco accounts. It is also expected that further legislation regulating advertising in other product categories (e.g., liquor) will similarly be introduced. The Freedom of Commercial Speech Trust, established by the advertising industry in 1997, continues to plan an important role in promoting freedom of commercial speech, self-regulation and the curtailment of proposed government legislation to limit or regulate advertising in various industries.
The four key players in South Africa's advertising industry are the Association of Advertising Agencies (AAA), the Association of Marketers (ASOM), and the two major media bodies, the National Association of Broadcasters (NAB) and the Print Media Association (PMA). AAA has 60 corporate members and owns the AAA School of Advertising, established in 1990 to address the industry's training and manpower development needs.
Advertising agencies in South Africa are no longer solely remunerated by clients on the commission system. Fee arrangements are becoming increasingly evident and specialist media buying companies are taking a growing market share of media purchases in South Africa. Customarily, the various media offer 16.5 percent commission to recognized advertising agencies provided payment is made within the stipulated 45-day period.
Additional information can be obtained from the Association of Marketers (ASOM) and the Association of Advertising Agencies (AAA).
Association of Marketers (ASOM)
PO Box 98859
Sloane Park 2152
Tel: (27 11) 706-1633; Fax: (27 11) 706-4151
Mr. Derrick Dickens (Executive Director)
E-mail: asom@pixie.co.za
Association of Advertising Agencies (AAA)
PO Box 2289
Parklands 2121
Tel: (27 11) 781-2772; Fax: (27 11) 781-2796
Mr. Russell Cory (Financial Director)
Names and addresses of major advertising agents, newspapers, magazines, market research companies, and public relations consultants along with their current rates, can be found in the Advertising and Press Annual of South Africa available from:
The National Publishing Company (Pty) Ltd.
IHS South Africa
PO Box 8147
Johannesburg 2000
Tel: (27 11) 835-2221; Fax: (27 11) 835-2631
Mr. Tim Gray (Executive Director)
E-mail: natpub@lia.co.za
8.1 Languages. The white population speaks Afrikaans and English. The African (black) and Asian populations speak a variety of languages and many also use English and Afrikaans. Printed advertising directed at the nonwhite population is mostly in English; radio advertising is broadcast in nine African languages, and television advertising is conducted in five languages. African language advertising and broadcasting are expected to escalate to reach more black consumers. South Africa has 11 official languages. Based on the most recent data available, the respective percentages of the population speaking each of them are: Zulu (22.4 percent), Xhosa (17.5 percent), Afrikaans (15.1 percent), Pedi (9.8 percent), English (9.1 percent), Tswana (7.2 percent), Sotho (6.9 percent), Tsonga (4.2 percent), Swati (2.6 percent), Venda (1.7 percent), and Ndebele (1.5 percent). Languages used by the Asian population include Tamil (2 percent), Hindi (2 percent), Gujerati (2 percent), and Urdu (1 percent).
8.2 Newspapers. Five daily national newspapers and thirteen weekly national papers are published in South Africa. The major press groups are Independent Newspapers, Nasionale Media Bepeck and Times Media Limited. The national dailies (and their language) include: Beeld (Afrikaans), Business Day (English), The Citizen (English), The Sowetan (English), The Star (English), Die Volksblad (Afrikaans). The national weeklies are: City Press (English), Rapport (Afrikaans), Sunday Times (English), Sunday Tribune (English), Sunday Independent (English), Mail & Guardian (English). There are also several regional newspapers published for the Johannesburg, Durban, and Cape Town areas.
Information about newspapers in circulation can be obtained from the Newspapers Press Union of South Africa. The circulation figures cited below are based upon a survey conducted in June of 1999. The actual readership figure for each paper is actually 3 to 4 times higher than the circulation figure.
