Lesotho Case Study
“Market and Mountain Kingdom”

Bob Terry
10/8/2012
Wk 7Assignment

Globalization & Regionalization Globalization is international integration of cultures, people, products, beliefs, and much more. Globalization makes goods and services available to locations that originally wouldn’t have them. Some of my favorite restaurants are Brazilian Steakhouses like Texas de Brazil and Fogo de Ciao. These restaurants would not be offered in Denver Colorado without globalization. Globalization has increased greatly over the past century due to advancements in technology, particularly in transportation and knowledge sharing (internet). These technologies have ingrained globalization in the modern era. Regionalization is the economic integration of countries. Some good examples of these are the North Atlantic Free Trade Organization (NAFTA) and the European Union (EU). Both of these agreements take countries that are in similar regions and in certain economic ways. All countries in the EU have the same currency which creates certain benefits but has also created economic disaster for many countries involved. The goal of regionalization is to benefit all countries involved and become stronger globally as a whole. These two forces have had tremendous impact on the small African nation of Lesotho. Foreign influences have shaped Lesotho throughout history and currently determine their economic factors today. Most recently trade agreements have made Lesotho dependent on Chinese manufacturers’ (major imports) and major US clothing companies like Levi and the GAP(major exports). These agreements shape Lesotho’s whole economy including wages, employment/unemployment, and the health of citizens.
Possible Industries Textile manufacturing provides most of the jobs for Lesotho citizens. Some other possible industries that could offer employment in Lesotho are supplying water, diamond mining, government jobs, uranium mining, agriculture, manufacturing furniture, and housing development. An opportunity to develop Comparative Advantage would be to increase mining of Uranium. Lesotho has a rich deposition of uranium in the country (Lesotho Industry). Uranium has many uses and a high demand in many countries around the world. Uranium could become a major export for Lesotho and even a cause for foreign direct investment in Lesotho. Another opportunity for comparative advantage is Diamond mining. Diamonds are currently Lesotho’s most profitable exported mineral (Lesotho Industry). Developing Competitive Advantage- the current trade advantages they receive from AGOA give them a competitive advantage in the textile industry. If the AGOA were to get renewed it would be great for Lesotho’s economy and continue to provide a competitive advantage in textile production.

Macroeconomic Conditions of Lesotho & South Africa
Lesotho
Inflation- 5% in 2011, Unemployment- 45% in 2002, government budget —12.4 % of GDP, Poverty line 49% below, Gini index-63.2 in 1995, GDP per capita 2,000 in 2011
South Africa
GDP growth rate 3.4%, Inflation- 5% 2011, GDP per capita 11,100 2011, Poverty line 50% below, Gini 65 in 2005, budget 102.8 billion – 3.8% of GDP, unemployment – 24.9% in 2011
Since the case study was written foreign demand for textiles has gone way down forcing investment in other areas of business.
Socio economic conditions- HIV/AIDS, Infant mortality rate, distribution of wealth. Apartheid.
Trade Barriers
AGOA
Africa Growth and Opportunity Act

International Organizations
World Health Organization
World Trade Organization

References
Lesotho Industry. (n.d.). World Map. Retrieved October 7, 2012, from http://www.mapsofworld.com/lesotho/economy-and-business/industry.html

Introduction
South Africa has a rich history which has shaped the country into what it is today. They have a similar history to the United States with their struggle with Apartheid and the United States’ issues with slavery and discrimination. Throughout this paper we will continue to compare the United States with South Africa in many different matters such as, Competitiveness, Foreign Direct Investment, Labor Inequality, Regional Economic Integration, Trade Policies, Research and Development, and Human Resources among other things. We hope to discover the different factors that contribute to the similarities and differences between the United States and South Africa throughout this paper.
