WT/TPR/S/34 Trade Policies Review
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IV. TRADE POLICIES AND PRACTICES BY SECTOR
(1) Introduction
1. South Africa has a relatively diversified economy at the core of which is the mining and
quarrying sector.  A long-standing and relatively expensive import-substitution strategy, maintained
during the period of international sanctions against South Africa, nevertheless contributed to the
development of forward and backward links between the different sectors of the economy.  The major
goal of the agriculture sector was South Africa's se lf-sufficiency in food;  the mining and quarrying
sector provided inputs to manufacturing industries and for the production of utilities (e.g. electricity
and oil) to meet domestic demand, particularly fo llowing international embargoes.  Control boards
and state-owned enterprises were established to suppo rt the system.  However, the inefficiencies and
resultant high costs induced by the import-substitution strategy and foreign pressure contributed to
timid trade liberalization processes during the 1970s and the 1980s.  Since 1992, with the phasing-out
of the sanctions, trade policies and practices in the individual sectors of the economy have come under
review, especially with a view to liberalization;  the process of deregulation and of introducing an
outward-oriented trade strategy begun by the previous Government has been continued.  There have
been tangible results from the liberalization process and from the review of the various incentives
provided by the Government, including through the Industrial Development Corporation (IDC) to
support the system;  incentive schemes are still concentrated in mining and quarrying activities, which
received the largest share of the financial assistance (Chart IV.1), but mainly for mineral processingpurposes.
05101520Chart IV.1
Sectoral distribution of IDC financial assistance, July 1992 - December 1996
a                 b                c                d                e                f                  g               h                i                 j                 k                l                 m               n       
a     Agriculture
b     Food
c     Textiles & clothingd     Fabricated metal productse     Rubber & plastic products f     Motor vehicles & components
g    Chemical products
h    Tourist accommodation
i     Machinery & equipment
j     Furniturek     Non-metallic mineral products
l      Basic metals
m    Paper & paper products
n     Others(Per cent) 65 %
Source :     Data provided b y the Industrial Develo pment Cor poration (IDC).% of total number of 
approved applications% of total value of 
approved applicationsRepublic of South Africa WT/TPR/S/34
Page 87
2. The agricultural sector accounts for less than 6% of South Africa's real GDP and usually
contributes between 8 and 10% to its merchandise exports (in nominal terms).  The sector has beenprotected mainly by means of non-tariff measures.  Since 1992, the Government has been liberalizing
the marketing boards  of agricultural products.  Agriculture provides inputs to industries, those
processing food in particular.  South Africa's manufacturing sector, protected by means of various
types of duties, is diversified.  The sector co ntributes some 24.5% to South Africa's real GDP.
Textiles, clothing and related products are the most tariff-protected branch of the manufacturingsector (Chart IV.2).
3. The contribution of the mining and quarrying sector to South Africa's GDP and exports has
declined following the continued decline in gold production since the 1970s.  However, minerals and
mineral products still account for more than 40% of South Africa's total exports of goods, with gold
representing more than 50% of the value of mineral exports.  Tariff protection for the sector is
relatively low.
4. Services account for more than half of South Africa's GDP.  Two state-owned enterprises,
Telkom and Transnet, dominate the services sector and are operating under monopoly or hold
exclusive rights in several branches of the sector, telecommunications and transport in particular.  The
liberalization of services should improve the efficiency of the other sectors and the competitiveness of
South Africa's exports, especially by reducing costs related to telecommunications and transport.
(2) Agriculture, forestry, fisheries and related activities
(i) Main features
5. South Africa's land area suitable for agriculture covers 103 million hectares (ha.) equivalent
to about 84% of South Africa's surface area;  about 70% of the 103 million ha. is appropriate for
animal grazing and around 15% is potentially arable land.  Forestry land represents 1.1% of
South Africa's land area.  The province of Western Cape holds the largest share of agriculturalproduction (nearly 22%) followed by KwaZulu-Natal and the Free State (nearly 15% each);  livestock
is also important in these three provinces.
1  Field crops are grown mainly in the provinces of Free
State and KwaZulu-Natal.  Western Cape produces about 50 per cent of South Africa's horticultural
crops.
6. South Africa's agricultural sector is dualistic;  modern large farms, the commercial branch of
the sector, coexist with small-scale units whose owners rely largely on traditional farming methods
and farm on a subsistence basis.  Commercial farms hold about 86% of agricultural land;  these farms
and those producing predominantly field crops are located mainly in the provinces of Free State
(4.2 million ha.), Mpumalanga (1.7 million ha.) and KwaZulu-Natal (1.2 million ha.).  A decline in
the number of commercial farms and in their full-tim e employment, and an increase in their average
size and specialization has been recorded for almost three decades.  Small-scale farmers provide
varying support to 68% of the rural population with crops grown on the 14% of the agricultural landthat they farm.  Most of the small-scale farmers supplement household income from sources other
than agriculture.  The ratio of arable land to rural population is 0.2 ha. per person in small-scale
farming areas compared with 2.5 ha. per person in commercial farming areas
2;  the small-scale and
commercial farming branches employ  roughly the same number of people.
                                                     
1The percentages refer to total agricultural production in 1991.
2The average farm size is 3,974 ha. in Northern Cape, Government of South Africa (1996i).  The
average size of farms in rural KwaZulu-Natal is 0.75 ha. and most farms are smaller than 2 ha..WT/TPR/S/34 Trade Policies Review
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111
121122
130210
220230
290311
312313
314321
322323
324331
332341
342351
352353
354355
356361
362369
371372
381382
383384
3853900102030405060Per centChart IV.2
Average South African tariffs by ISIC classification, 1997
Source :  Data provided by the South African authorities; and estimates by the WTO Secretariat.ISIC
111
121
122130
210
220
230
290
311-312
313
314321322
323
324331332
341
342351352
353
354
355
356361362
369
371372381
382
383384385
390Major groups
Agriculture and livestock production
Forestry
LoggingFishing
Coal mining
Crude petroleum and natural gas production
Metal ore mining
Other mining
Food products
Beverages
TobaccoTextilesClothing
Leather poducts
FootwearWood productsFurniture except metal
Paper products
PrintingIndustrial chemicalsOther chemicals, incl. pharm.
Petroleum refineries
Petroleum and coal products
Rubber products
Plastic productsPottery and chinaGlass and products
Other non-metallic mineral products
Iron and steelNon-ferrous metalsFabricated metal products
Non-electrical machinery incl. computers
Electrical machineryTransport equipmentProfessional and scientific equipment
Other manufactured productsISICRepublic of South Africa WT/TPR/S/34
Page 89
7. Agriculture, forestry and fisheries employ less than 10% of the economically active
population and accounted for 5.6% of real GDP in 1996 as against 6.3% in 1988.  A downward trend
of the share of the sector in South Africa's real GDP has been recorded since 1985.  Significant
forward and backward linkages exist between agriculture and the other sectors of the economy:
agriculture provides inputs to industry and is a beneficiary of intermediate inputs from the other
sectors.
8. Exports represent about 30%, on average, of the value of annual agricultural production in
South Africa.  The share of agricultural products in South Africa's foreign trade (both imports and
exports) has been increasing since 1990:  earnings from agricultural exports were 8.7% of the value of
total exports in 1990 and 10% in 1995;  the value of agricultural imports were 10.1% of total imports
in 1995 as against 4.9% in 1990.  South Africa's major agricultural exports include maize and maize
products, wool, mohair, hides and skins, deciduous fru it, citrus fruit, table grapes, preserved fruit and
jam, wheat products, cut flowers and bulbs, wine, sugar, and groundnuts;  major agricultural imports
include rice, coffee, cottonne, vegetable oils, wheat, dry beans, sisal, cocoa beans, bananas,unprocessed rubber, tea and oilseeds.  In addition to these export products, South Africa produces,
inter alia , vegetables, grain sorghum, wheat, subtropical fruit, oats, barley, rye, lucerne seed, dry peas,
lentils, chicory root, sunflower seed, soya beans, wattle bark, sisal, nuts, potatoes, rooibos tea, tobacco
and hay.  The national herd comprises cattle, sheep, goats, poultry and ostriches.  Farmers have been
substituting horticultural products, livestock and animal products for field crops since the early 1980s;therefore, a decline in the production of field crops (maize in particular) has since been recorded
(Chart IV.3).  Forestry is being developed and fishing is severely regulated in South Africa.
9. There has been a decline in annual real net fixed investment in agriculture since the 1980s.
Total capital investment in the sector increased by only 1.5% (in nominal terms) during the
period 1990-95.  In 1995, gross domestic fixed investment in agriculture was R 1,815 million inconstant 1990 prices.  Total capital assets of commercial farmers amounted to about R 77 billion in
1995, with fixed assets representing nearly two thirds of this value.  Rapid increases in input prices
compared with producer prices, the decline in the Government's agricultural budget in both nominal
and real terms since the mid-1980s, high real interest rates and the slowing of agricultural investments
have negatively affected the sector and contributed to the weakening of the financial position ofSouth African farmers.  Indeed, the substitution of non-farm inputs for labour and land since the
1980s has led to the increase in the prices of those inputs;  the resultant intensive use of labour and
land contributed to an increase in their productivity.  The depreciation of the rand since early 1996 has
fuelled the increase in the prices of non-farm inputs while the prices of locally produced goods are
still set relatively low in comparison with increasing prices of imported inputs.
10. South Africa's agriculture is vulnerable to unfa vourable weather conditions;  only about 8% of
arable land is under irrigation.  Recurrent droughts have contributed to large fluctuations inagricultural production, mainly livestock and maize;  the 1992 drought was the worst in South Africa's
history.  Other factors, including topographical impediments, reduce the area of available agricultural
land that can be brought under conventional cultivation.WT/TPR/S/34 Trade Policies Review
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1981 82 83 84 85 86 87 88 89 90 91 92 93 94 95 19960102030405060Chart IV.3
Contribution of the main branches to gross value of  agricultural 
production, 1981-96
      Information provided by the South African authorities. Source :Field crops Horticultural crops Animal products(Per cent)
(ii) Policies, objectives and instruments
11. The major objective of agricultural policy in South Africa has shifted from food self-
sufficiency to food security, at both household and national levels;  agriculture is to ensure a secure
supply of food to the consumer at "reasonable" prices.3  Therefore, the main mission assigned to
South Africa's agricultural policies is to ensure more equitable access to agriculture (including
production factors, inputs and assistance) and more productive use of agricultural resources, with a
view to promoting the development of the rural se ctor and uplifting, in a sustainable manner, the
general standard of living in rural areas via the enhancement of the beneficiaries' wealth.  Freer
national and international movement of commodities, at more affordable prices for consumers, is to
be developed without compromizing the national agriculturally based industries, "reasonable" returns
to farmers and long-term agricultural viability.  Farming systems, more adapted to the natural
resource base and variable climate of South Africa, are to be developed and used.  Farmers will be
encouraged to make provision for drought periods as a normal phenomenon and the development and
use of hardy crop varieties will be promoted.
12. Under the 1996 Constitution, agriculture, incl uding the marketing of agricultural products
falls within the authority of provincial governments;  support services, such as training, extension
services and information on the sector are provided without charge by the provincial departments of
agriculture.  At the national level, regulatory functions, as well as the delivery of certain services, are
performed by the National Department of Agriculture and research support services are rendered by
                                                     
3In the South African definition, food security means access by all people at all times to enough food
for an active and healthy life.Republic of South Africa WT/TPR/S/34
Page 91
the Agricultural Research Council (ARC), whic h employs 3,000 persons and comprises 11 research
institutes.
13. Marketing schemes for agricultural products, set up under the 1968 Marketing Act (as
amended), have been notified by South Africa to the WTO as state trading under GATT
Article XVII.4  Each scheme is administered by a control board.  The number of boards was reduced
from 22 in 1992 to 14 in June 1997.  The boards currently administer three basic types of scheme.
The Wheat Board, the Dried Fruit Board, the Citrus Board and the Deciduous Fruit Board operate
single-channel pool schemes, under which producers market their goods through a board-operated
pool;  they receive advance payments on delivery of their crops and deferred payments once final pool
proceeds have been realized.  The Oilseeds Board, the Lucerne Seed Board, the Meat Board, theMohair Board, the Sorghum Board and the Maize Board (until the end of April 1997) operate
surplus-removal or floor-price schemes.  Under the schemes, some at which are voluntary, the boards
only intervene when prices drop below a fixed floor price;  the surplus is purchased for redistribution
or resale at a later date, or for export.  The Wool Board, the Cottonne Board, the Milk Board and the
Canning Fruit Board currently operate supervisory schemes:  under these, the board arranges contractsbetween producers and buyers.  The Cooperative Wine Growers Association (KWV) controls the
marketing of wine.
14. The control boards operate under the supervision of the Minister of Agriculture;  their
members, mostly farmers, are appointed by the Minister.  The National Marketing Council advises the
Minister on issues relating to the marketing of agricultural products.  Prices fixed by the boards mustbe approved by the Minister.  In certain cases, including the Dried Fruit Board, the boards may
appoint agents to purchase and pay the producers directly;  the agents are paid on a commission basis.
Products marketed through the boards are destined for sale in "controlled areas" where most
production and consumption occur;  in the case of wheat, all of South Africa is a controlled area.
Outside controlled areas, no levy is payable and sales occur without any price or supply intervention;
as a result, regional market segmentation occurs.  To ensure a better price for higher quality produce,
sales of inferior products may be prohibited on the local market in the controlled areas.
15. All boards have either overt control over, or tacit influence on, conditions for international
trade in their commodities.  The administrative expenses of the boards are financed by ordinary levies,
typically paid by producers in controlled areas.  Special levies are also collected to finance price
stabilization funds, surplus disposal and exports, handling, advertising, research, inspection services
and payments to the South African Agricultural Union, to finance its activities(Chapter III(2)(iii)(d)).
5  The Maize Board was closed on 30 April 1997.
16. Import and export controls on agricultural products are effected by means of permits issued
by the Director of Imports and Exports, Departme nt of Trade and Industry, on the recommendation of
the Department of Agriculture.  Import controls apply to fish, crustaceans and molluscs, dairy
products, oats and maize, wine, vermouth, fermented beverages and ethyl alcohol (Table III.9).Coffee and wattle seeds are subject to export controls (Table III.13).  Veterinary permits are required
for the importation of live animals, and imports and exports of plants and plant products are subject to
                                                     