Newspapers Press Union of South Africa
Parklands 2121
Tel: (27 11) 447-1264; Fax: (27 11) 447-1289
Mr. Graham Langmead (Executive Director)
Major newspapers in South Africa include:
Business Day
PO Box 1746
Saxonwold 2132
Tel: (27 11) 280-3000; Fax: (27 11) 280-5600
Daily (Monday to Friday); Circulation: 44,042
Internet: www.bday.co.za
The Star
PO Box 1014 Johannesburg 2000
Mr. Gary Pitzer (Advertising Manager)
Tel: (21 11) 633-2417
Daily (Monday to Saturday); Circulation: 166,962
Saturday Star circulation: 145,250
Internet: www.star.co.za
The Citizen
PO Box 7712
Johannesburg 2000
Tel: (27 11) 402-2900; Fax: (27 11) 402-6862
Daily (Monday to Saturday); Circulation: 117,398
Saturday circulation: 112,016
The Sowetan
PO Box 6663
Johannesburg 2000
Tel: (27 11) 474-3740; Fax: (27 11) 474-8834
Daily (Monday to Saturday); Circulation: 209,855
City Press
P.O. Box 3413
Johannesburg 2000
Tel: (27 11) 402-1632 through 9; Fax: (27 11) 402-6501
Daily circulation: 293,258
Sunday World
P.O. Box 30315
Wibsey 1717
Tel: (27 11) 471-4200
Fax: (27 11) 474-8834
Sunday circulation: 26577
Sunday Tribune
P.O. Box 47548, Greyville 4023
Tel: (27 31) 308-2911
Fax: (27 31) 308-2715
Daily circulation: 111,198
The Mail & Guardian
PO Box 32362
Braamfontein 2017
Tel: (27 11) 727-7000
Weekly; Circulation: 36,555
Internet: www.mg.co.za
The Sunday Times
PO Box 1742
Saxonwold 2132
Tel: (27 11) 280-3000; Fax: (27 11) 280-3200
Weekly; Circulation: 476,034
The Sunday Independent
PO Box 1014
Johannesburg 2000
Tel: (27 11) 633-9111; Fax: (27 11) 836-8398
Weekly; Circulation: 42,628
Internet: www.iol.co.za
Beeld
PO Box 5425
Johannesburg 2000
Tel: (27 11) 406-4600; Fax: (27 11) 406-4643
Daily; Circulation: 105,210
Saturday: 91,533
Rapport
PO Box 28052
Sunnyside 0132
Tel: (27 12) 341-0981; Fax: (27 12) 341-4620
Weekly (Sunday); Circulation: 361,666
8.3 Trade Journals. See Appendix C for a listing of trade journals.
9. Pricing Product
Prices are generally market-determined, with the exception of petroleum products and certain agricultural goods. Provisions of the Sales and Service Matters Act (previously known as the Price Control Act) set marking requirements and stipulate that prices cannot be evaded through auction sales. The act also requires that persons offering goods or services for resale keep and retain records for possible recall, indicating purchase costs, manufacturing costs, and selling prices. Changes in the fixed prices are published in the South African Government Gazette (Tel. 27 12-334-4500).
10. Sales Service/Customer Support
For a variety of reasons, including years of economic isolation, private sector and parastatal monopolies, collusion, and the lack of real competition in many sectors, there is in general a lack of a customer service mentality in South Africa. While there has been political emancipation in the New South Africa, the customer is still in many instances at the mercy of the old ways of doing business. There are exceptions, of course, but by and large American companies that bring well-honed customer support systems and attitudes with them to this market will find themselves with a competitive advantage. Queries and complaints may be directed to:
The Consumer Council
Private Bag X091
Marshalltown 2107
Tel: (27 11) 355-8008; Fax: (27 11) 355-8019
Contact: Mr. Moeletsi (Director)
11. Selling to the Government
Government purchasing is a significant factor in the South African economy. Nearly all such purchasing is done through competitive bidding on invitations for tenders, which are published in an official state publication, the State Tender Bulletin, and sometimes in leading newspapers. Although the purchasing procedures of the central government and parastatal institutions favor products of local manufacturers, an overseas firm is not precluded from bidding if the firm has an agent in South Africa to act on its behalf. As a general practice, payment is made to the local agent.
Although there are currently no legislated minimums for majority-owned (non-white) businesses, pressure is growing to include "set-asides" and other preferences for black businesses in national government procurement policy, as some provinces already do, including Gauteng province (comprising Pretoria and Johannesburg). When selling to the government, consideration should be given to the government's priority on accelerating black participation in the economy.
11.1 Central Government Procurement. The South African Government is attempting to centralize and universalize the buying procedures of national, provincial, local, and state-owned corporate entities. Currently, the Chief Directorate of the Office of the State Tender Board in Pretoria and nine provincial offices perform the administrative work of the State Tender Board and provincial tender boards, which has responsibility for procuring for over forty government departments. However, a government appointed task team has recently proposed abolishment of provincial tender boards as part of its Green Paper on Public Sector Procurement.
Purchases are by competitive tender for project, supply and other contracts. Bidders generally need not pre-qualify, but the ability of bidders to supply goods or render a service generally is examined. Foreign firms can bid through a local agent, who will then be so examined. The due date for a bid is usually at least twenty-one days from the publication of the notice. As a general practice, however, a lead-time of thirty to forty-five days is allowed. Bids for government tenders must be on a basis of all costs included to the point where the goods are required. Bids on tenders are to be addressed as indicated in the tender document and must be lodged in a sealed envelope with the tender number, due date and name and address of the tenderer on the outside.