Apartheid
South Africa has a dark history of racial segregation laws, known as apartheid. These laws supported racism and created an environment in which a minority white population dominated the majority black population. This legal system was put in place by the Afrikaner Nation Party (ANP). Some examples of apartheid laws are the Population Registration Act that required the entire population of South Africa be registered by race, and the Group Areas Act that required racial segregation of public areas. (McCoy) The apartheid system was supported by a constant military presence. (McCoy)
“The African National Congress was an organization that opposed the white minority government and its policy of racial separation”. (answers) A leading member of this group was Nelson Mandela. The minority powered government opposed the ANC outlawing them completely in 1960, and sending Mandela and his followers to jail in 1962. They were charged with sabotage and many other crimes in 1964. (answers) Mandela was sentenced for life and spent most of his sentence on Robin Island. When he was released he led the ANC and became the first democratically elected president in 1994.
The United States has also had a history of racial segregation. In the 18th century are country supported slavery and it was an essential part of our economy. Even more recently than that, our country supported racial segregation in the form of Jim Crow laws. These laws separated blacks and whites in the form of public facilities (bathroom, train cars, water-fountains, etc.) and wouldn’t even let black and white children play together in the state of Alabama. (Jim Crow Laws) In the United States the Civil Rights movement led to the Civil Rights Act of 1964 that banned discrimination against African Americans and women. This movement had many supporters and Christopher McCoy, a writer for Prospect, argues that the push for freedom and equality in America had a part in ending the apartheid movement in South Africa.
The United States originally had a large part in supporting the apartheid movement because of its trade with South Africa. At the time apartheid was put in place, the focus in the United States was on the end of WW2 and fighting against communism. The Afrikaner National Party also fought against communism passing the Suppression of Communism Act around the same time they passed the Population Registration Act and the Group Areas Act. South Africa relied heavily on the United States for military weapons, in 1952 the US sold over $112 million dollars in arms to the South African military, and we even have a nuclear agreement with them that dates back to 1974 (McCoy) This reliance was a main factor in ending apartheid because we were major player in trading with them. The suffering of apartheid was publicized here in the United States and we had a population that could relate to suffering of black South Africans struggling in the apartheid system. (McCoy) Eventually there was a lot of pressure put on congress to do something about apartheid. Despite a veto by President Reagan, Congress approved the Comprehensive Anti-Apartheid Act in 1986. This prohibited trade with South Africa and encouraged other industrialized democratic nations to do the same. (McCoy) Apartheid continued for several years and the consequences are still felt today. This history has influenced the makeup of South Africa’s government, legal, education, health care, and economy.
Regional, Class, Racial, and Ethnic Divisions Today, the struggles of apartheid can still be seen by the huge disparities between black and white. There are a number of huge disparities between blacks and whites in the form income, employment, and poverty ratings. Political Risk services states that “More than 25% of the burgeoning black majority cannot find work in the formal economy, and they lack the training to fill the more senior posts from which whites have been forced out.”(Political Risk Services) They also state that 8% percent of the population controls 90% of the wealth, 50% of the population lives in poverty, making homes out of shacks, outbuilding, huts, and migrant worker hostels.
Education
The PRS Group also states that official figures show South African’s illiterate rate at 11% it is really much higher, probably over 50%. (Political Risk Services) They also say that 50% of children drop out at the elementary level and that despite these dropout rates, most black classrooms are crowded. So even though the segregation laws have been changed for over fifteen years, the black population still struggles to receive quality education.
The United States reports a literacy rate of 99% according to the United Nations Development Program, but you can still see signs of disparities between blacks and whites. Detroit, Michigan is a city with one of the highest African American populations in the United States. Education there is not up to par with the rest of the country. Jasmine Harris writes for the Nubian Message saying that,
Nearly half of that population are functionally illiterate with elementary reading, writing and sometimes even speech competency levels. As with the prison system, the unemployment rate and the high school drop out rate, there is an overwhelming gap between the amount of literate black and white students throughout the United States.
So despite the differences in ranking of literacy rates, both countries find themselves with huge disparities between their black and white populations. These disparities can probably both be traced back to the countries similar backgrounds of racial segregation.