4WTO document G/STR/N/2/ZAF, 16 September 1996.
5See GATT (1993) for more details on the functioning of the boards.WT/TPR/S/34 Trade Policies Review
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authorization and certification (Chapter III(2)(ix)(b)).6  Under the 1990 Agricultural Products
Standards Act, quality, compositional, marking a nd labelling requirements apply to agricultural
products sold in, or exported from, South Africa (Chapter III(2)(ix)(c));  imported products must
comply with the same standards set for local products.  The Act requires the inspection of most
animal products, citrus, subtropical and deciduous fruit, and certain processed products, including
canned vegetables, fruit and food, before exportation;  fresh produce is tested for pesticide residue
levels.  Fees charged for the inspection of agricultural standards range up to 12.1 cents per kg. of redmeat or part thereof in a consignment;  the fees may vary depending on the inspection point.  Certain
agricultural imports, eligible for preferential tariff treatment under bilateral trade agreements to which
South Africa is a party, are subject to an additional permit;  this is the case for dairy products,
potatoes, coffee, tea and unmanufactured tobacco under the agreement with Malawi, and for all
agricultural products (except a limited number of products such as vegetables, tea and fruit juice)
covered by the agreement with Zimbabwe.  South Africa applies tariff quotas to imports (including
agricultural imports) from Mozambique that are eligible for non-reciprocal tariff treatment(Chapter II(5)(iii)).
17. Tariffs on imports of agricultural products, including forestry and fishing, range from zero to
35%, with a simple average of 5.6%.  Imports of ag ricultural products, such as live animals, seeds,
fruit and spores of a kind used for sowing, logging products, and some products of animal origin are
duty-free;  ad valorem  tariff rates on farm, livestock and forestry products are on average lower than
the mean tariff rate in the sector;  fishery products carry rates that are on average higher than the
mean.  Higher tariff rates, ranging up to 55%, apply to processed food and beverages (Table AIV.1).
Formula duties apply to certain preparations of toma to, cornflour, cherries and tobacco (Table III.2).
The majority of South Africa's specific duties are applied in agriculture, mainly dairy products,
beverages, meat and edible meat offal, products of the milling industry, sugars and sugarconfectionery, and to fishery products. Incentives specifically available to farmers include the
Orchards Scheme (Table AIII.3).
18. In the Uruguay Round, South Africa committed itself to fill quotas, under the minimum
market access commitments, at a maximum tariff of 20% of the bound rates.  Products subject to the
commitments include animal products, potatoes, vegetabl es, fruit, cereals, coffee, tea, oil seeds, sugar,
food preparations, wine and spirits, vinegar, tobacco, and cottonne.  Initial quotas are expected to
increase for, inter alia , meat of sheep, fresh milk and cream, cheese, eggs, certain cereals, potatoes
and sugar (Table IV.1).  According to the authorities,  rebate facilities are being administered to fulfil
South Africa's commitments regarding minimum market access;  in consequence, no quantitative
restriction formally applies to these products.
                                                     
6South Africa is a member of the Internatio nal Plant Protection Convention (IPPC) and the Office
International des Epizooties .  Inspection fees charged by the Perishable Products Export Control Board range
from R 3.41 per pallet of deciduous fruit to R 10.20 pe r pallet of avocados;  and R 0.0028 per kg. of foreign
meat to R 0.0138 per kg. of flowers, bulbs and proteas.  The fees range up to R 8.80 per integral container for
the transport of perishable products.Republic of South Africa WT/TPR/S/34
Page 93
Table IV.1
Tariff quotas in terms of South Africa's minimum market access commitments
Product description Tariff heading
HS lineQuotas
Initial quota (1995) Final quota (2000)
Meat of bovine animals 02.01
02.0226,254 26,254
Meat of swine 02.03 2,814 4,691
Meat of sheep 02.04 3,601 6,002
Edible offal 02.06 2,544 2,544
Meat and edible offal of poultry 02.07 17,420 29,033
Milk and cream fresh 04.01 32,194 53,657
Milk powder 04.02 4,470 4,470
Buttermilk and yoghurt 04.03 213 213
Whey 04.04 2,786 2,786
Butter 04.05 1,167 1,167
Cheese 04.06 1,557 1,989
Eggs 04.07
04.085,400 9,000
Potatoes 07.01 28,897 48,161
Chicory, fresh 07.05.20 4 4
Peas and beans, fresh 07.08 263 263
Vegetables, frozen 07.10 583 583
Dried vegetables 07.12 860 860
Dried peas 07.13.20
07.13.905,184 5,184
Dried beans 07.13.30 11,063 11,063
Lentils 07.13.40 1,601 1,601
Grapes, dried 08.06.20 238 397
Dried fruit 08.13 259 349
Coffee 09.01 15,746 15,746
Tea 09.02 11,375 11,375
Wheat or wheat equivalent 10.01 ex 11.00 97,333 108,279
Rye 10.02 50 83
Barley 10.03 14,552 14,552
Oats or oats equivalent 10.04 ex 11.00 7,333 7,333
Maize or maize equivalent 10.05 ex 11.00 161,400 269,000
Grain Sorghum 10.07 12,670 21,116
Other cereals 10.08 145 145
Barley equivalent Ex 11.00 96,248 96,248
Soya beans 12.01 1,030 1,717
Groundnuts 12.02 7,908 7,908
Linseed 12.04 202 202
Rapeseed 12.05 871 871
Sunflower seed 12.06 8,709 14,514
Lucerne seed 12.09.21 576 576
Vegetables oils 15.07
15.0815.10 - 15.1561,083 61,083
Sugar 17.01 46,667 62,037
Other sugars 17.02 6,391 6,391
Table IV.1 (Cont'd)WT/TPR/S/34 Trade Policies Review
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Product description Tariff heading
HS lineQuotas
Initial quota (1995) Final quota (2000)
Molasses 17.03 20,720 34,533
Malt extracts 19.01 6,119 6,119
Pasta 19.02 1,749 1,749
Tapioca 19.03 5,448 5,448
Preserved fruit and nuts 20.08 ex 1,636 1,636
Food preparations 21.06 3,109 3,109
Wine and spirits LI AA 22.04 - 22.08 9,572,405 9,572,405
Vinegar LI 22.09 9,000 15,000
Corn gluten feed 23.03 3,960 3,960
Oilcake 23.04 - 23.06 120,667 120,667
Tobacco 24.01 16,773  16,773
Cotton 52.01 17,101  17,101
Source:  Data provided by the South African authorities.
19. South Africa has tariffied quantitative restrictions on all agricultural products, except black
tea, and bound 87.2% of the tariff lines (at the eight-digit level) HS Chapters 01-7 ; ceiling bound rates
range up to 399.9% on certain spirits (Chapter III(2)(iii)(b)).  South Africa bound tariffs on all
products covered by the WTO Agreement on Agriculture, except certain albuminoidal substances
based on eggs (HS 35 02 10 90);  it also bound normal and specific levies (other duties and charges)
on agricultural products (Table III.4).  "As a result of the substantial inflation rate experienced by
South Africa during the period under review, together with the marked reduction in the value of the
South African rand over the same period and the widely fluctuating crop harvests as a results of theweather, the AMS has been calculated in real terms, in US$ terms and in percentage terms."
8
South Africa is to reduce its base AMS, estimated at R 2,519.28 million, by the agreed 20% over thesix-year period ending 2000.
20. Several investigations into South Africa's agricultural policies, in particular the 1992
investigation of the Committee of Inquiry into th e Marketing Act (CIMA), were commissioned by the
Government;  wine and sugar were not covered by the investigations.  The major finding of theinvestigations was that the Act had not achieved its intended goals;  it favoured large-scale farmers
and did not promote efficient production, demand and consumption.  The price mechanism set under
the Act operated against producers and led to a growing gap between producer and consumer prices.
Moreover, the introduction of control boards had limited the ability of producers to anticipate and
respond suitably to the scope of foreign competition and to bargain with the relatively small number
of buyers of their products.
9
21. In consequence of the investigations, the Mini ster of Agriculture appointed an Agricultural
Marketing Policy Evaluation Committee (AMPEC), comprising representatives of the majorparticipants in agricultural marketing, to evaluate, inter alia , the recommendations emanating from
                                                     
7The bulk of unbound tariff lines (excluding petroleum products) is on fishery products and
preparations thereof (HS Chapters 03, 15 and 16).
8South Africa's Uruguay Round Schedule XVII;  AMS means Aggregate Measurement of Support.
WTO document G/AG/N/ZAF/13, 6 November 1997, contains information on domestic support commitments
for 1996 notified by South Africa.
9Government of South Africa (1996d).Republic of South Africa WT/TPR/S/34
Page 95
the investigation committees and the merits of specified trade policy instruments used by
South Africa.  On the basis of the recommendations of AMPEC, the Government undertook a revisionof its agricultural policies, including the marketing of agricultural products.  In keeping with the
Reconstruction and Development Programme (RDP), a White Paper published in 1995 set the basic
principles for the formulation of South Africa's agricultural policies.  The present uneven income
distribution in agriculture and rural communities is to be addressed by broadening access to
mainstream agriculture for the emerging farmers via land reform, technical and financial assistance,improved infrastructure, training and other supply-side measures.
10
22. Awareness of the South African farmers' weaknesses in marketing their products directly(partly a consequence of the regulatory environment), and the structural adjustments required for the
reform of the marketing system, led the South Af rican Future Exchange (SAFEX) to establish a
national electronic auction system, the Agri-Marketing Exchange (AMEX), which started trading on
31 July 1995.  Agricultural products marketed through AMEX include chilled beef, grains, oil seeds,
potatoes, calves, sheep carcases, maize, sunflower seed and feedgrade wheat.  Also, the Marketing ofAgricultural Products Act (Act No. 47) was passed in 1996, and came into force in January 1997, to
replace the 1968 Marketing Act.  The Act is aimed at promoting the deregulation of the current
marketing systems by contributing to increased mark et access for all market participants;  promoting
the efficiency of the marketing of agricultural products;  optimizing export earnings from agricultural
products;  and enhanced viability of the sector.  In this connection, the control boards were requestedto submit business plans within one month following entry into force of the Act, to conclude their
business and wind up their affairs within one year (two years maximum) after the first meeting of the
National Agricultural Marketing Council (NAMC), held on 6 January 1997.
11  The Act allows,
inter alia , the imposition of levies, the conduct of pools, and the control of exports and prohibition of
imports and exports of agricultural products.  However, according to the authorities, no more than aminimum degree of government intervention in the marketing of agricultural products is to result
from the marketing reform.
23. According to the authorities, agricultural rest ructuring, including land reform, must preserve
the current contribution of the sector to the overall economy.  While formulating agricultural policies,
the Government is to take account, under the Act, of the advantages of labour-intensive production aswell as of the potential of different regions.  Aware of the fact that commercial farmers have better
access to research, technology and cooperatives than the small-scale farmers, the Government has
decided to give higher priority to small-scale farmers in its funding of research.  Greater focus is to be
placed on the user-charge principle in respect of water, research and other services;  the cost of water
provision for irrigation farming will be increased.  The Government is also to promote a more
equitable distribution of land;  a Restitution of Land Rights Act (Act No. 22 of 1994) has been
enacted by Parliament and a Land Claims Court was established in November 1995 to address theissues of restitution for those dispossessed of their land during apartheid.  Financial systems will be
developed and a settlement grant of R 15,000 per household will be provided to resource-poor and
                                                     
10The 1993 interim Constitution required that a new policy be established for agriculture and that land
reform be implemented to favour new entrants in agriculture.
11NAMC is an advisory organ comprising all stakeholders in the agricultural sector.WT/TPR/S/34 Trade Policies Review
Page 96
beginner farmers in order to enable them to purchase land and agricultural inputs.12  The 1996 Land
Reform Act (Act No. 3) which came into force on 21 February 1997 protects existing tenants' rightsand offers them the possibility of fair acquisition, from the owner, of the land they live on.
24. Agriculture is to be protected "primarily" by tariffs;  the Minister of Trade and Industry will
consider reports and recommendations of the Board on Tariffs and Trade (BTT) with regard to
agricultural products in the light of the opinion of the Minister of Agriculture.
13  AMPEC proposed
that tariffs on agricultural products be fixed on the basis of price bands and be automatically adjustedaccording to a predetermined formula based on international prices.
14  This would be achieved by
increasing the level of tariff protection when international prices are relatively low and reducing it
when international prices are relatively high.  Such a system was applied in the case of tariff
protection for maize and has been applicable on wheat since the end of 1995;  the applicable tariff on
wheat is calculated by using the four-week average of the Argentinian Trigo Pan Price of wheat as
published in the IWC Grain Market Report (London).
(iii) Policy by type of product
(a) Maize and other food crops
25. Maize, the predominant crop and staple food in rural areas, in normal years accounts for about
one quarter of the value of horticultural and field crops;  however, the production of maize is more
affected by drought than other crops (Chart IV.4) .  Maize is grown by both commercial and small-
scale farmers.  Commercial farmers also grow wheat and vegetables.  Households are generallyengaged in mixed cropping.  Other important crops cultivated by small-scale farmers for subsistence
purposes include sorghum, millet, cowpeas, beans, melons, gourds, pumpkins and sweet reed.
Bananas are produced for domestic consumption and represent about 34% of the gross value of
subtropical fruit produced in South Africa.  Horticultural products such as vegetables are mostly for
local consumption.
26. South Africa is self-sufficient in terms of all important field crops (except rice) and
horticultural products (except coffee, cocoa, tea and spices), with self-sufficiency indices of 134% and
152% respectively, in the 1980s;  these indices were just over 100% in recent years.
15  However, the
substitution of rice and potatoes for maize by consumers, combined with high average growth rates of
consumption of field crops and horticultural prod ucts in comparison with growth rates of the
population in recent years, has raised government concerns about future self-sufficiency in food.16
                                                     
12In accordance with the recommendations of the Commission of Inquiry into Rural Financial Services
(Strauss Report) which was approved by Cabinet, the Department is in the process of developing agriculturalfinance support interventions with the aim to broaden access to agricultural finance to the developingagricultural sector.
13Previously, prior to the tariffication that resulted from the Uruguay Round, protection was afforded to
local producers of agricultural goods "primari ly" through quantitative import restrictions.
14Government of South Africa (1994b).
15The self-sufficiency index in terms of a product is the ratio of local production of the good to its
consumption.
16Government of South Africa (1996i).Republic of South Africa WT/TPR/S/34
Page 97
1992 1993 1994 1995 1996020406080100Chart IV.4
Gross income from field and horticultural crops, 1992-96
Source :  Information provided by the South African authorities.a            In general, sunflower seeds account for more than two thirds.(Per cent)
Maize
ViticultureOther field crops
Deciduous and 
other fruitCitrus fruit
Other horti-
cultural prod.Vegetables
Groundnuts and
sunflower seedsSugar cane
Wheat
a
27. Tariffs on imports of cereals range from zero on products such as rye, barley, oats, maize and
rice to 25% on, inter alia , millet and canary seed;  higher rates ranging up to 50% apply to products of
the milling industry.  Imports of canned fruit and vegetables are subject to tariffs ranging up to 55%,
with an average rate of 15.6%.  Prepared foodstuffs are subject to specific excise duties.  South Africa
is a signatory to the 1995 Grains Trade Convention.
28. Until 1997, the Maize Marketing Scheme applied to maize and maize products.  The Maize
Board, a self-financed institution, was the sole authorized exporter of maize;  it operated a floor-priceand a surplus-removal system in the form of a voluntary export pool, in order to provide a certain
price stability to producers.  The Minister of Agriculture determined the maximum quantity to be
exported in each season.  Maize delivered to the export pool could be sold by the Board back onto the
domestic market at a price of import parity plus R 20 per tonnene.  The Board did not control imports;
maize prices were market determined.  The Maize Marketing Scheme was substantially liberalizedbefore being terminated on 30 April 1997.  Table IV.2 provides data on production, consumption and
trade of maize over the period 1992-96.WT/TPR/S/34 Trade Policies Review
Page 98
Table IV.2
Maize production, consumption and trade, 1992-96
('000 tonnes)
Year Imports Exports Production Consumption Stock levels Balancea
1992 3,949 408 2,955b6,828 701 369
1993 0 1,447 9,077 6,773 1,754 2,611
1994 0 4,719 12,067 6,417 3,304 4,235
1995 1,119 887 4,406b6,842 849 -1,355
1996 139 2,656 9,694 6,738 946 1,385
a Balance = Imports - Exports + Production - Consumption + Stock levels.
b Shortfall of production i.e. local production is lower than consumption.
Source: Information provided by the South African authorities.
29. The Wheat Board operates a single-channel, fixed-price system, for locally produced wheat
and barley;  it appoints agents for the purchase and distribution of these cereals.  The prices at which
the Board buys and sells wheat and barley are annually determined on a basis negotiated between
interested parties and approved by the Minister of Agriculture.  The Wheat Board set the minimumprice per tonnene of R 1032 (US$ 219) for the 1996/1997 season.
17  The Board, or any person it
authorizes by permit, is responsible for both imports and exports of wheat and barley.  In the case of
oats, producers have been permitted to sell directly to consumers.  The Sorghum Board operates a
voluntary pool system under which exports are subject to permits, with the annual maximum volume
of sorghum exported subject to approval by the Minister of Agriculture.  The Sorghum Board was tobe disbanded on 30 September 1997 and the Wheat Board on 31 October 1997.
(b) Export crops
30. South Africa is normally a net exporter of agricultural products;  it has recorded a strong
growth of agricultural exports since 1984.  Agricultural exports increased by 84.9% between 1993 and
1995 largely because of rapid growth in exports of fruit to Europe and the Far East (following the end
of the international embargo against South Africa).  The Government is investigating the possibilities
for greater diversification of agricultural export markets.
31. South Africa, in a normal year, exports groundnuts, cut flowers and bulbs, wine, deciduous
fruit, preserved fruit and jam, and maize and maize products.  Horticultural crops are grown mainly in
the Western Cape, and subtropical fruit is grown in the Northern Province and Mpumalanga.  Apples
and table grapes, the most important varieties of deciduous fruit exported by South Africa, annually
earn some R 1 billion in exports;  the area planted in these fruits is about 36,000 ha.  Together withpears, these two varieties of deciduous fruit account for more than 80% of the gross value of
deciduous fruit produced in South Africa.  Other varieties exported include peaches and plums.
Production of subtropical fruit is expanding rapidly;  citrus is the most important product in this
category, accounting for more than 70% of the gross value of subtropical fruit produced by
South Africa and among South Africa's major exports in value.  Other export-oriented subtropicalfruit includes pineapples (mainly for canning), avocados, mangoes, litchis and macadamia nuts.
                                                     