As part of the Government's policy to encourage local industry, a price preference schedule, based on the percent of local content in relation to the tendered price is employed to compare tenders. To claim preference for local content, tenders must enclose with their bid a certificate showing classification of supplies offered in terms of local content, calculated as follows:
Table 2. Competitive Tender Price Preference Schedule
Percent of Local Content Price Preference
Not more than 5 percent 1 Over 5 percent to 10 percent 2 Over 10 percent to 20 percent 3 Over 20 percent to 30 percent 4 Over 30 percent to 40 percent 5 Over 40 percent to 50 percent 6 Over 50 percent to 60 percent 7 Over 60 percent to 70 percent 8 Over 70 percent to 80 percent 9 Over 80 percent 10An additional 2.5 percent preference may be claimed if a product bears the mark of the South African Bureau of Standards. On tenders of less than R2 million the government awards preference points to enterprises and companies operating in South Africa that demonstrate significant ownership or employment of previously disadvantaged individuals. Additional information on tender requirements can be obtained by contacting:
Department of State Expenditurev
Office of the State Tender Board
Private Bag X845
Pretoria 0001
Tel: (27 12) 315-5111; Fax: (27 12) 325-4533
11.2 Offsets and Countertrade. In late 1996, the government approved the Industrial Participation Program (IPP) which mandates a countertrade/offset package for all state and parastatal purchases of goods, services, and lease contracts in excess of USD 10 million. Under the program all bidders on government and parastatal contracts who exceed the imported content threshold must also submit an Industrial Participation package worth 30 percent of the imported content value. The bidder then has seven years to discharge the Industrial Participation obligation. Non-performance of the contract is subject to a penalty of 5 percent of the outstanding Industrial Participation obligation. These IPP requirements have been issued with the tender documentation of all government and parastatal tenders since September 1996 and are overseen by the Industrial Participation Secretariat of the Department of Trade and Industry.
11.3 Parastatals, Local Authorities and Private Buyers. Parastatals, local authorities, and major private buyers such as the mining houses must follow similar practices to the central government. Parastatal procurement is guided by and bound to the schedule of local content preference. Local government purchases are increasingly significant and also involve overseas bidding. With the establishment of nine new provincial governments in South Africa, the prospects for additional government procurement below the central government-level are significant.
12. Protecting Your Product from IPR Infringement
12.1 Protection of Property Rights
Property rights, including intellectual property, are protected under a variety of laws and regulations. South Africa has an independent judiciary under which any threat to property rights may be enforced without political interference.
Patents may be registered under the Patents Act of 1978 and are granted for 20 years. Trademarks can be registered under the Trademarks Act of 1993, are granted for ten years and may be renewed for an additional ten years. New designs may be registered under the Designs Act of 1967, which grants copyrights for five years. Literary, musical and artistic works, cinematographic films and sound recordings are eligible for copyrights under the Copyright Act of 1978. This act is based on the provisions of the Berne Convention as modified in Paris in 1971 and was amended in 1992 to include computer software. The Patents, Trademarks, Designs, and Copyrights Registrar of the Department of Trade and Industry administers these acts.
South Africa is a member of the Paris Union and acceded to the Stockholm text of the Paris Convention for the protection of industrial property. South Africa is also a member of the World Intellectual Property Organization (WIPO). The Government passed two IPR-related bills in parliament at the end of 1997 -the Counterfeit Goods Bill and the Intellectual Property Laws Amendment Bills, thereby enhancing its IPR protections.
While South African IPR laws and regulations are largely in keeping with TRIPS (Trade Related Aspects of Intellectual Property), there is concern about increasing copyright piracy and trademark counterfeiting. The U.S. copyright industry estimates trade losses due to piracy of copyrighted works increased by more than 35 percent between 1997 and 1998. The U.S. is working with the South African Government to find ways of raising awareness and ensuring that all government offices in South Africa use only legitimate software. The South African Government recently took the positive step of adopting an implementing strategy to its 1997 Counterfeit Goods Act, which could strengthen enforcement. South Africa is required to bring its IPR regime into full compliance with TRIPS before the treaty's required deadline of January 1, 2000.
The U.S. and South African governments have held extensive consultations to clarify a section of the South African Medicines Act which appears to grant the Minister of Health broad powers in regard to patents on pharmaceuticals. Due to a separate constitutional challenge to the law brought by private parties, the law has not been implemented.
Additional information on South African rules and registration procedures for patents, trademarks, and copyrights can be obtained from:
Department of Trade and Industry
Trademarks, Patents, Design and Copyright
Private Bag X84
Pretoria 0001
Tel: (27 12) 310-8700/8707; Fax: (27 12) 323-4257
Internet: wwwdti.pwv.gov/dtiwww
13. Need for a Local Attorney
U.S. companies seeking legal representation in South Africa should contact the Commercial Service office in Johannesburg for a list of local attorneys. For additional information, contact the Law Society of the Transvaal.
Law Society of the Transvaal
PO Box 1493
Pretoria 0001
Tel: (27 12) 323-0400; Fax: (27 12) 323-2606
Mr. M.J.S. Grobler (Executive Director)
The following attorneys's firms offer useful information on their websites:
www.werkmans.co.za
www.gjw.co.za
www.alevy.co.za
www.ir-net.co.za
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[end of document] Note* International Copyright, United States Government, 1999. All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title 17, United States Code.
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