Health
The PRS Group notes some statistics to the health of South Africa. The life expectancy in South Africa was reported at 52 years in 2010, infant mortality rate was 44 out of 1,000 births. There are also distinctions between blacks and whites in life expectancy as well. “The government spends 8.6% of GDP on health care, but provides only limited national health care facilities and services, which are often overcrowded or of lower quality than expensive private services and facilities, and the AIDS epidemic is also very widespread amongst black populations.” (Political Risk Services) These factors could contribute to the fact that the average white male is expected to live five years longer than the average black male (PRS).
Government
The South African constitution that was adopted in 1996 is based on “individual dignity, the achievement of equality and the advancement of human rights and freedoms” (africafiles.org) One step forward that South Africa has taken towards equality is the redistribution of Farmland. Quality farmland has been dominated by wealthy white owners, but the ANC has planned to redistribute 30% of this land to black owners by 2014. (telegraph) Despite their efforts toward equality, South Africa’s has found it difficult to categorize groups that are disadvantaged which makes it very difficult to help them. (telegraph) Due to these difficulties, poverty and unemployment levels still remain very high.
Their current president is Jacob Zuma who is also the current president of the ANC. (info.gov) The Republic of South Africa’s government is a parliamentary democracy where power is shared between parliament and the president. Much like the US they have three branches of government, executive, judicial, and legislative. Their government is set up much like the US but there are subtle differences. One difference is that their president can be elected for two five year terms. (123) South Africa’s democratic government feeds its newly free market economy.
Legal System
The new legal system in South Africa is very similar to our own common law system even down to the small claims and community courts. Tradition has shaped South Africa’s legal system in many ways. During the apartheid era law was much different than it is now. The principles embodied by their legal system were adapted from Roman-Dutch law and English law. (countrystudies) Today their legal system embodies the supreme law of the land and is binding on all judicial organs of the state. Their Constitutional Court has the power to review and to abolish legislation inconsistent with the constitution. This is very similar to our own common law system where judges interpret the law, rather than apply the law.
Starting a Business
The past decade of reform has been very beneficial for South Africa. In terms of economic development, their transition to democracy and free trade principles should help them continue to develop quickly. Also they encourage entrepreneurship. In South Africa there is no minimum capital to start a business and it takes 5 procedures and 19 days, much quicker than world averages of 7 procedures and 30 days. (heritage.org) This focus on democracy, free trade, and entrepreneurship will help South Africa grow economically. Now that we have looked into the South African economy, we will discuss their culture in terms of Geerte Hofstede’s four approaches in terms of business and societal culture.
Hofstede
Hofstede says that there are four important factors when looking at a nations culture, the first factor is power distance. South Africa in this area seems to be very accepting of a hierarchical order (Hofstede). This can be seen as a positive because you want the educated people to be able to handle a work force that recognizes the power that you hold and allow you to do what is best for the market. When it comes to the degree of how interdependent South Africans are amongst each other, they are skewed more to and individualistic society (Hofstede). This can be interpreted from knowing that South Africa does business in a free market economy; however individualism and capitalism are not synonymous traits. Although there is a hierarchical power orientation, the employ/employer relationship is contract based, and centered on mutual advantage (Hofstede). Also, starting a business in an individualistic society is ideal, due to the consumer freedom in purchasing what they want without restriction and with their personal ends as a priority. What seems to go hand in hand with individualism is masculinity; this term yields to sub terms such as competition, success, and authority. When running a business in a masculine country such as South Africa, it is an advantage to the business owners because it is easier to focus on profit maximization due to the fact that competition is in the best interest of the society and economy; although a good business owner will throw in ideas of collectivism/feminism such as environmental awareness and social responsibility.
The final dimension that Hofstede says is important in understanding a nations culture is, uncertainty avoidance. South Africa scores on the side of risk aversion when it comes to uncertainty, this means that they believe in rigid codes and behavior that keep the norm as a focal point (Hofstede). It would be difficult to bring in a vastly different product or service that would require the emergence of a new market as a business owner. We will now look into South African history and discuss how it has affected ethical standards today.