17Africa Economic Digest, 11 November 1996.Republic of South Africa WT/TPR/S/34
Page 99
32. The Dried Fruit Board operates a single-channel pool system for the marketing, including
export of dried fruit.  Under the system, surpluses of dried fruit are exported;  the Board allocates thequantities to be exported to the different foreign markets.  Similar systems are also operated for
exports by the Citrus Board and the Deciduous Fruit Board;  the Deciduous Fruit Board has appointed
a single agent, Unifruco (a private company), to handle exports to almost all markets.  The Canning
Fruit Board operates a supervisory system but it may intervene to fix minimum producer or export
prices.  According to the Authorities, these control boards were to be phased out before31 December 1997.
33. The Oilseeds Board operates a surplus removal scheme for all oil seeds and administers a
single-channel system for the exportation of groundnuts;  however, permits may be issued by the
Board to persons who meet certain quality parameters set by the Board for the exportation of
groundnuts.  Producer prices are fixed by the Board, subject to approval by the Minister of
Agriculture.  The Board is involved in the exportat ion of sunflower seed and soya beans, with permits
required for the exportation of these products by private traders.  The Oilseeds Board was to bedisbanded on 30 September 1997.
34. The 1989 Liquor Products Act provides for control, for quality purposes, over the sale,
production, import and export of alcoholic products, excluding beer and medicines.  Imports and
exports of beverages and spirits must comply with local standards of labelling, chemical composition
and sensory evaluation.  Wine and spirits are also subject to import controls under the Import andExport Control Act, administered by the Department  of Trade and Industry.  A negotiated wine price,
the base price, is applicable, supplemented by negotiated higher non-statutory guideline prices.
35. The 1970 Wine and Spirits Control Act is administered by the Cooperative Wine Growers
Association (KWV).  The Act empow ers KWV to import distilling wine, on behalf of the industry, to
cover shortfalls of local production.  Subject to the approval of the Minister of Agriculture, thequantity of distilling wine to be imported is calculated on the basis of estimated commercial needs and
the requirements of the wine industry, taking into account the total crop, and sales of wine (and juice
for non-alcoholic purposes).  An import-pool committee allocates at least 75% of the distilling wine
so imported to individual distillers and to KWV.  The five members of the committee, namely an
officer of the Department of Agriculture who is the chairman, two representatives of the Cape Wineand Spirit Institute and two representatives of KWV are appointed by the Minister of Agriculture.  An
investigation committee appointed by the Minister of Agriculture recommended the abolition of
import controls in terms of the Wine and Spirits Control Act.
36. Tariffs on imports range from zero on fruit not grown on a large scale in South Africa, such as
dates, figs and nuts (including almonds, hazelnuts or filberts, walnuts and pistachios) to 20% on flours
and meals of oil seeds or oleaginous fruits, and cut flowers, and to 35% on guavas, mangoes and
mangosteens.  In general, beverages, spirits and vinegar are subject to specific tariffs and exciseduties;  ad valorem  tariff rates on these products range up to 25%.  Certain categories of water carry
compound duties.
(c) Sugar
37. South Africa produces cane for local processing into sugar.  The production and marketing,
including the sugar price, are regulated.  Established under the 1936 Sugar Act and incorporated underthe 1978 Sugar Act, the South African Sugar Association (SASA) has statutory marketing powers and
is the sole sugar exporter.  A Sugar Industry Agreement was promulgated in 1936 and substantially
revised in 1993;  the revised agreement came into effect in April 1994.  The Sugar Industry
Agreement covers:  the administration of cane production and coordination of the supply of sugarcane
to the mills;  the administration of a two-price pool system;  dispute resolution structures;  theWT/TPR/S/34 Trade Policies Review
Page 100
determination of the quantity of sugar required for the South African national market;  the disposal of
the sugar available for export by SASA on behalf of  the industry;  the pooling of proceeds from the
sale of sugar and molasses and the division of th e net proceeds between the growing and milling
sections;  the determination of the sucrose content and price payable for sucrose in cane;  the pooling
of the cost of transporting sugar to permit the rationalization of production of the various grades of
sugar;  the imposition of levies to cover the cost of the administration of the industry by SASA;  and
control of pests and diseases.
38. Created to stabilize prices for a large proportion of total production of sugar, the two-tier
price system has been in force since the 1985/86 season.  The system comprises an A-pool of all the
proceeds from local market production and a pro portion of the proceeds from exports, and a B-pool
consisting of the balance of the proceeds from expo rts.  Each sugar-cane farmer is allocated a quota
from the A-pool;  since exports are subject to the conditions prevailing on the world  sugar market,
producers are free to determine the quantity they produce for exports and therefore their proceeds
from the B-pool.  The B-pool price is lower than th e A-pool price;  for example, during the 1995/96
season, the average price was R 886.27 per tonne of sucrose and R 105.20 per tonne of cane from the
A-pool, and R 639.90 per tonne of sucrose and R 75.96 per tonne of cane from the B-pool
(Table IV.3). 18  From the 1984/1985 to 1991/1992 seasons, sucrose prices had been kept low thanks
to the financial support provided by the Growers' Transport Compensation fund in relation to
transportation costs of cane.19
39. The Sugar Association provides financial assistance to 45,000 small-scale growers through
the Small Cane Grower's Financial Aid Fund (FAF).20  FAF provides loans for establishment or
replanting of cane lands.  Loans are for a maximum period of eight years and carry an interest rate of
17.5% (1997/98).  Loans are repaid by way of a deduction from the grower's sugar proceeds when
cane is delivered to a sugar mill.  The benchmark loan rate is R 4,840 per hectare (1997/98).  Both thetotal number and value of loans provided by FAF have been declining since the 1993/94 season when
10,577 loans of a total value of R 39.2 million were provided, as against 2,387 loans of a total value
of 15.8 million during the 1996/97 season.
40. The 1994 revised Sugar Industry Agreement provides for certain deregulatory measures,
including:  the removal of quota restrictions on cane production over a period of four years;  the freeentry of prospective new growers into the industry;  the removal of registered quota land provisions;
the termination of the dual pool production and pricing system in 1998;  and the lifting of the
prohibition on subsidies.  At the end of the 1993/ 94 season, a system of fixed division of proceeds
replaced the 1972 division formula based on production costs and allowed returns.  Under the new
system, net pooled proceeds are divided between growers and millers on the basis of predetermined
percentages;  the total proceeds attributable to growers are used to determine the price they
individually receive per tonne of sucrose in cane.
                                                     
18The 1996/97 A-pool price was lower than its 1995/96 level because of a significant increase in the
total crop;  the increase in the B-pool price resulted from improved export prices and changes in the exchangerate, Government of South Africa (1997).
19Government of South Africa (1997).
20Small-scale growers are defined as those who do not have access to normal sources of agricultural
credit and who produce less than 200 tonnes of sucrose per annum.Republic of South Africa WT/TPR/S/34
Page 101
Table IV.3
Sucrose and cane prices, 1987 to 1997a
(Rands per tonne)
Sucrose Cane
Season A-Pool B-Pool A-Pool B-Pool
1987/88 299.68 132.97 35.96 15.96
1988/89 339.10 267.93 42.76 32.52
1989/90 387.62 358.92 51.01 47.27
1990/91 436.19 362.09 56.31 46.75
1991/92 468.25 260.02 61.06 33.91
1992/93 705.88 344.31 97.55 47.58
1993/94 797.24 797.24 99.89 99.89
1994/95 833.50 639.73 104.52 80.22
1995/96 886.27 639.90 105.20 75.96
1996/97  872.23 721.33 109.90 90.89
a From 1984/85 to 1991/92, the sucrose price was reduced as a result of a proportion of the cane transport costs being financed
through the Growers' Transport Compensation Fund.
Source: Data provided by the South African Authorities.
41. In 1996/97, South Africa produced some 2.27 million tonnes of sugar from nearly
21 million tonnes of cane, of which 994,000 tonnes were exported.  South African sugar is exported to
some 30 countries including Canada, Egypt, Iran, Japan, Republic of Korea, Malaysia, Ukraine and
the United States.21  An agreement between South African and Swaziland Sugar associations had
limited the quantity of sugar produced in Swaziland and sold in South Africa;  the agreement was
terminated in 1995.
(d) Other agricultural products
42. South Africa is a world leading producer of certain blends of coffee.  Cotton is produced for
local consumption.  Cotton prices are negotiated in the Consensus Committee consisting of producers,
ginners and spinners;  if no consensus is reached, a free market price applies.  South Africa is a net
importer of tobacco and imposes tariff quotas on imports of unmanufactured tobacco under bilateralagreements;  the tobacco may be imported duty-free from Malawi and Zimbabwe, within limits of
300 tonnes and 900 tonnes respectively.
43. Import tariffs range from zero on cane molasses, fructose syrup, tobacco extracts and essences
to 27.5% on sugar confectionery;  higher rates ranging to 45% apply to manufactured tobacco.
Certain tobacco products are subject to formula duties (Table III.2).  In addition, specific excise dutiesapply to tobacco.
                                                     
21South Africa's exports of sugar to the United States  are subject to tariff quota:  exports falling within
the allowable quota allocated to Sout h Africa enter the United States duty-free under the Generalized System of
Preferences.WT/TPR/S/34 Trade Policies Review
Page 102
(e) Livestock
44. About one fourth of South Africa's small-scale farmers earn income from livestock
production.  Beef production is an integral part of  South Africa's mixed farming system in commercial
units.  The total cattle population in the commercial sector was 8.4 million animals in 1996;  a typical
beef farm covers 3,800 ha. with a herd of approximately 380 animals.22  Beef is produced in the
northern areas (Free State, Mpumalanga and KwaZulu-Natal),  sheep in western and southern
provinces (Western Cape, Northern Cape, Eastern Cape and Free State) and poultry in regions close tothe metropolitan areas (Western Cape, Gauteng and KwaZulu-Natal).  Slaughtered livestock
contributes more than 50% of total income from livestock and animal products.  Poultry accounts for
around 31% of the value of animal products.  Since 1980, per capita domestic consumption has
increased by 75.5% for poultry, by 51.2% for eggs, 14.7% for pork and 2.1% for fresh milk, and has
decreased by 50.1% for mutton and 40.2% for beef.  Economic recession and increases in prices of
red meat resulted in the substitution of white meat, mostly chicken, for red meat (Chart IV.5).
45. Since 1992, animal products have annually contributed some 43% to the gross value of
South Africa's agricultural prod uction.  South Africa's animal products are primarily for domestic
consumption, and cover around 80% of its meat requirements;  the shortfalls of local supplies, mainly
of red meat (beef, mutton, goat and lamb meat) and industrial milk products, are covered by imports,
mainly from the other SACU member countries (Botswana, Namibia and Swaziland in particular).
Droughts have contributed to a decline in local supply of animal products and an increase in imports;in the period 1992-96, imports from outside the SACU area increased nearly tenfold for beef and veal,
and nearly fivefold for mutton (Table IV.4).  Imports of live animals are duty-free while imports
tariffs range to 40% on meat and edible meat offal and to 50% on preparations of meat.  Imports of
dairy products are mostly subject to specific duties.
bSheep, lambs and slaughtered goats1992 1993 1994 1995 1996020406080100Chart IV.5
Gross income from animal products, 1992-96
Source :  Information provided by the South African authorities.a            Fresh milk accounts for more than 60%.(Per cent)
b            Sheep and lambs account for nearly 97%.Poultry products
Wool + mohairPigs, slaughtered
Other livestock productsDairy productsaOstrich feathers and prod.
c
c            Wool accounts for around 82%.Cattle and slaughtered calves
                                                     
22WTO document IMA/INA/9/Rev.1, 23 May 1996.Republic of South Africa WT/TPR/S/34
Page 103
Table IV.4
Beef, veal and mutton in South Africa by origin, 1992-96
(Tonnes)
Import from
Years Local production BLNSaOtherExports and net
purchases of the Board Total availableb
Beef and veal
1992 489,339 52,587 3,900 -12,982 532,844
1993 446,905 52,055 7,603 -4,558 502,005
1994  369,226 57,848 41,775 4,036 472,885
1995 340,270 56,781 51,883 -1,971 446,963
1996 317,012 70,212 38,218 -2,136 423,306
Mutton
1992 118,702 19,457 5,609 -1,563 142,205
1993 108,192 15,039 4,982 325 128,538
1994 71,895 17,267 36,722 231 126,115
1995 61,556 17,695 24,619 -302 103,568
1996 68,172 16,334 25,470 -548 109,428
a Botswana, Lesotho, Namibia and Swaziland.
b Total available = local production + imports + exports and net purchases of the Board.
Source: Data provided by the South African authorities.
46. The Meat Board annually determines total meat exports, subject to Ministerial approval, and
issues permits to private exporters.  The Meat Board is financed by specific levies collected on animal
products (Table III.7).  The Meat Board has statutory authority to implement floor prices (guaranteed
minimum prices), at which it operates a surplus removal system;  however, according to theauthorities, the Meat Board has not implemented floor prices or operated a surplus removal system
since 1995.  The average retail mark-up for cut and bulk meat sales is approximately 30% on
wholesale prices.  All imports of animals and animal products are subject to a veterinary import
permit issued by the Directorate of Animal Health (Department of Agriculture).  Slaughtering of cattle
and marketing of beef are subject to health and sanitary standards set by the Government.  Any meat
plant in a country wishing to export meat to So uth Africa must be approved by South Africa's
Director of Meat Hygiene.
23  Consignments not complying with  South African standards (physical
conditions, temperature and bacterial counts of the meat) are condemned and are either returned to the
exporting country or used for the manufacturing of pet food under Departmental supervision.  The
Perishable Products Export Control Board performs inspections on behalf of the Directorate of Plant
and Quality Control, and charges inspection fees for its own account.24  The Government is involved
in prevention and eradication of animal diseases.  Foot and mouth disease is currently endemic inKruger National Park.
47. South Africa has traditionally exported wool, mohair clips and karakul pelts;  it also exports
hides and skins.  A voluntary surplus removal scheme (at predetermined floor prices) is operated by
the Mohair Board;  all operators, including producers and traders or dealers of mohair must register
with the Board.  The Wool Board and the Milk Bo ard operate supervisory systems.  Ostriches and
their fertilized eggs are still subject to export prohib ition;  according to the authorities, the prohibition
will be lifted in the near future.  South Africa is a signatory to the Plurilateral Agreements on Bovine
Meat and Dairy Products.
                                                     