Corruption
According to Transparency Internationals 2011 Corruption Perceptions Index Study, South Africa had a rating of 4.1 out of ten, making it 64th on the corruption list. The United States was ranked 16th with a score of 7.8 out of ten. (cpi.transparency) Their were 182 countries in the study making South Africa about the middle of the pack when it comes to corruption. “The 2011 index draws on assessments and opinion surveys carried out by independent and reputable institutions. These surveys and assessments include questions related to the bribery of public officials, kickbacks in public procurement, embezzlement of public funds, and the effectiveness of public sector anti-corruption efforts” (cpi.transparency)
Competitiveness
According to the Global Competitiveness Index, South Africa has remained stable in its competitiveness ranks after a large increase since post-apartheid; with a 2011 ranking of 50 out of 142 countries (World Economic Forum, 2011). The key behind South Africa’s stable competitiveness is its large market and ability to house quality institutions, which was a determinant of the competitiveness index in which South Africa ranked 47th (World Economic Forum,2011). A big reason for South Africa’s increase in competitiveness is because it has a good hold on different facets of the macro economy. The areas that they have good holds on the different facets are; goods and market efficiency where they are ranked 40th, their financial markets which rank 9th, innovation they are ranked 44th, and business sophistication they come in 38th (World Economic Forum, 2011 ). This can attest to the idea that more companies can find it favorable to invest their money in South Africa during a time when other countries financial trust has been worn, thus leading to more home offices blooming in South Africa. According to the World Economic Forum the labor market efficiency in South Africa needs some strengthening, we believe this stat to be true because South Africa is still home to labor inequalities and poor working conditions that are residual from the Apartheid era economy.
Today, South Africa is breaking away from its apartheid era economy. During the apartheid, South Africa was a very internal and shielding economy. A lot of this had to do with the fact that other nations refused to trade with South Africa because of apartheid. Now that the apartheid has ended, the South African economy is headed towards an internationally competitive economy with roughly sixteen percent of its GDP coming from international trade. (South Africa – International Trade) The post-apartheid government has done a great deal to increase global trade in South Africa by lowering tariffs, eliminating import controls, reforming the regulatory systems, and entering into trade relations with a variety of countries. (South Africa – International Trade) On top of entering into trade relations they have also made it extremely easy for other countries to participate in foreign direct investment.

Foreign Direct Investment
With the end of the apartheid it has not only brought about new areas of trade but also allows for foreign direct investment. The South African Government is very supportive of foreign direct investment and views it as, “a means to drive growth, improve international competitiveness, and obtain access to foreign markets” (Foreign Direct Investment in South Africa). Foreign direct investment in South Africa looks very promising for other nations because the government allows any business industry to directly invest along with having no restrictions. The government does not restrict foreign investors on the form or extent of investment and even has the Department of Trade assist in setting up foreign direct investors.
It is apparent in South Africa that there is unequal income distribution and social class inequalities. According to Eric Werker, this gap creates an existence of two different economies, that may drive away possible foreign investment. Werker says that there is an economic base of sophisticated consumers who have the income to purchase from the global firms; with the other economy, Werker says being the rural side of the economy. He says this consists of farmers and other individuals living off government aided income. But this observation can go the other direction and be seen as a positive, because it allows for a variety of companies to enter due to the different target markets available.
Despite this economic gap, South Africa is said to be attractive for foreign direct investment because they have, “reduced levels of public debt, generally low inflation, and a progression from a fiscal deficit to a fiscal surplus, and a consistently positive rate of economic growth” (Foreign Direct Investment in South Africa). South Africa is behind Brazil and China when it comes to foreign direct investment but as of 2006, they were competing with countries like India. In 2005 alone, foreign direct investment rose by 63%. (Foreign Direct Investment Soars). Companies looking to do foreign direct investment in South Africa tend to invest heavily, like when Barclays bank bought out a majority of the South African bank Absa. Foreign direct investment has, “resulted in several large foreign acquisitions in banking, telecommunications, tourism, and other sectors, foreign direct investment has fallen short of the Governments expectations”(Foreign Direct Investment in South Africa). South Africans can expect more investors entering their nation due to the countries high strength of investor protection, which is supported by the World Economic Forums ranking of South Africa in this category at 10.
Just like South Africa, the United States Government is promoting inbound foreign direct investment. The US government has an open investment policy, meaning foreign companies can not only come here to invest but can grow and expand their business nationwide. (Promoting inbound foreign direct investment) Despite the rapid decline in foreign direct investment in 2000, foreign direct investment is now rising rapidly in the US. In 2010, foreign direct investment rose by 49 percent. (Promoting inbound foreign direct investment)
The United States receives more foreign direct investment than any other nation on the planet, with over 237 billion being invested in 2007. According to President Obama ,foreign investors target the US, “ ‘due to our strong and open economy, our productive workforce, a unique culture of innovation and entrepreneurship, remarkable colleges and universities, and a business environment underpinned by transparency, protection of intellectual property, and the rule of law’ “ (Promoting inbound foreign direct investment) Not only is the president trying to promote foreign direct investment but local cities and state governments are promoting foreign investors. In the economic down turn we are currently in, state governments are trying to bring in foreign investors in order to create jobs for their state economies. One aspect that is affecting foreign direct investment is the lack of inequality in the work force.
Labor Inequality According to M Stern and G Szalontai, South Africa is going through a “Brain Drain”. This refers to mass amounts of professional and skilled laborers leaving the country. They estimate that South Africa has been losing between 6900 skilled professionals annually since 1994. More interestingly the rate has risen since apartheid ended in 1994. “On average, South Africa suffered a net loss 2,300 skilled migrants from 1989 to 1993. This has risen to around 9,300 a year since 1994.” (Stern & Szalontai). These numbers could mean huge implications for a developing country, where skilled labor is usually the most in demand. The research also shows that the main destination for these emigrants is to more developed countries, particularly New Zealand, the United Kingdom, the United States, Australia, and Canada. In a study done on the quality of life in South Africa by Mattes and Richmond (2000) they found that large amounts of the population were dissatisfied by the ability to find a good school for children and ability to find medical services for family. Both of these services would be found more readily available in more developed countries. These stats bring forth some economic problems for South Africa because the labor that is leaving the country is the same labor they need to continue developing their country (doctors, nurses, contractors). This problem is well displayed by Transnet Corp. Transnet is a large organization that is responsible for much of the development taking place in many of South Africa’s sea ports, as well as, other transportation development, they are also a very large supplier of jobs in South Africa. The Government has recently put a lot of money into a number of their projects, and a recent report by Marian Lydall assesses the impact on the capital goods sector. The report states, “Although considerable backward linkages will be created in the process of procuring goods and services needed in the construction and operation of the planned projects, a significant portion of investment will be lost because of having to import foreign skills and components that are unavailable locally.” (Lydall, 2009) Migration of skilled workers clearly creates a problem for the labor force and development of the country. The South African government has recently taken some steps to try and fight this problem. “In the health care sector, for example, the South African Government has negotiated an agreement with the United Kingdom to prohibit the recruitment of doctors and nurses to the British public health care system.”(Stern & Szalontai) The United States also has migration issues, but they are much different than the lack of skilled labor that the South African Government is currently battling right now. The United States also relies on bringing in workers, as a whole we do not produce enough engineers’ and scientist’s to keep up with our nation’s needs. So we import jobs and outsource a lot of services. Also our education system produces people that are overqualified to work low paying labor jobs. Large amounts of illegal immigrants come to our nation to work the surplus of low wage jobs. Immigration is constantly a heated topic in all our elections and has recently seen some policy change. Despite the need to fill the low income jobs many Americans disagree with the large amounts of illegal immigrants so they try to get more strict immigration policies enforced. The New York Times states, “President Obama’s enforcement strategies have led to more than 1.1 million deportations since the beginning of his term, the highest numbers in six decades” (3/12/20012) Despite this, the article explains that the efforts are to increase the deportations of convicted criminals while halting the deportation of immigrants with no criminal record. In this effort it will only help South Africa as a nation along with support from surrounding nations.