23Article 121 of the 1992 Abattoir Act.
24WTO document IMA/INV/9/Rev.1, 23 May 1996.WT/TPR/S/34 Trade Policies Review
Page 104
(f) Fishing
48. South Africa's Atlantic and Indian Ocean shoreline is 3,000 km. long and offers excellent
opportunities for fishing.  However, overfishing of marine resources gave rise to strict catch quotas
after 1983.  Fishing currently employs less than 30,000 persons.  The South African fleet comprises
3,800 vessels.  Annual catches are around 500,000 tonnes, to a value of around R 1.5 billion.  Total
pelagic fish catches fell from around 450,000 tonnes in 1992 to about 200,000 in 1996;  pilchards
accounted for one half, followed by red eye and anchovy.  Other species of seafood caught inSouth Africa's waters include hake, abalone, rock lobster and seaweed.
49. About one fifth of the catch is locally processed into fishmeal, fish body oil (from anchovy
when available) and canned fish (pilchards in particular) by the nine fish meal plants and six canning
plants in operation in South Africa.  Canned fish  production is presently expected to meet 75% of
local demand as against 40% five years ago.  As a result of an increase in pilchard resource, a
substitution of canned fish for fish meal production has been recorded in recent years.  Fish meal
production fell from about 100,000 tonnes in 1992 to around 40,000 in 1996;  the 1997 productionwill meet about 12% of the local requirements.  In the near future, the production of fish meal based
on red eye is expected to increase while anchovy meal is expected to fall to some 25% of the long-
term average as a result of a decline in the anchovy resource.  A maximum of 3,000 tonnes of fish
meal is forecasted for 1997.
25
50. The South African Bureau of Standards has set compulsory production standards for the
seafood processing industry.  Processing technolo gy is developed by the Fishing Industry Research
Institute;  conservation policy is based on research conducted by the Sea Fisheries Research Institute
(Department of Environmental Affairs and Tourism) and is enforced by 130 marine conservation
inspectors.26  The Government annually determines the "total allowable catch" of species such as
pilchards, anchovy, abalone, lobster, sole and hake on the basis of scientific surveys;  catches of otherspecies of seafood in South Africa's waters are not subject to quotas.
51. Imports tariffs range from zero on live fish, to 30% on meal and pellets of cooked lobster,
with an average of 14.9% on fishing products.  Specific tariffs apply to a large variety of seafood;
certain fishery products are subject to mixed tariffs.  South Africa has not bound tariffs on fishery
products.
(g) Forestry
52. Commercial forestry covers 1.5 million ha., about 1% of South Africa's land area.  Around
16 million tonnes of timber are harvested every year, of which 35% is exported.  Annual earnings
from forestry amount to R 5.5 billion and its contribution to South Africa's GDP (in nominal terms) is
about 2%.  The sector employs 112,000 persons (direct jobs), of which about one third are involved in
harvesting, transportation and processing.  Forestry is mainly developed in the provinces of
Mpumalanga (41.2 % of the total industrial pl antation area) and KwaZulu-Natal (37.2%).  About
750,000 ha. still have a high suitability for afforestation, mostly in KwaZulu-Natal and the Eastern
Cape Province.
53. The main products of the forestry sector are pulpwood (65.5% of the 1994/95 volume of
wood-products production), and sawlogs and veneer logs (22.8%).  Capital investment in forestry has
                                                     
25Government of South Africa (1997).
26SADC (1997).Republic of South Africa WT/TPR/S/34
Page 105
grown at nearly 5% a year since 1980 to R 19 billion in 1996.27  In 1996, Sappi and Mondi, the two
largest pulp companies in South Africa, ranked 20 and 76, respectively, in the top 150 pulp andpaperboard companies in the world;  the two companies produced 84% of the 1995 pulp production of
Africa and presently employ some 41,000 persons.
54. South Africa's forestry is undergoing transformation.  In terms of the 1996 Forestry White
Paper, the Government will not be managing plantations and forests after 2001.
28  A National Forestry
Action Programme, aimed mainly at increasing exports of value-added forest products, was launchedin August 1996 to implement the recommendations  contained in the White Paper.  SAFCOL, the
state-owned forestry company with 236,000 ha., is classified among the parastatals with no public
interest and no visible role in the Reconstruction and Development Programme (Chapter
III(4)(iii)(c));  it is earmarked for privatization, and in consequence output of the sector is expected to
increase.  However, only 111 forestry farmers currently have permits to afforest 67,452 ha.;  other
farmers afforest illegally.  The management of the Afforestation Permit System has been under the
control of the Water Utilisation Directorate (Department of Water Affairs and Forestry) since 1996.A portion of SAFCOL's plantations has been certified as sustainably managed forest and the
South African Bureau of Standards recently launched its ISO 14001 environmental standards
programme (Chapter III(2)(ix)(a)).
55. South Africa values regional integration in the forestry sector, including forest resource,
expertise and market access, as well as SADC initiatives in this regard.  South Africa imports sawntimber from Zimbabwe (over 50,000 m
3 per year) and pulpwood from Argentina (some 82,000 m3 in
1996/97).  The sector is increasingly giving attention to more value-addition.  Forestry and logging
imports carry tariffs ranging to 25%, with an average of 2.7%;  tariffs range from zero on wood
charcoal, fuel wood, wood in the rough or roughl y squared, gums and resins, to 25% on vegetable
saps and extracts.  Paper and paper products, and printing and publishing products carry tariffsranging up to 22%.  Higher tariff rates, ranging to 30%, apply to wood products.  Tariff escalation is
present on wood products, paper products and rubber products (Chapter III(2)(iii)(b)).
(3) Mining and quarrying
56. The mining and quarrying sector is at the heart of South Africa's economy.  With its abundant
and diverse endowment of minerals, South Africa is  one of the world's leading suppliers of minerals
and mineral products.  In 1995, South Africa had the world's largest known reserves of gold,
manganese, platinum metals, chromium, vanadium and alumino-silicates;  second-largest reserves of
vermiculite, zirconium minerals, titanium minerals and antimony;  third-largest of fluorspar and
phosphate rock;  fourth-largest of zinc;  fifth-largest reserves of coal and nickel;  and the seventh and
eighth of uranium and iron ore, respectively (Chart IV.6).  Other industrially important metals,
minerals and rocks found in South Africa include granite, diamonds and lead.  Among processed
mineral products, South Africa is also the world largest supplier of ferro-alloys and a leading producerof steel. 
29
                                                     
27SADC (1997).
28Government of South Africa (1996j).
29Government of South Africa (1996k).WT/TPR/S/34 Trade Policies Review
Page 106
Chart IV.6
South Africa's shares in world mineral reserves, 31 August 1995
(Demonstrated reserves and marginal reserves)
(Per cent)
Source :   Information provided by South African authorities.a              Identified resources.020406080100
Platinum group 
metals
Manganese
Phosphate rock
Coal
Nickel
Fluorspar
Titanium minerals
Zirconum minerals
Vermiculite
Alumino-silicates
Gold
Vanadium
Zinc
Animony
Chrome ore
Uranium
Iron ore
aa
57. South Africa's major mining (including processing) companies are Anglo American
Corporation of South Africa, Anglovaal Limited, Ge ncor, Gold Fields of South Africa Limited, Iron
and Steel Corporation (ISCOR) Limited, Johannes burg Consolidated Investment Limited, Randgold
and Exploration Corporation Limited, Samancor and SASOL;  they produce the bulk of minerals and
mineral products in South Africa.  The sector's contri bution to South Africa's real GDP (at factor cost)
was 8.6% in 1996 and 9.0% in 1995, as against some 10% in 1992 and 1993;  gas, electricity andwater contribute a further 4.5 to 5%.  In 1996, mineral sales amounted to US$16.91 billion
(R 65.1 billion), of which 78.4% was exported;  Chart IV.7 portrays the 1995 sales of major
South African minerals.  Affected by the decline in gold production, mineral exports accounted for
41.1% of total earnings from exports of goods in 1996, as compared to 51.2% in 1993 and 66% in
1986.  The sector employs about 536,475 persons, of which nearly 63% are employed in goldproduction.  Wages represent about one fourth of total mining revenue.  The share of government
revenue from mining in total public revenue declined from 12.5% in 1986 and 4.4% in 1990 to 1.7%
in 1996
30 ; this situation reflects, inter alia , the declining profitability in the mining sector (gold in
particular).
                                                     
30The share does not include government revenue from processed minerals.Republic of South Africa WT/TPR/S/34
Page 107
Total Gold Platinum group metal Coal Other0102030405060Chart IV.7
South Africa's mineral sales, 1995
a
Source :Other major minerals include diamonds, uranium oxide, antimony, titanium, silver, chrome, copper, 
iron ore, manganese, nickel, zinc, andalusite, asbestos, limestone & dolomite, fluorspar, sulphur and granite.
Data provided by the South African authorities.(Rand billion)
a
Total mineral sales:  R 56.9 billionLocal sales
Export sales
43.51% of South Africa's total merchandise exports
a
58. entered into force on 1 January 1992.  The Act is aimed at ensuring optimal and safe
exploitation and utilization of South Africa's mineral and energy resources, the rehabilitation of theland surface affected by mining and prospecting operations, and the development of environmental
management standards.
31  The Act is also aimed at ensuring fair management of mineral prospecting
and of mining rights:  it protects the rights of freehold owners against "unnecessary" damage to their
property by mining operations, and protects the holders of mineral rights against the locking-up of
their minerals as a result of the utilization of the surface and the worsening of their situation because
of the implementation of the Act.32  Aside from mineral rights under the continental shelf, which are
controlled by the Government, some 27% of the mineral rights of South Africa's total land area areheld by the private sector.  Under the Act, the number of authorizations required for operating in the
sector has been reduced from around 40 to 3:  a prospecting permit, a mining permit and a mining
licence.  Prospecting permits are issued for 12 months or a longer period, renewable on application.
The mining permit is issued for a period not exceeding two years, and the mining licence is issued
where the mineral is to be mined on a larger scale or during a longer period than visualized under a
permit, i.e. for a period exceeding two years.
59. The Department of Minerals and Energy administers the Act.  It formulates policies in the
sector, and issues and renews permits and licences upon the consent of the Regional Director of
                                                     
31The 1996 Mine Health and Safety Act (Act No. 29) is also aimed at promoting and ensuring safety
and health in the sector.
32Under South African common law, ownership of land includes the minerals on it;  Government of
South Africa (1996k).WT/TPR/S/34 Trade Policies Review
Page 108
Minerals and Energy, under whose jurisdiction the operations are undertaken.  The Minister of
Minerals and Energy may suspend or cancel any mining authorization if the holder contravenes orfails to comply with any relevant provision of the Act.  The Mining Technology Division (Miningtek)
of the Council for Scientific and Industrial Research  (CSIR), a statutory organization partly funded by
the Government, provides information on and is in charge of research and development in extractive
metallurgy.  The Chamber of Mines, a private se ctor employers' organization, was established to
develop consultation and cooperation between its members;  companies associated with the Chamberinclude the Rand Refinery and the Nuclear Fuels Corporation of South Africa.
60. In 1996, a new minerals and mining policy was debated with a view to attracting investment
into the sector, improving the international competitiv eness of the sector and maximizing profits.  The
private sector, through the Chamber of Mines, participated in the debate.  Its main proposals,
contained in a policy paper prepared by the Chamber in 1995, included:  minerals bonification
through market forces rather than government intervention;  taxation on profits and not on inputs;  and
the creation by the Government of an enabling environment for activities in the sector.  The privatesector also proposed that cooperation be promoted through a phased removal of barriers to free
movements of labour, capital, goods and services in the Southern African region.
61. In general, mining companies are liable to a company tax levied at a standard rate of 35%,
and a Secondary Tax on Companies (STC) levied at a single rate of 12.5% on the net amount of
dividends declared.  However, the rate of company tax pertaining to gold mining companies iscalculated on the basis of formulae and the companies may choose to be exempt from the STC
(section(i) below).
33  Under the 1991 Minerals Act, a levy is collected on all mines to finance mine
safety research;  the revenue collected amounted to nearly R 36 million in 1995.  Prospection
expenditure may be deducted from mining income in addition to the general tax deductions provided
to South African companies;  mining companies may also immediately deduct capital expenditure
from their taxable income, while other companies must split such expenditure over a five-year period.
Table AIII.3 also notes other incentives for which minerals and mineral products may be eligible for.
62. Mineral products subject to export controls include aluminium and aluminium alloys;  iceland
spar;  iron and steel in unworked or semi-worked form;  lead in the form of metal;  sugulite;  tin, scrap
and tin-bearing residues;  tiger's-eye;  and zinc in the form of virgin zinc, remelted zinc, old zinc,cuttings, hard zinc and zinc ashes.  Controls are exercised by means of permits.  Exports of
unprocessed tiger's-eye are prohibited.  Mineral products subject to import controls, including by
means of licences, include mineral fuels, mineral oils and products of their distillation, radioactive
chemical elements and radioactive isotopes, gold and coins, cobalt, cadmium antimony, manganese
diromium, geranium, vanadium, gallium, hafniu mindium, rhenium, and thallium.  Tariffs on imports
range from zero on crude petroleum oils and oils obtained from bituminous minerals, natural gas,
coal, and base metals, including silver, gold, platinum and precious and semi-precious stones, notfurther worked than semi-manufactured, to 18% on salt, pure sodium chloride, sea water and certain
glass fibres;  tariffs average 1.4%.  Imports of metal ore carry tariffs ranging to 4%;  a tariff rate of
20% applies to imports of distilled mineral tars, petroleum jelly and bituminous mixtures based on
natural asphalt.  Mineral products are also subject to specific excise duties.
                                                     