Regional Economic Integration
South Africa is a member the Southern African Development Community or SADC. The countries that are included in the SADC are Botswana, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Swaziland, Tanzania, Zambia, and Zimbabwe. According to the SADC website one of the main goals of this integration is, “to coordinate regional trade and financial liberalization; to facilitate competitive, diversified industrial development; increased investment and the integration of the SADC economy in the global economy and to foster regional integration through the SADC Free Trade Area, the creation of the Customs Union, Common Market and the Monetary Union. The aim is to contribute to the SADC ultimate objective of poverty eradication in the region” (sadc.int). However, this is not the only group South Africa is a part of; they are also a member of the Southern Africa Customs Union consisting of 4 other member nations including Botswana, Lesotho, Namibia, and Swaziland. The goals of the SACU are very similar to those of the SADC. Ideas such as facilitating movement of goods between the Member States, Promote fair competition, increase investment opportunities, enhance economic development, and so on(sacu.int). South Africa is the single biggest player in the SADC, accounting for 60 percent of the SADC’s total trade, and 70 percent of their GDP (OSISA). South Africa is the driving force of the SADC and is the only country that has the ability and resources to make the SADC mutually beneficial for all Member States. However, there are some that say South Africa is acting in a way that is mostly self-interested. Despite South Africa doing many good things for the region such as, the creation of jobs, upgrading and building new infrastructure, facilitated technology transfer, increased tax revenue as well as consumer choice, and boosted general investor confidence in host countries, there have been some instances of South Africa taking advantage of the power they have over the rest of the region (OSISA). Market Penetration by South African companies into the rest of the region would generally be viewed as a positive sign of integration in the region; however there have been some instances of these companies not bringing their good business practices into the new countries. In member countries that seem to have relaxed regulations, South African companies are taking advantage of, in some instances Violating labor rights, Returning of apartheid attitudes in the mining and agriculture industries, companies failing to be good corporate citizens in host markets, and market dominance in host countries in the food and retail industries. The United States has a similar regional economic integration agreement to South Africa’s SADC in NAFTA. The NAFTA agreement which was implemented in 1994 removed most trade barriers between the United States, Canada, and Mexico (NAFTA1). NAFTA was an important agreement in the world of economic integration, “NAFTA created the world's largest free trade area, which now links 450 million people producing $17 trillion worth of goods and services” (NAFTA2). The NAFTA agreement sky rocketed the trade between the three countries. In 2009 the United States traded $1.6 trillion worth of goods and services. NAFTA’s goals are much the same as the SADC’s, however NAFTA has been far more successful than the SADC mostly because the companies are all developed and can hold their own. South Africa dominates the SADC to where it is not completely mutually beneficial. NAFTA on the other hand benefits Mexico, Canada, and the United States more than it hurts them. (NAFTA2) In an effort to try and expand trade not only with in Africa but also the world they have expanded one of their trade ports know as Dube.
Dube Trade Port
South Africa is very heavily involved in international trade within Africa and across the globe. In order to do so they need to expand their port system as well as other means of transportation. South Africa is in the process of making importing and exporting much easier throughout South Africa and the continent of Africa. They are doing this by further developing one of the main ports in South Africa that is located between Durban and Richards Bay. Right now the port into a multi-billion dollar cargo terminal, trade zone and agrizone. (South Africa Launches Dube Trade Port) It has been operational for the last two years and is still continuing to develop. The port is placed directly between two of the largest ports in the entire southern hemisphere and can handle the largest cargo ships. It also has a major international airport, cargo terminals, trade zones, and IT telecommunications platforms. (South Africa Launches Dube Trade Port) The new port is and will continue to do wonders for South Africa. The new port will help connect economic centers along with improving export capacity through sea and by railway lines. (South Africa Launches Dube Trade Port) "The Trade Port is also set to be southern Africa's premier logistics platform, given that the Port of Durban provides connectivity to 53 international destinations and access to local distribution networks" (South Africa Launches Dube Trade Port). The Dube Trade Port will allow for imports and exports to expand.