33The rate of the  Secondary Tax on Companies (STC) was reduced in 1996 from 25% to 12.5%;  it
applies to the net amount of any dividend declared  (after payment of the company tax) on or after
13 March 1996 by any company, except gold mining companies which may choose between the dual taxation
system and a unique rate.Republic of South Africa WT/TPR/S/34
Page 109
(i) Gold
63. South Africa's major gold fields, located in the Witwatersrand basin, account for about 98%
of South Africa's gold output.  Six companies Anglo-American Corporation, Gold Fields of
South Africa, Gengold, Johannesburg Consolidat ed Investment Company, Randgold and Anglovaal
produce almost all of the gold produced in Sout h Africa;  Anglo-Ameri can Corporation alone
accounts for more than 40% of the total.  The Rand Refinery refines the raw gold to 99.5-99.95%
purity, depending on market requirements.
64. South Africa's gold production declined from 1,000 tonnes in 1970 to 523.8 tonnes in 1995
and 496.9 tonnes in 1996;  this decline in production led to a fall in South Africa's share of world
supply of gold from 70% in 1970 to around one fifth in 1996.  The largest annual drop in 20 years was
recorded in 1995 when the production declined by nearly 10% from its 1994 level (Table IV.5);  the
1996 production was the lowest since 1956.  However, gold still dominates South Africa's minerals
sales;  it represented some 41% of such sales (Chart IV.8) and accounted for some 53% of the value
of mineral exports, i.e. about 23% of the total value of South Africa's merchandise exports in 1995.Most of the gold produced in South Africa is exported;  about 30 tonnes of gold are reportedly also
smuggled out of South Africa every year.
34
65. By law, all newly mined gold must be offered to the South African Reserve Bank (SARB)within 30 days of production, against payment in U.S. dollars.  However, the Chamber of Mines has
the right to sell up to one third of South African  production, independently of the SARB, in value-
added forms (gold coins and kilo bars) of one kilogram or less.  Subject to the prior approval of the
SARB, the monetary authorities, authorized dealers, registered gold producers, and authorized
industrial and professional users may export gold.
35  Rand Refinery Limited, the world largest gold
refinery, provides refining services to gold mines, members of the Chamber.  Each year,
approximately 5 tonnes of the gold produced in South Africa are processed into jewellery, mainly
chains and wedding rings, by some 500 ma nufacturers employing about 4,000 persons;  the
Government's plan is to remove protection measures, including customs duties on imported raw
materials, and promote higher value-addition and more labour-intensive downstream operations.  Tax
incentives have recently been announced in this regard.
Table IV.5
South Africa's gold production, sales and holdings of the Reserve Bank, 1986-96
Year Production Sales Reserve Bank holdingsa
(tonnes) (R billion) (tonnes) (R billion)
1986 640.0 17.34 150.0 3.71
1987 604.3 17.56 181.3 4.90
1988 619.9 19.76 107.9 3.08
1989 607.7 19.50 95.7 2.88
1990 605.1 19.06 127.2 3.63
1991 601.0 19.36 201.3 5.69
 1992 613.0 19.51 206.7 6.08
1993 619.3 23.24 147.9 5.63
1994 580.2 24.95 130.7 5.12
1995 523.8 23.33 132.1 5.40
1996 496.9 26.48 118.0 5.90
a Gold holdings at year ends.
Source: Data from the South African Reserve Bank and the Mineral Bureau of South Africa.
                                                     
34Africa Economic Digest, 24 February 1997.
35Gold mining companies and houses may sell forward anticipated receipts of their future gold sales.
South African residents may purchase, hold and sell gold in South Africa for numismatic purposes and
investment, IMF (1996).WT/TPR/S/34 Trade Policies Review
Page 110
Chart IV.8
Shares of products in South Africa's mineral sales, 1995
a
Source :Other major minerals include:  diamonds, uranium oxide, antimony, titanium, silver, chrome, copper, 
iron ore, manganese, nickel, zinc, andalusite, asbestos, limestone & dolomite, fluorspar, sulphur and granite.
Data provided by the South African authorities.(Per cent)
a
Total mineral sales:  R 56.9 billionGold
41.0
Other
24.4Coal
23.0Platinum group metals
11.6
66. The fall in the volume of production results from, inter alia , ore depletion and declining
grades (the average grade fell from 13.28g per tonne in 1970 to 5.05g per tonne in 1990 and 4.87g per
tonne in 1995);  increasing depths of mines;  lower capital expenditure, real capital expenditure in
Chamber-member gold mines fell from nearly R 80 per tonne milled in 1981 to about R 25 per tonne
milled in 1996;  labour unrest;  and the twofold increase in the number of public holidays in 1995.
South Africa has high production costs by international standards;  in 1996, one third of the major
gold mining companies had operating costs higher than the average London gold price.  In 1996,personnel costs represented 37% of the turnover of the gold mining industry (Chart IV.9).  Moreover,
the high cost of imported equipment has been exacerbated by the recent depreciation of the rand.
67. In response to the difficulties experienced by the gold mining industry and the resultant
decline in the production of gold, since 1995 new management and operational structures are being
developed and restructuring plans have been formulated, either at the level of individual companies orat industry level.  Mining time was rescheduled to minimize idle and under-productive working
periods.  A new shift system, the Full Calendar Operations (Fulco), was introduced at mines that offer
scope for more intensive mining operations, with a view to optimizing the utilization of capital and
labour;  mines may be granted permission, by the Ministry of Minerals and Energy to work on
Sunday.  The operating companies have been restructured:  acquisitions or mergers have beenundertaken and certain companies have restructured their management and operations.  Under a 1991
Cabinet decision, assistance is provided to "marginal" mines within approved guidelines.
36  A n
Interdepartmental Committee for Assistance to the Mining Industry processes the applications for
assistance;  its decisions are submitted to the Cabinet for approval.  Companies receiving assistance
must interrupt dividend payments;  State aid to the industry amounted to R 44.86 million in 1996.
                                                     
36GATT (1993).Republic of South Africa WT/TPR/S/34
Page 111
Turnover of R 24.8 billion (100%) =   Material input of R 8.9 billion (35.8%)  + Value added of R 15.9 billion (64.2%)       Chart IV.9
Gold mining industry, value added statement, 1996
Source : Data provided by the South African authorities.(Per cent)
Power & water
9.3
Remuneration 
of employees
37.0
Capital 
expenditure
11.4Tax
3.2Dividends
8.4Reserves/borrowing
4.2Other costs
8.5Stores & services
18.0
68. A taxation system based on two formulae applies to profits earned by gold mining companies;
profits earned by companies that opted to remain outside the dual-tax system when the Government
introduced the Secondary Tax on Companies (STC) are subject to rates calculated on the basis of one
formula, while a second formula is used to determine the tax rates on profits earned by the other
companies.  Since the gold mining companies, members of the Chamber of Mines, generally
distribute all their profits in the form of dividends, they have all elected to be exempted from the STC,
i.e. the dual-tax system.37  Gold mining companies exempt from the STC and with profitability ratios
lower than 32.38% are liable to taxation rates lower than the combination of the standard rate of
corporate tax of 35% and the STC of 12.5%, i.e. 43.125% (Chart IV.10 and Box IV.1).38  A minimum
profitability ratio over which profits of gold mining companies become taxable has been set at 5%
since 1992.
(ii) Platinum group metals
69. The platinum group metals (PGMs) produced in South Africa comprise platinum, iridium,
osmium, palladium, rhodium and ruthenium.  Ten mines located in the Bushveld Complex produce
almost all South Africa's PGMs.  The ore is locally processed through milling, flotation and smelting
in order to form a matte containing PGMs, gold, silver and base metals such as nickel, copper and
cobalt.  Further refining of the matte takes place at three refineries.
                                                     
37Chamber of Mines Newsletter, No. 2/1996.
38The combined rate of 43.125% results from the following calculation:  [35% + 12.5%(1-0.35)] =
43.125%.WT/TPR/S/34 Trade Policies Review
Page 112
Box IV.1:  The gold tax formula
The rate of company tax on profits earned by a gold mining company is calculated on the basis of
the following formula:
y = a - (ab/x) = a(1 - b/x),
where:
y = the tax rate (in per cent) - to be determined;
a and b are fixed parameters;  and
x = the ratio of profits to revenue (the profitability ratio) in per cent.
It follows from the formula that a zero rate applies if x = b;  profits are taxable only if they
represent more than b% of the revenue of the company.  Therefore, b is the ratio of profitability
above which profits become taxable.  The parameter a is fixed by the Government;  it is the rate
of taxation which pertains to a company in a full tax-paying position, i.e. with a large ratio of
profitability (close to infinity).  Since y is an increasing function of x, a progressive tax applies to
profits derived from gold mining.  This means that lower rates of taxation pertain to companies
with low ratios of profitability;  such companies may include those operating marginal mines as
well as mismanaged companies, even if the intention of the Government is to encourage the
mining of marginal ore.  The gold tax formulae were amended following the lowering of the
Secondary Tax on Companies (STC) from 25% to 12.5%, with effect from 14 March 1996.  The
new formulae are:
yD96 = 43 - (215/x), for companies which chose not to be exempt from the STC;  and
y96 = 51 - (255/x), for companies which opted to be exempt from the STC.
The formula which was in force until March 1996 for gold mining companies exempt from the
STC was:
y92 = 58 - (290/x).
The change in taxation rates experienced by gold mining companies exempt from the STC, as a
result of the revision of the tax formula, amounts to:
(y96 - y 92)/y92 = [(51 - (255/x)) - (58 - (290/ x))]/(58 - (290/x))   = -7/58, equivalent to a reduction
of 12.07% of the rate they would otherwise be liable to.
In the formulae, b has been kept constant and equal to 5, i.e. no tax is levied on profits earned by
gold mining companies with profitability ratios of less than 5%.  The combined tax rate on profits
earned by non-gold mining companies is [35% + 12.5%(1 - 0.35)] = 43.125%, and currently
corresponds to the tax rate for gold mining companies (exempt from the STC) with a profit ratio
of 32.38%  - the combined rate of taxation is obtained by substituting y96 with 43.125% and
solving the equation in x.  The average profitability  ratio of the gold mining companies, members
of the Chamber, has fallen below 30% since 1989.  In 1992, the combined taxation rate was
51.25% and corresponded to a profitability ratio of 42.96% for companies exempt from the STC.Republic of South Africa WT/TPR/S/34
Page 113
0 5 6.3 7.6 8.9 10.2 11.5 12.8 14.1 15.4 16.7 18 19.3 20.6 21.9 23.2 24.5 25.8 27.1 28.4 29.7 31.0 32.3 33.6 34.90102030405060
y  =58-(290/X) y   =51-(255/X)Chart IV.10
Gold formula tax
x (profit ratios in per cent)y  (rates of taxation in per cent)
(32.381, 43.125)43.125
Source :   Information provided by the South African authorities and WTO estimates.92 96a
a               See Box IV.1 for the definitions of the variables.
70. In 1996, South Africa produced some 47% of the world supply of platinum group metals.
Production rose by some 47% between 1987 and 1996, to 188.6 tonnes, while the rand price in realterms dropped from R 27,506 to R 15,204 per kg.;  the volume of production stagnated between 1994
and 1995 but due to a rise in the rand price, earnings from the metals increased by 11.6%.
71. To improve their performance, South Africa's largest PGM producers have undertaken the
restructuring of their shareholding, mergers of companies and cost-reduction measures.  The level of
employment in the sector dropped from 106,565 in 1992 to 93,223 persons in 1996.
(iii) Coal and other energy minerals
72. The main sources of energy are coal, which provides 70% of South Africa's primary energy,
followed by crude oil (about 16%).  Coal ranks firs t (31%), followed by liquid fuel (30%), in terms of
contribution to final energy use in South Africa;  electricity accounts for some 21%.  Other sources of
energy include biomass and hydro-power.  The Govern ment provides financial support to the private
sector for the development of renewable energy, including solar and wind power.
73. Coal produced by South Africa is mostly of bituminous thermal grade, with only 1.3%
anthracitic and 0.9% of metallurgical quality.39  The four largest mining groups (out of the 62 coal
mining companies) produce about 88% of South Africa's saleable coal products, with Ingwe
producing 36% of the total, followed by Amcoal (23%), Sasol (21%) and Iscor (7%).40  Coal mining
                                                     
39Government of South Africa (1996l)
40The shares are for 1996.WT/TPR/S/34 Trade Policies Review
Page 114
companies employed 60,500 workers in 1996 as against 116,000 a decade earlier.  About 55% of
production is used by Eskom, a State-owned enterprise, to generate electricity, and some 31% is usedby Sasol to produce 27% of South Africa's liquid fuel  requirements, as well as synthetic gas and other
by-products such as waxes, phenol, ammonia, explosives and sulphuric acid.
41  The price at which
coal is supplied to Eskom is among the lowest in the world.42
74. Coal contributed 22.8% to South Africa's earnings from mineral sales in 1996;  the total valueof sales increased by nearly 21% to R 15,462 million due to the depreciation of the rand against theUS$ (Table IV.6).  Coal is South Africa's third largest source of export earnings, after gold and
PGMs.  In 1996, South Africa supplied some 13% of the world exports of coal and ranked as the
world's fifth-largest producer of coal;  it is the wo rld second largest exporter of steam coal (with some
one fifth of world exports), which accounts for 96 .3% of South Africa's exports of coal.  Exports of
coal were up 23% to R 8,111 million in 1996;  the major destinations were the European Union (52%)
and the Far East (33%).  The Richards' Bay Coal Terminal, with a rated capacity of 63 million tonnes
per year, is South Africa's main coal export terminal.  Incentives are available to companies for thedevelopment of multi-product coal mines and higher quality (e.g. washed) coal for export.
43
Table IV.6
South Africa's saleable coal production, local sales and exports, 1985-96
Year Production Local sales Export sales
Volume Value Volume Value (f.o.b.)
Million tonnes Million tonnes R million Rand per
tonneMillion tonnes R million Rand per
tonne
1985 175.8 125.2 1,939.3 16 46.7 3,148.0 67
1986 176.7 127.0 2,202.0 17 46.9 3,203.8 53
1987 176.1 128.9 2,533.5 20 43.6 2,312.0 53
1988 181.8 139.4 3,112.8 22 44.2 2,839.2 64
1989 177.7 131.0 3,685.7 28 48.9 3,883.2 79
1990 175.0 134.8 4,146.4 31 49.6 4,018.6 81
1991 178.4 132.6 4,505.9 34 49.3 4,279.4 87
1993 182.3 131.8 5,193.1 39 52.2 4,520.9 87
1994 195.7 138.8 5,520.3 40 54.8 4,832.3 88
1995 206.2 146.0 6,339.0 43 59.7 6,478.8 109
1996 206.4 154.1 7,350.7 48 60.2 8,111.2 135
Source: Government of South Africa (1996), South Africa's Mineral Industry, 1996/ 97 ,  Pretovia.
75. In 1995, South Africa's electricity system had an installed capacity, including mothballed
plant but excluding pumped storage systems, of 41,400 megawatts (MW), and ranked fourth in the
world in terms of generation capacity.  Eskom accounts for more than half of the electricity produced
in Africa and with sales of 149,443 gigawatt-hours (GWh) in 1995, it ranked as the fifth-largest
                                                     
41SASOL was privatized in 1991 but the State still holds 30% of its equity.
42Government of South Africa (1996m).
43GATT (1993).Republic of South Africa WT/TPR/S/34
Page 115
electricity supplier in the world.44  The electricity branch, including more than 400 local authority
distributors, employs some 58,000 workers, of which Eskom accounts for nearly 70%.  Electricity issupplied by Eskom to households at higher average prices than to industries and mining companies;
prices of electricity supplied by the 400 local distributors, including local authorities, vary widely.
76. South Africa has small petroleum and gas deposits at Mossel Bay.  Mossgas, a parastatal,
processes offshore natural gas into liquid fuels, equivalent to about 5% of the total produced in
South Africa.  Imports of crude oil represent around 11% of primary energy demand.  Liquid fuelscontribute some 30% to final energy use in South Africa.  Distribution, wholesale and retail marketing
of liquid fuels are regulated by the Department of Minerals and Energy (DME).  The Department of
Trade and Industry, on the advice of the DME, controls imports and exports of crude oil and refined
products.  Prices of petroleum products are determined on the basis of "import parity costs",
wholesale and retail margins, as well as transportation costs, import duties and fuel tax.  A maximum
wholesale price (determined on the same basis) and a retail margin are set for paraffin.  A fuel levy is
collected at the pump.  An Equalization Fund levy on petroleum and diesel products is used to protectsynthetic-fuel production.  The Strategic Fuel Fund, a subsidiary of the Central Energy Fund (a
parastatal), trades in crude oil and manages the national strategic stock equivalent to three months of
demand for crude oil.
45  Petronet, a parastatal, provides port and bulk storage facilities, and transport
of liquid fuels by pipeline and rail.
77. South Africa also produces uranium oxide (1,678 tonnes in 1995), mostly as a by-product of
gold mining, and has a nuclear power station of 1,850 MW.  The 1993 Nuclear Energy Act prohibits
the import and export (without prior authorization of the Minister of Minerals and Energy) of source
material to or from South Africa by anybody, ex cept the parastatal Atomic Energy Corporation
(AEC);  the sole right to produce nuclear energy is vested in the AEC.  The enrichment and
fabrication of nuclear elements were terminated respectively in 1995 and 1996 for economic reasons.
78. A draft white paper on national energy policy is in the process of completion.  Table IV.7
presents a summary of the past, present and expected future shifts in the policy focus.  On the request
of the Minister of Minerals and Energy, the International Energy Agency conducted a review of
South Africa's energy policy in 1995.  The Agency recommended, inter alia , that both the regulation
of the liquid fuel branch and government intervention be rationalized;  subsidies for liquid fuels bephased out;  and competition be introduced in the electricity sector in the medium term.  Issues under
discussion in the energy sub-sector include:  en ergy supply and use by the poor;  energy pricing
policies, including retail price maintenance for petrol;  the present service station rationalization plan
under which quotas are allocated to specific geographic areas;  import and export controls in force on
refined liquid fuel products;  and government re quirements on oil companies to uplift SASOL and
Mossgas production.
46  The restructuring will involve commercialization but not privatization in the
short and medium terms.
79. South Africa has not bound its import tariffs on petroleum and petroleum products.  The
modal tariff rate on imports of these products is zero per cent;  the simple average tariff rate is zero
                                                     
44Government of South Africa (1996m).
45The Central Energy Fund group comprises the Strategic Fuel Fund Associations, Mossgas and the
Southern Oil Exploration Corporation (SOEKER), which is the state oil and gas exploration and offshorelicensing agency.
46See Basson (1997) for full details on the recommendations of the International Energy Agency and
issues under debate.WT/TPR/S/34 Trade Policies Review
Page 116
per cent on crude petroleum and natural gas, 5.4% on refined petroleum, and 7.4% on petroleum and
coal products.
(iv) Others
80. South Africa produces nearly 7 million tonnes of primary steel products per annum, of which
some 55% is locally consumed;  stainless steel and ferro-alloys (ferrochrome and ferromanganese) are
the main products.  The Iron and Steel Corporation (ISCOR), a private company, is the major
producer of iron and steel in South Africa.  South African primary steel producers financially assist
exporters of secondary steel products where at least 25% value is added to primary steel produced in
South Africa (Chapter III(3)(vii)).  The assistance is provided through the Fund of the Committee for
Secondary Manufacture with a view to promoting exports of secondary steel products.  Price rebates
are also negotiated between primary steel producers and exporters of secondary products;  domestic
prices of steel are higher than export prices (the average destination price of South African carbon
steel in 1996 was $498 per tonne in Gauteng, as against $403 per tonne in Antwerps).  South Africa
has participated in the negotiations on the Multilateral Steel Agreement (MSA).
Table IV.7
Focus of the national energy policy
Past (up to 1993) Present (1993 to about 2000) Future (after about 2000)
Security of supply Electrification Level playing field
Low cost of secondary energy RDP energy actions (energy for poor) Attention to both effective supply and use of energy
SASOL Restructuring of electricity distribution sector Competition in energy sector
Mossgas Policy negotiating forums Integrated energy policy development
Nuclear developments Start leveling playing field Efficient use of energy
Stakeholder consultation Physical environment
Secrecy Pervasive change Increased use of renewable energy
Source:  Basson (1997), Overview of the South African Energy Sector - Primary Issues currently under Debate .
81. South Africa produces diamonds, uranium oxide, antimony, titanium, silver, chrome, copper,
iron ore, manganese, nickel, zinc, andalusite, asbestos, limestone and dolomite, fluorspar, sulphurgranite, and aluminium.  In 1995, South Africa produced some 9.7 million carats of rough diamonds,
down by 10.6% from the 1994 level.  The Diamond Board established under the 1986 Diamond Act
regulates the possession, buying, selling, processing, import and export of rough and polished
diamonds.  Sales of diamonds by De Beers' Central Selling Organization (CSO), a world leader in the
marketing of this precious stone, rose by 6.6% to US$4.5 billion in 1995.
47  Exports of unpolished
diamonds are subject to a 15% tax.  South Africa al so produces tiger's-eye, a precious stone;  exports
of this gemstone and articles thereof are subject to export permits issued by the Department of Trade
and Industry on the recommendation of the Department of Minerals and Energy.  With the exception
of samples of mass not exceeding 114 grams and tiger's-eye of mass not exceeding one kilogram,
which foreign guests of local mineral clubs are allowed to carry out of South Africa, exports of crude
or semi-processed tiger's-eye are prohibited (Chapter III(3)(iii)).
                                                     
47The CSO controls almost all South African and a large share of world diamond sales.Republic of South Africa WT/TPR/S/34
Page 117
(4) Manufacturing
82. The main activities of South Africa's manufacturing sector are the processing of mineral and
agricultural products (sections (2) and (3) respectively).  The major branches of the sector include:
the motor industry; textiles, clothing and related products;  food processing and beverages;  mineral-
based industries;  machinery and equipment;  and pulp and paper.  The output of the sector grew by
0.4% in 1996 as against 7.6% in 1995;  its contribution to South Africa's GDP has stabilized to around
24.5% since 1992.  The manufacturing sector employ ment stood at 1.45 million persons in the first
semester of 1996.  Gross domestic fi xed investment (GDFI) in the sector declined from an average of
4.7% of GDP a year in the 1980s to an annual average of 4.2% during the first half of the 1990s.  This
relative slowdown in GDFI contribut ed to the downward trend of value added (in real terms) in the
manufacturing sector since the early 1980s.
83. South Africa's trade in manufactured goods has been on an upward trend since 1991.
Manufactured exports increased by 20.6% between the first semesters of 1995 and 1996 due to the
increase in exports of non-ferrous metal basic products, ceramics and industrial chemicals.  Industrialchemicals accounted for 9.3% of South Africa's manufactured exports, followed by iron and steel
products (7.6%) and non-ferrous metal basic products (6.8%) in this period.  Machinery and
equipment represented 24% of manufactured imports to South Africa followed by motor vehicles,
parts and accessories (15%), electrical machinery (12%) and industrial chemicals (9.6%).
84. Textiles, clothing and related products, tobacco and certain items produced by the motor
vehicles, parts and accessories branch are the most protected products of South Africa's
manufacturing sector;  certain manufactured products such as textiles and clothing enjoy high
protection by means of a complex tariff structure (Chart IV.2).  The simple average tariff rate in the
manufacturing sector (15.6%) is slightly higher than the overall average of 15.1%.  The majority of
formula duties apply to manufactured products such as industrial chemicals, processed food, filamentlamps and syringes (Table III.2).  In addition, products of the chemical or allied industries are subject
to specific excise duties and a large number of manufactured goods carry ad valorem  excise duties
ranging from 6% on items such as printing machines to 15% on, inter alia , articles of apparel,
clothing accessories, cassette players, records and sunglasses (Table III.6).  The rates of ad valorem
excise duties on motor vehicles range up to 20%.  The implementation of the Tariff RationalizationProcess will increase tariff escalation already presen t in several subsectors (Chapter III(2)(iii)(b) and
Table AIII.2).
85. The Government, through the Industrial Development Corporation (IDC), provides various
incentives to the manufacturing sector with a view to making the sector more export-oriented,
enhancing value added and promoting labour-intensive activities such as agro-industries and small-
and medium-scale manufacturing enterprises (Chapter III(2)(iii)(e);  3(v), (vi) and (vii);  4(i), (ii)).
The incentives combined with the phasing-down of import duties are also aimed at reducing the costsof inputs and enhancing the international competitiveness of the sector.  The largest share, 65% of the
total of R 20.44 billion financial assistance, was granted to industries processing basic metals (Chart
IV.1).  Lack of skilled labour force and upward pressures on unit labour costs are among the problems
South Africa's manufacturing sector is experiencing.
48
                                                     
48SARB (1996).WT/TPR/S/34 Trade Policies Review
Page 118
(i) Motor industry
86. In South Africa, motor vehicle manufacturers are either licensees or subsidiaries of foreign
car-makers.  Foreign firms currently operating, generally in car assembly, include BMW, Honda,
Mercedes, Toyota and Volkswagen.49  The industry employed some 93,000 persons in 1996 and
contributed just over 2.3% to South Africa's ma nufactured exports.  The number of new motor
vehicles sold increased from 200,000 in 1993 to just over 393,000 in 1996;  revenue from the sales
increased by about 8.8% (in 1995) to some R 30.8 billion in 1996.  The largest increase was recordedin sales of medium commercial vehicles;  however, passenger cars still account for some 64% of the
number of vehicles sold, followed by li ght commercial vehicles (about 33%).
50
87. Incentive schemes available to the motor industry include the World Player Scheme
(Chapter III(4)(i)) and the Motor Industry Deve lopment Programme (MIDP).  The MIDP has two
components, one for light motor vehicles (motor cars and light commercial vehicles) and the other for
medium and heavy commercial vehicles.  To be eligible for the MIDP, motor vehicle manufacturers,
including motor vehicle assemblers and component manufacturers and exporters, importing originalequipment components must be approved by th e Department of Trade and Industry (DTI) and
registered with the Commissioner of Customs and Excise for import duty rebate purposes.
51  Under
the 1996 version of the MIDP, the rate of customs duty on completely built-up (CBU) light motor
vehicles is to be reduced in phases from 61% on 1 January 1996 to 40% on 1 January 2002;  the tariff
rate on CBU medium and heavy motor vehicles is to be reduced in phases from 36% on1 January 1996 to 20% on 1 January 2000.
52  The tariff rate on components imported for the
manufacture of motor vehicles of both categories is to be reduced from 46% on 1 January 1996 to
30% on 1 January 2002.
88. Registered exporters of both categories of motor vehicles and their components may
participate in the import rebate credit scheme (based on rebate credit certificates) under which theduty payable on imported components may be rebated up to the exported local-content value of the
category of motor vehicles and their components;  motor vehicles exported by any person other than
by a registered motor vehicle manufacturer from its licensed premises do not qualify as eligible
exports.
53  The issuing of rebate certificates is subject to proof of repatriation of foreign currency
earnings (the export sales value);  import rebate credit certificates may be transferred betweenparticipants or sold by one participant to another, but not more than once.  Only new and unused items
manufactured in the Southern African Customs Union (SACU) are eligible for the import rebate credit
scheme.  The earning of import rebate credits is subject to various criteria;  for example, applications
for import rebate credit certificates are only considered for catalytic converters only if exported in a
welded condition and complying with the following criteria:
                                                     
49Jeune Afrique Economie , No. 1905, 9-15 July 1997.
50Industrial Development Corporation of South Africa (1997).
51Eligible companies are licensed as special manufacturing warehouses.
52Light motor vehicles covered by the programme include items of HS tariff headings 87.03,
8702.10.80, 8702.90.10, 8701.20.10, 8704.21.80, 8704. 31.80, and 8704.90.80, with the exception of
ambulances, golf carts and prison vans;  the medium and heavy motor vehicles include items of HS tariffheadings 8701.20.20, 8702.10.90, 8702.99.20, 8704.21.90, 8704.22.90, 8704.23.90, 8704.31.90, 8704.32.90 and
8704.90.90.
53The local content is defined as the difference between the manufacturer's wholesale sales and net
foreign exchange used.Republic of South Africa WT/TPR/S/34
Page 119
(a) locally sourced platinum rhodium and/or palladium have to be used in the coating 
mixture;
(b) the coating mixture has to be produced in the SACU area, using the precious metals
mentioned in (a) above;
(c) imported stainless steel may be used in the canning process for catalytic converters,
but the value thereof must be declared as part of the foreign currency usage (for
local-content calculation purposes);  and
(d) the complete canning process must  be undertaken within the SACU area.
89. Manufacturers entitled to the MIDP may import components up to a value of 27% of their
quarterly turnover of locally sold CBU light motor vehicles as a duty-free allowance.54  A further
duty-free allowance is available to manufacturers of light motor vehicles with production costs per
vehicle lower than R 40,000;  the allowance is equivalent to 0.3% of the amount by which the
production cost per vehicle is lower than R 40,000.  The customs duty is partially or fully rebated on
the following components of heavy motor vehicles (subject to a rebate permit):  diesel engines,
transmissions, axles, tyres and cabs or bodies imported for the manufacture of heavy motor vehicles
(Table IV.8).  Components of heavy motor vehicles (other than the aforementioned components)
eligible for rebate of the full customs duty may be imported without a rebate permit.  The MIDP is to
be terminated in 2000 for medium and heavy commercial vehicles and 2002 for motor cars and light
commercial vehicles.  Manufacturers in the motor industry are eligible for the others incentivesavailable to the manufacturing sector (Chapters III(3)(vi), (vii), (viii) and 4(i)).
Table IV.8
Tariff liberalization and rebate scheme for heavy vehicles under the MIDPa, 1996-2002
Duty Extent of rebate
On components Drivetrain components
and tyresCabs/bodies Other components
1 January 1996 46%Full duty less 27.5% Full duty less 17.5% Full duty
1 January 1997 43% Full duty less 25% Full duty less 15% Full duty
1 January 1998 40% Full duty less 22.5% Full duty less 10% Full duty
1 January 1999 37.5% Full duty less 20% Full duty less 5% Full duty
1 January 2000 35% Full duty less 15% Full duty Full duty
1 January 2001 32.5% Full duty less 15% Full duty Full duty
1 January 2002 30% Full duty less 15% Full duty Full duty
a Motor Industry Development Programme.
Source:  Government of South Africa (1996), Motor Industry Development Programme (Information document ) , Petrovia.
90. Vulcanized rubber thread and cord, plates and strip, and new pneumatic tyres are subject to
import controls.  Export controls apply to motor vehicles (Chapter III(3)(iii) and Table III.13).  Tariffs
on imports of tyres and tubes range to 43%, with an average of 19.2%.  Imports of original equipment
components are subject to a tariff rate of 43%.  Imports of transport equipment carry tariffs up to57.5%, with an average of 12.3%;  the rate of 57.5% applies to products such as road tractors, motor
vehicles for the transport of persons and/or goods and chassis.  A progressive excise duty applies to
both locally manufactured and imported motor vehicles and their components:  the rate of duty is
calculated on the basis of a formula and increases with the value for ad valorem  excise duty purposes,
to a maximum of 20% (Chapter III(2)(iii)(d)).
                                                     
54The duty-free allowance was reduced from 35% to its current level of 27% in 1995.WT/TPR/S/34 Trade Policies Review
Page 120
(ii) Textiles, clothing and related products
91. The textiles, clothing and related products sector employed some 260,000 persons during the
first half of 1996 and contributed about 1.36% to GDP and 4% to South Africa's manufactured
exports.  Earnings from sales of textiles and cl othing amounted to R 17.9 billion in 1995 against
R 14.8 billion in 1994, with textiles accounting for more than half.  In 1996, South Africa's exports of
clothing amounted to R 626 million, of which some 34% was to the United States.
92. South Africa has six private ginning companies and one ginning cooperative.  The Cotton
Board, comprising representatives of cotton grower s and ginners, oversees the marketing of cotton.
The Board's pricing committee, composed of interested parties, annually sets lint prices to be paid by
textile mills to gins during the following season, on the basis of, inter alia , the Cotlook A Index and
of cotton production costs.  Annual quotas of lint, based on indications of need from the industry, are
allocated to each textile mill;  textile mills are required to buy at least one twelfth of their allocation
each month.55
93. In addition to incentive schemes available to all manufacturers in South Africa, textile, clothing
and footwear producers are also eligible for the Duty Credit Certificate Scheme and the World Player
Scheme (Chapter III(4)(i)).  Introduced on 1 April 1993, the Duty Credit Certificate Scheme is
available to exporters of certain prescribed textile and clothing products as a temporary kick-start
measure aimed at enhancing export competitiveness.  Eligible exporters must register with the
Department of Trade and Industry;  they are required to increase their workforce training expenditureto at least 4% of their wage bill and to participate in, and achieve targets set in terms of, a Productivity
Performance Monitoring Scheme (PPMS).
94. Documentary proof of repatriation of export sales value is required for the issuance of duty
credit certificates.  Only export products, manufactured from locally produced textile inputs and/or
imported inputs on which the full duty was paid, qualify for duty credit certificates.  Yarns and fabricsmanufactured in Botswana, Lesotho, Namibia and Swaziland (South Africa' s SACU partners) are
regarded as locally manufactured inputs.  In cons equence, only exports outside the SACU area qualify
for the scheme.  The credit certificate cannot be granted concurrently with rebate facilities provided
under Schedules 3, 4 and 5 of the Tariff Book on inputs imported for production and export purposes
(Chapter III(2)(iii)(e) and 3(vi)).  The certificate is valid for one year;  it is neither transferable nornegotiable.  The certificate earned by an exporter allows him credit, to the value of the certificate, on
duties payable on imports of certain prescribed textile and clothing products.  Eligible import and
export products include specified items of the categories of clothing and clothing accessories,
household textiles, fabrics, yarn and other types of textile.  Table IV.9 presents the value of duty
credit certificates (as a percentage of the export sales value of proven exports) corresponding to the
products that may be imported under the scheme;  for example, the value of a duty credit certificate is
30% of the sales value of eligible exports of clothing and clothing accessories.  Goods imported undera duty credit certificate may be sold on the domestic market.  The Scheme is scheduled to be phased
out as from March 2000.
                                                     
55Towsend (1996).Republic of South Africa WT/TPR/S/34
Page 121
Table IV.9
Conditions on imports and exports under the Duty Credit Certificate Scheme
Exporter Product exported Product allowed to be imported Duty Credit Certificatesa
Clothing and clothing
accessories:  ManufacturerClothing/clothing accessories Fabric and clothing/clothing accessories 30%
Clothing and accessories:
KnitterClothing/clothing accessories Yarn and clothing/clothing accessories 30%
Household textiles:
ManufacturerHousehold textiles Fabric and household textiles 20%
Fabric and other textiles:
ManufacturerFabric/other textiles Yarn and fabric/other textiles 15%
Yarn:  Manufacturer Yarn Yarn 10%
Trading house Clothing/clothing accessories Clothing/clothing accessories 30%
Household textiles Household textiles 20%
Fabric/other textiles Fabric/other textiles 15%
Yarn Yarn 10%
a The percentage corresponds to the value of duty credit certificate as percentage of the export sales value of proven exports.
Source: Informations provided by the South African authorities.
95. The tariff structure that presently applies to textiles, clothing and related products generally
consists of ad valorem  duties with alternate minimum and maximum specific duties.  Import tariff
rates range to 72% on articles of apparel and clothing accessories (HS Chapters 61 and 62);  the
average tariff on textile, wearing apparel and leather products is 34.9%, with mean rates of 54.9% on
knitting mills and 59% on wearing apparel.  An ad valorem  excise duty of 15% applies to articles of
apparel and clothing accessories of furskin, artificial fur and articles thereof.
96. In 1995, a sectoral restructuring plan was introduced after an investigation by a Textile and
Clothing Panel consisting of representatives of business/industry, labour and Government.  Under this
programme, the tariff rates on textiles and clothing products will be phased down up to the year 2002
and all tariffs applying to the products will become ad valorem ;  most tariff rebate concessions will be
phased out by the end of 2002.  The final phased-down tariff rates (the base minimum rates of duty)
will be 40% on all clothing products, 30% on household textiles, 22% on all textiles fabrics, 15% onyarn and 7.5% on some synthetic fibres (polyester) and polypropylene fiber.
97. South Africa was not a participant in the Multifibre Arrangement (MFA);  in accordance with
Article 6 of the WTO Agreement on Textiles and Clothing, South Africa has provided a list of
products to be integrated into GATT during Phases I and II (Chapter III(2)(vi)(a)).
(iii) Other manufacturing
98. South Africa's arms industry employs some 50,000 persons;  its turnover from supply of goods
and services was about R 4.6 billion in 1995, of which exports accounted for nearly 22%.  Following
the transfer of most of Armscor's manufacturing facilities to Denel Group in 1992, Armscor became
the marketing and procurement branch of the indu stry;  both Armscor and Denel are State-owned
enterprises.WT/TPR/S/34 Trade Policies Review
Page 122
99. South Africa also exports electrical machinery.  Local content in television manufacture is
rewarded by a proportionate rebate of the excise duty on the product.  Standards set by theSouth African Bureau of Standards on television sets require costly modifications of these products
when they are imported.
56  A six-year structural adjustment programme for insulated electric
machines was formulated in 1990;  according to the authorities, the programme has not been
implemented.  Processed forest products, mostly pulp and paper, contribute around 14% to
South Africa's total exports of manufactured goods;  South Africa is the world's largest singleproducer of rayon pulp.
57
100. Import controls apply to revolvers, pistols, other firearms and parts, ammunition and parts, andgambling machines.  Import tariffs range to 35% on bombs, grenades, ammunitions, and parts and
accessories thereof;  30% on television sets;  and 50% on electrical appliances and housewares.
Compound duties apply to imports of certain arms and ammunitions (Table III.2).  Products such as
cosmetic or toilet preparations, video recording apparatus and magnetic tape recorders are subject to
an ad valorem  excise duty of 15% (Table III.6).
(5) Services
101. The services sector accounts for around 53% of South Africa's real GDP.  Administrative
services is the largest subsector, followed by fi nancial services and transport services.  The main
state-owned companies currently operating in the sector are Telkom for telecommunication services
and Transnet, a holding company supplying various type s of transport services.  South Africa is a net
importer of services.
102.  Under the WTO's General Agreement on Trade in Services (GATS), South Africa scheduled
commitments in several service categories.58  These commitments exclude the presence of foreign
natural persons, except (under specified conditions) salespersons, intra-corporate transferees,
executives, managers, specialists, professionals and personnel engaged in establishment. 59
Table AIV.2 provides more details on South Africa's commitments under the GATS.  South Africa is
a participant in the WTO Negotiating Group on Financial Services and has been an observer in the
WTO Negotiating Groups on Maritime Transport and Basic Telecommunications services.
(i) Telecommunications
103. South Africa is Africa's major telecommunications market and has its largest
telecommunication network and traffic.  In 1995, this sector employed some 60,000 persons and
contributed 2.2% to South Africa's GDP.  Teledensity rose from 8.73 in 1991 to 9.45 lines per
100 inhabitants in 1995 (Table IV.10);  the average for sub-saharan Africa was 0.46, in 1994.  The
waiting period for a telephone line is about one year.  South Africa's telecommunication network is
relatively sophisticated, with a high degree of digitalization and an increasing percentage of optical
fiber.  In 1995, over 48,000 computers in South africa had direct connection to the world-wide
Internet network.
                                                     
56GATT(1993).
57SADC (1997).
58Taxation services, engineering services, integrated  engineering services, urban planning, medical,
dental and veterinary services, computer and related servi ces, real estate services, rental/leasing services without
operators, courier services, distribution services, envir onmental services, and travel agencies and tour operators
services.
59WTO document GATS/SC/78, 15 April 1994.Republic of South Africa WT/TPR/S/34
Page 123
104. In October 1991, the parastatal in charge of telecommunications and postal services was split
into Telkom SA and SA Post Office, both who lly owned by the Government.  Telkom retains
monopoly powers, except on the cellular market, where two private companies, joint-ventures
between South Africans and foreign companies, operate.60  Telkom grants licences to value-added
network services (VAN) suppliers, sets standards for telephone equipment and fixes
telecommunication tariffs, subject to the approval of the Minister of Posts, Telecommunications and
Broadcasting;  licensees and private VAN services suppliers are generally required to use Telkominfrastructure.
61  Fees charged by the two cellular companies must be approved by Telkom and then
by the Minister.
105. In January 1997, Telkom increased the price of  local calls from R 0.241 to R 0.307 per minute
and lowered the price of international and long-distance calls by 11.5% and 11.2%, respectively.
Long-distance and international calls account for 22% of earnings from communications, and provide
68% of Telkom's revenue, which amounted to US$2,797 million in 1994.  Calling the European
Union from South Africa is cheaper than calling African countries.  At the regular 1994 rate, it wasless expensive to call South Africa from Egypt, Ghana, Mauritius and Uganda than vice versa
(Table IV.11).  In March 1997, a 30% stake in Telkom was sold to SBC Communications Inc. and
Telekom Malaysia for US$1.26 billion.
62
Table IV.10
Selected telecommunication indicators, 1991-95 (year ending 31 March)
1991 1992a1993 1994 1995
Main telephone lines ('000) 3,315 3,435 3,524 3,660 3,919
Main lines per 100 inhabitants 8.73 8.84 8.86 9.00 9.45
Telephone stations (sets) ('000) 5,128 5,208 5,206 5,276 ...
Percentage of digital main lines 47.6 52.0 56.4 60.0 66
Waiting list ('000) 125 127 120 136 136
Public pay phonesb ('000) 42.11 43.44 45.52 49.64 70.15
Cellular telephone subscribers ('000) 5.68 7.10 12.51 40.00 535.0
Facsimile machines (estimates '000) ... ... 50.00 60.00 75.00
Full-time telecommunication staff ('000) 67.67 66.21 61.99 60.17 59.90
Telecom revenue as a percentage of GDP 2.1 2.1 2.0 2.2 2.2
Annual investment in telecom (rand million) 1,659.05 ... 1,436.60 2,226.70 2,790.58
... Not available.
aE s t i m a t e s .
b Coinphones, Cardphones & table-mounted renter's payphone.Source: ITU (1996), African Telecommunication Indicators
;  and Government of South Africa.
                                                     
60The two private companies are Mobile Telephone Networks (GSM), owned by Multichoice (25%),
Cable & Wireless (25%), and Transtel, Naftel, FABCOS, Cosatu (50%);  and Vodacom Group (GSM), ownedby Telkom South Africa (50%),Vodafone, UK (35%), and Rembrant Group (15%).
61Value-added network (VAN) services include electronic data exchange, e-mail, protocol conversion,
access to databases, and managed data network services.
62Financial Times, 14 August 1997;  and International Herald Tribune , 17 August 1997.WT/TPR/S/34 Trade Policies Review
Page 124
Table IV.11
Telephone rates for three minutes, 1994(U.S. dollars)
Country Rate
(from South Africa)Rate
(to South Africa)
Angola 8.7 11
Cote d'Ivoire 8.7 16
Egypt 10 8.9
Ghana 8.7 7.5
Mauritius 8.5 5
Mozambique 1.4 4
Namibia 1.3 1
Uganda 7.4 7
Swaziland 1.4 1.8
Zambia 2.2 2.6
Zimbabwe 1.4 2.6
Source: ITU (1996), African Telecommunication Indicators .
106. The expansion of the telecommunications in frastructure and the promotion of universal
services are the main goals of the Government in the area of telecommunications.63  Under its
Reconstruction and Development Programme (RDP), S outh Africa is increasing the teledensity in the
former homelands and townships;  five million new lines are to be established by the year 2001.
107. Under the 1996 Telecommunications Act (Act No. 103), the Minister of Posts,
Telecommunications and Broadcasting formulates pol icies in the areas of telecommunications and the
radio frequency spectrum.64  The Act provides for an independent regulator, the South African
Telecommunications Regulatory Authority (SATRA ) and Universal Service Agency.  Under the
authority of the Minister, all regulatory functions will be transferred to the new regulator which will
also issue licences, and set and approve standards for telecommunications equipment.  The Agency,
established to promote universal services, will operate in synergy with SATRA which, in cooperation
with the Competition Board, will address issues such as unfair competition, cross-subsidization, andaccess to confidential information.  After a transition period (ending not later than
31 December 2003), during which Telkom will still hold exclusive rights over basic public switched
telecommunication services, various telecommunication market segments will be open to
competition.
65
108. There is no legislation on call-back services in South Africa.  However, call-back is addressed
implicitly in the 1952 Post Office Act, the 1958 Radio Act, the 1996 Telecommunications Act and the
1996 Telkom Licence.  Investigations are under-way on call-back services in line with exclusive
rights held by Telkom over basic switched telecommunication services.
                                                     
63Government of South Africa (1996n).
64Following the adoption of a 1993 legislation and the establishment of an Independent Broadcasting
Authority, the Government control over radio and television has been terminated;  all stations were required toreapply for licences, (Europa, 1996).
65During the period, Telkom has the "primary" role in universal access/service provision.  National
long-distance services, local access telecommunications services and public pay-telephone services,
international services, as well as switching networks will exclusively be provided by Telkom.Republic of South Africa WT/TPR/S/34
Page 125
(ii) Financial services
109.  In 1995, financial services, including finance, insurance and real estate accounted for 15.2%
of South Africa's real GDP.  Since October 1996, all fee-based financial services, except certain
premiums on life policies, interest, contributions to retirement funds, and unit trust charges, are
subject to the value-added tax.  A financial service levy of 7.5% is collected on a quarterly basis on all
interest accrued to registered insurers, pension fund organizations and friendly societies, except:
government and certain parastatal pension funds;  private pension funds and friendly societies where
interest per quarter does not exceed R 125,000;  the stabilization account of the South African
Defence Force Group Life Assurance Scheme;  and interest received by pension fund organizations
from other pension fund organizations, insurers or unit trust schemes.  This tax is to be abolished with
effect from January 1998.
(a) Banking services
110.   In 1996, the banking subsector consisted of 40 registered (equity) banks, and four registered
mutual banks.66  There were six branches and 58 representative offices of foreign banks.  The banking
subsector employed 125,000 workers in 3,359 branches and agencies;  its total assets amounted to
R 471 billion (R 398 billion in 1995).  The four major banks, namely, ABSA Bank Limited, the
Standard Bank of South Africa Limited, First Na tional Bank of Southern Africa Limited, and Nedcor
Bank Limited, hold 78% of total assets.  Deposits from the public provided 71% of total funding, and
79% of total assets was applied to provide non-bank loans and advances.
111. The Central Bank, namely the South African Reserve Bank (SARB), formulates and
implements South Africa's monetary and exchange rate  policies, and assists the Government in the
formulation and implementation of its macroeconomic policy.  The SARB also sets the discount rate.
Although its Governor, and Deputy-Governors are a ppointed by the Government, the SARB enjoys a
high degree of independence and has private shareholders.  The Bank Supervision Department isheaded by the Registrar of Banks.  Banks and mutual banks are supervised in accordance with risk-
management principles established under the 1990 Banks Act (Act No. 94) and the 1993 Mutual
Banks Act (Act No. 124), and the recommendations  of the Basle Committee on Banking Supervision.
112. Any person, whether South African or foreigner, may control a bank. However, the prior
written approval of the Registrar is required for an investment above 15% of the capital of the bank;for investments exceeding 49% of the share capital, the approval of the Minister of Finance is also
required.  These investments cannot be made with borrowed funds.  Local borrowings by
non-resident-owned or non-resident-controlled firms are subject to limitations.
113. The principal approval criteria for the registration of a bank in South Africa are:
(a) a minimum capital of R 50 million for a new equity bank, and R 10 million for a
mutual bank (or 8% of risk-weighted assets and off-balance-sheet exposures,
whichever is the greater);
(b) the directors and management have to be "fit and proper individuals" in terms of
character and expertise;
(c) the activities have to be in the public interest;
                                                     
66Mutual banks are community-based and are owned by their depositors.  Financial statistics relate to
31 December 1996.WT/TPR/S/34 Trade Policies Review
Page 126
(d) the business conducted will be that of a bank and has to be viable and conducted
prudently;
(e) the proposed bank has to be registered as a public company and comply with the
requirements of the 1973 Companies Act, as well as the 1990 Banks Act or the 1993
Mutual Banks Act, as the case may be;  and
(f) the systems and controls have to be commensurate with the type and volume of
activity.
Moreover, foreign banks applying for authorization to open a branch in South Africa must have
certified net assets in excess of US$1 billion, and an investment-grade debt rating.  Branches may
accept deposits;  however, the first deposit made by a natural person must not be less than R 1 million.
A representative office must not conduct the business of a bank.
114. The Johannesburg Stock Exchange (JSE), established in 1887, is the only licensed stock
exchange in South Africa.  The activities of the JSE are regulated under the 1985 Stock Exchange
Control Act, as amended.  At 31 December 1996, the number of companies listed on the JSE totalled
626;  market capitalization of all securities listed amounted to R 1.13 trillion;  the JSE is the
fourteenth largest equity market in the world.  Th e South African Futures Exchange (SAFEX), created
in August 1990 under the 1989 Financial Markets Control Act, is South Africa's only licensed
derivatives exchange.  The Agricultural Markets Division of SAFEX, Agri-marketing Exchange
(AMEX), began operating in July 1995.  The Bond Exchange of South Africa (BESA) was licensed in
May 1996.  The JSE, and SAFEX and BESA are superv ised by the Financial Services Board through
the Registrar of the Stock Exchange, and the Registrar of Financial Markets, respectively.
(b) Insurance
115. In March 1997, 52 insurance companies were registered for long-term business (such as life,
home, industrial and funeral businesses), 62 for short-term businesses (including fire, motor, personal
accidents, guarantee) and five for both long- and short-term businesses.  South African insurers
receive some 80% of all premia paid in Africa in terms of life insurance.
116. The Financial Services Board, an independent institution established under the 1990 Financial
Services Board Act, oversees South Africa's insurance companies, which must register with it.  To beeligible for registration, an applicant must be a public company incorporated and registered under the
1973 Companies Act, and its head office must be in South Africa;  also, a long-term insurer must not
be a mutual or private company, or a corporate body established under the provisions of any other
law.  The directors and management must be "fit and proper individuals", and the statutory actuary
must be a resident of South Africa.  A registrati on fee of R 5,000 is payable to the Registrar;  an
additional levy is payable by long-term insurers.  Foreign insurers cannot open branches in South
Africa but they may register subsidiaries.
117. The minimum capital requirements are R 5 million for short-term insurance companies and R
10 million for long-term insurers.  Any person, whether South African or foreign, may control an
insurance company in South Africa.  However, if shareholdings exceeding 25% of the capital of thecompany are transferred, the transaction must be approved by the Financial Services Board and
shareholders must be "fit and proper".  The Government provides reinsurance facilities and is the
reinsurer of the last resort.  Insurance premia are market-determined.  Since July 1995, with a view to
portfolio diversification, insurance companies have been allowed to invest a portion of their assets
abroad through swap arrangements with foreign investors.Republic of South Africa WT/TPR/S/34
Page 127
(iii) Transport
118. South Africa's transport network includes airlines, cargoes, railways and roads.  In 1994,
transport, storage and related services employed about 460,000 persons, and contributed 5.6% to
South Africa's real GDP.67  Transnet Limited, a parastatal enterprise founded in April 1991, carries
goods and passengers;  it comprises a railway system handled by Spoornet, port support services
supplied by Portnet, South African Airways (SAA), road transport services supplied by Autonet,
pipelines managed by Petronet, and a parcel ma rket (PX).  Spoornet, Portnet and Petronet hold
exclusive rights in their respective fields of activity.
119. The main goals of transport policies in South Africa are to provide safe, reliable, effective,
efficient, fully integrated transport operations and a good infrastructure, with a view to supporting the
objectives of the Reconstruction and Development Programme.68  The Department of Transport
(DoT) formulates and implements transport policies.  In this regard, it sets guidelines, as well as
service and safety standards, and controls transport prices.
(a) Maritime transport120. South Africa has six major deep-water ports:  Durban, Cape Town, Port Elizabeth, East
London, Richards Bay and Saldanha Bay.  The first three have large container terminals for deep-sea
and coastal container traffic, and the last two were created to handle substantial tonnages of coal and
mineral exports.  From 1984/85 to 1994/95, the volume of merchandise transported through
South African ports increased by 44%, to 130.7 million tonnes handled by 13,189 vessels.  The fleetcontrolled by South African interests consists of 68 vessels, of which six are under the national flag.
The South African Marine Corporation (Safma rine) and Unicorn and Griffin Shipping are
South Africa's largest shipping lines; they provide a large number of services between South Africa
and the major ports of the world.  Maritime transport plays a central role in international trade,
handling 109.4 million tonnes of South Africa's expor ts and 17.0 million tonnes of imports  in 1995.
121. Portnet holds the largest share of maritime transport services in South Africa by controlling
the seven largest ports;  Portnet has a natural and legally structured monopoly and is its own
regulator.
69  In 1994, Portnet was split into Port Management, which is in charge of port
infrastructure, and Port Operations Division, whic h deals with the management of superstructures.
122. Both local and foreign owned vessels on the international trade-routes to and from
South Africa may carry South African coastal cargoes and purchase fuel free of duties or other
charges.  Since February 1995, South Africa has been a full member of the International Maritime
Organization;  South Africa intends to increase its share of liner shipping and to monitor its options in
accordance with the UNCTAD Code of Conduct for Line r Conferences.  South Africa is a signatory
to several international maritime agreements, including the 1974 International Convention for the
Safety of Life at Sea and its 1978 Protocol, the 1966 International Convention on Load lines, the 1976
Convention on the International Maritime Satellite Organization and the 1969 InternationalConvention on Tonnage Measurement of ships.  It has also concluded bilateral shipping agreements
with the Netherlands, Madagascar, Malaysia and Mozambique.
                                                     
67SARB (1997).
68Government of South Africa (1996o).
69Government of South Africa (1996o)WT/TPR/S/34 Trade Policies Review
Page 128
(b) Air transport
123. In 1994, South Africa's airport network included 375 private airports and nine state airports.
Up to 1995, the South African air transport system had 266 registered operators, including the
parastatal, South African Airways (SAA),  28 operators for scheduled air services, and 237 operators
for non-scheduled air services. Between 1984/85 and 1994/95, the number of passengers using
commercial flights more than doubled to reach some 10.6 million passengers, of whom more than
4.5 million were carried by SAA, which also accounted for some 35% of total cargo conveyed by air.SAA has a fleet of 40 aircraft, serving both domestic and international routes.
124. The Airports Company is responsible for the planning, construction and operations of the nine
state airports, including the airports of Durba n, Cape Town, Johannesburg, Bloemfontein, and East
London;  the first three are classified as interna tional airports.  Domestic air service licences are
issued by the Air Service Licensing Council (ASLC).  Eligible applicants must:  (i) be able to provide
a safe and reliable service; (ii) adhere to prescribed requirements for insurance; (iii) have 75% of their
domestic services owned by South Africans; (iv) in general, use South African aircraft to provide airservices;  and (v) actively and effectively control and manage  the services.  The cost of licensing fees
ranges up to R 5,000.  The Civil Aviation Authority (CAA) negotiates bilateral air transport
agreements, and controls and manages South Africa's obligations in terms of ratified aviation
conventions with international organizations.  South Africa is a signatory to several international air
transport agreements, including the 1944 Convention on International Civil Aviation, the 1944International Air Transport Agreement and the 1929 Convention for the Unification of Certain Rules
relating to International Carriage by Air.
125. The South African air transport market was deregulated in 1991;  SAA has since operated in
competition with private airlines such as Airlink, Comair and Sun Air.  South Africa's major airports
have been commercialized, but have not yet been privatized.  In April 1997, the Governmentannounced the phased privatization of SAA.
70  The Government also intends to sell a 49% stake in the
Airports Company.71
(c) Land transport
126. Land transport includes passenger and merchandise transport services by road and rail.  The
South African road system covers 7,000 kilometres of national roads, of which about 660 kilometres
are toll roads.  Road transport accounts for approximately 8% of all freight transported by land in
South Africa.72  The railway system covers roughly 34,000 kilometres of track, of which almost half
is electrified.  During the period 1994-95, a total of 172 million tonnes was conveyed by rail.  Land
transport contributes some 5% to South Afri ca's nominal GDP and employs around 63,000 persons.
127. Transnet's road transport division, Autonet, is one of the largest commercial road transporters
in South Africa.  Autonet operates road transport services for passengers and goods; commercial
transport and cartage services are also supplied by private companies.  Spoornet is the largesttransport business in South Africa, operating freight and passenger railway transport;  it mainly
transports commodities such as coal, iron-coal, iron- ore, minerals and agricultural products, of which
                                                     
70Africa Research Bulletin, April-May 1997.
71"La Lettre Afrique Expansion ", Monday 17 March 1997.
72SADC (1997).Republic of South Africa WT/TPR/S/34
Page 129
the coal line is the most profitable.  The South African Rail Commuter Corporation (SARCC)
provides commuter services in the six major urban centres.
128. South Africa has no "comprehensive" enabling legislation on land transport of passengers;
and, according to the authorities, the enforcement of legislation on road transport of merchandise
presents certain weaknesses due to the limited number of enforcement officers and coordinationproblems.
73  A deposit amounting to the duties which would be paid on the goods carried is required
from foreign truckers to ensure that merchandise in transit does not remain in South Africa;  the
deposit is payable by truckers who cannot prove that  the final destination of the goods is outside
South Africa.  The fee payable for the issuing of  international road transport operations permits
amounts to R 50 for permits to Botswana, Lesotho and Swaziland, and R 100 for other countries.
129. Up to 1980, transportation of products further than 80 km from a factory had to be handled by
rail; road transport has since competed with rail tr ansport.  However, no regulatory mechanisms are in
place to address cross-subsidization and the protection of private companies against unfair
competition from enterprises controlled directly or  indirectly by the State.  As a result of the
Government's commitment to privatize road transport services, private companies have undertaken
the construction of national freeways with a toll-road system.  The Government intends to regulatecompetition in the public passenger transport system by means of operation permission, operation
contracts at a tendered price, or concessions to operate at an agreed price;  contracts at tendered price
will be fully implemented by 2000. Contracts, based on passenger transport plans, would be awarded
by the transport authority to recognized route entities, cooperatives, associations, close corporations,
companies or legal persons.
130. South Africa is an important transit point for merchandise conveyed to the southern African
region, in particular the landlocked countries.  The Governments of Mozambique and South Africa
are implementing the Maputo Development Corridor (MDC), which includes transport andcommunication projects in the 550 km-long corridor running from Johannesburg in South Africa to
Maputo in Mozambique.
131. In addition to its road and rail network, South Africa has a pipeline network of 3,000 km,
which is managed, operated and maintained by Petronet.  Products transported are crude oil, leadedand unleaded petrol, diesel, aviation turbine fuel, alcohol and gas.
(iv) Tourism
132. South Africa was the world's 25th tourism destination in terms of international arrivals in
1995, compared to 55th in 1985.  South Africa's key attractions include scenic beauty, wildlife,
climate, cultural diversity and the political ch ange.  In 1996, South Africa's reception capacity was
46,435 rooms with 94,366 beds.  Low category hotels accounted for 56% of the total number of
rooms, as against 28% for three-star hotels.  Between 1991 and 1996, the number of foreign-visitor
arrivals increased from 1.7 million to some 4.9 million, mainly from Africa (Chart IV.11), and thecontribution of tourism to GDP rose from roughly 3.6%   to 4.7%.  The equivalent of R 13 billion was
earned in foreign exchange from tourism, which employed some 550,000 persons in 1995.
133. The tourism industry expects growth of between 12% and 15% in foreign arrivals during the
next decade, with additional earnings of foreign exchange equivalent to R 250 billion.  The 1993
                                                     
73Government of South Africa (1996o).WT/TPR/S/34 Trade Policies Review
Page 130
Tourism Act is aimed at rationalizing the industry, enhancing the standard of facilities and services
hired out or made available to tourists, coordinating and rationalizing, as far as practicable, theactivities of persons active in the tourism industry;  it authorized the Minister of Tourism to establish
a grading and classification scheme in respect of accommodation establishments, in which
membership is to be voluntary.
134. The Department of Environmental Affairs and Tourism is responsible for tourism policy and
promotes the development of South African tourism businesses.  It established the Tourism Training
Advisory Committee and the Tourism Safety Task Group to address training and crime problems.
Established under the 1993 Tourism Act, the South African Tourism Board (SATOUR) aims to
promote tourism, ensure that services comply with the highest attainable standards, manage
information and conduct research relating to tourism.  The Board advises the Minister of Tourism on
issues relating to tourism in South Africa.  The Board comprises between 15 and 20 members
appointed by the Minister.  The funds of the Bo ard consist of money appropriated by Parliament,
income derived in terms of the provisions of th e Act, and donations and contributions received from
other sources.  The grading and classification scheme provided for by the Act may be establishedupon the recommendation of the Board. The Minister may also establish schemes in respect of any
prescribed branch of the tourism industry (other than accommodation establishments) on the
recommendation of the Board, and after consultation with persons active in the sector.
135. The Industrial Development Corporation (IDC ) provides two financing schemes, at its
prevailing interest rates, for the promotion of tour ism in South Africa.  Under both schemes, owners,
members or shareholders are required to finance at least 40% of their total assets.  Under the Eco-
tourism Scheme, for projects in conservation areas, financing is normally provided in the form of loan
facilities, and in risk participation, including equity, to promoters who are not in a position to provide
sufficient equity capital.  The General Tourism Scheme finances the renovation, refurbishment and
extension of existing accommodation.  The maximum IDC funding per project under this Scheme is
limited to R 10 million, subject to the condition that turnover for accommodation represents at least
70% of the total turnover.
136. Investment and price decisions in tourism are ma rket driven.  Other than exchange control and
immigration regulations, no barriers to foreign entry exist.  Several international chains and travel
services operate in South Africa.  The total planned investment in new hotels and resorts amounted to
more than R 30 billion for 1997.  For example, planned investment by Sun International in the tourism
branch was estimated at R 2 billion and Liberty Life was investing R 350 million in January 1997.
74
137. South Africa values regional cooperation, through the regional Tourism Organization
(RETOSA), as a means to develop its tourism industry.75  Crime and violence, inadequate funding,
lack of tourist infrastructure and poor education are among the troublesome issues the Government
and the tourism industry seek to address.76
                                                     
74Africa Research Bulletin N° 12843, December 1996-January 1997.
75RETOSA is an institution of SADC.
76SARB (1996b).Republic of South Africa WT/TPR/S/34
Page 131
1991
Total:  1,709,554Chart IV.11
International arrivals in South Africa, by origin, 1991 and 1995
Source :   SATOUR, South African Foreign Tourism Market, 12 April 1996.Germany
5.1Asia and Middle East
              3.5Africa
69.4
United States
                2.8Other
8.6
United Kingdom
8.4Africa
73.31995
Total:  4,488,272(Per cent)
a              France and the Netherlands accounting for about half each.France and 
Netherlands
2.3United Kingdom
5.4Germany
3.8France and 
Netherlands
2.2United States
               2.3Asia and ME 
                3.5Other
9.6
aaWT/TPR/S/34 Trade Policies Review
Page 132
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