Import and Exports
Even though South Africa is trying to become an industrialized nation, they still rely heavily on exporting primary and intermediate commodities to industrialized nations (South Africa – International Trade). That being said, over seventy percent South African imports are manufactured goods. Europe is the largest trading partner with South Africa. Seven out of ten top trading partners is a European country with the British leading the way. (South Africa – International Trade)
South Africa relies on natural resources and governmental trade incentives as their primary imports and exports. South Africa currently has a trade surplus due the recent economic situation. South Africa specializes in exporting “gold, diamonds, platinum, other metals and minerals, machinery, and equipment” (Economy Watch). South Africa was reported as having close to $68 billion worth of exports in 2009. (Economy Watch) Although there is a large movement to increase exports to other African nations, South Africa has six main consumers of their exports. In order, they are “Japan, USA, Germany, UK, China, and Netherlands” (Economy Watch). South Africa has many items they need to import, These items include but are not limited to, “machinery and equipment, chemicals, petroleum products, scientific instruments, and food materials” (Economy Watch). In 2009, South Africa did just over $70 billion in imports. (Economy Watch) The list of major importers to South Africa looks a lot like the list of exports with some minor changes. In order, they are “Germany, China, USA, Saudi Arabia, Japan, and the UK” (Economy Watch). Both the import and export numbers provided were before the new Dube Trade port was operational. With the new trade port it will provide boost to the South African economy by providing more jobs and easier ways to import and export commodities. besides imports and exports, the Dube Trade Port also provides new and easier ways for companies to outsource to South Africa.
Out-Sourcing
The new trade port is also helping boost the outsourcing to South Africa. South Africa is becoming one of the world leaders in telecommunications. The new trade port is promoting this by having an IT telecommunications hub. (South Africa Launches Dube Trade Port) Telecommunications is growing in South Africa because they have a cheaper labor market that speaks English. On a global scale and in terms of production, Africa ranks high in the export areas of, automotive, chemicals, and machinery. They are extremely low in electronics and textiles and clothing. In terms of export grown they are currently ranked twentieth in the world, and are expected to grow 10.9%. (Global-production.com) South Africa continues to grow and continues to try and be a major player in the world market yet falls way short when compared to the United States.
United States Imports and Exports
It is not hard to figure that the United States is a much larger player than South Africa in terms of foreign trade. South Africa has the US on both its top import and export lists while the US does not have South Africa on either list. The United States primary exporters are “Canada, European Union, Mexico, China, and Japan” (United States Exports). For decades now, the US has been the top import nation in the world while ranking in the top three for exports. (United States Exports) As of January 2012, exports totaled over $180 billion with its main exports being, “machinery and equipment, industrial supplies, non-auto consumer goods, motor vehicles and parts, aircraft and parts, food, feed and beverages” (United States Exports). The United States is the world leader in imports and in January 2012, imports were worth $234.4 billion. (United States Imports) The United States imports a variety of goods yet the top imports almost seem to be identical to the top exports. The top imports are “non-auto consumer goods, fuels, production machinery and equipment, non-fuel industrial supplies, motor vehicles and parts, food, feed, and beverages” (United States Imports). The United States main import partners are “European Union, China, Canada, Mexico, and Japan” (United States Imports). In terms of outsourcing, the US is a major contributor to global outsourcing. They are also one of the major receivers of outsourcing due to the stability of the government and the economy.
Research and Development
Research and development in the United States are at the top of the list, as they have an established scientific sector, affluent consumers, large market, and high competition between firms. This absolutely depends on the market that a firm is entering, but if a firm who sells technology products were entering into South Africa, they would be happy to know that the Government has increased its budget for research and development five fold over the last 11 years (defenceWeb, 2010). It will take more than just a raise in budget; it is up to the businesses to utilize the funds to create products that will spur spending and competition. When it comes to research & development it is a domino effect, the key is to motivate businesses to utilize the funds, and communicate with their marketing team to be able to create a product that is desirable by the different markets.
Human Resources
Another aspect of an organization that will prove vital in its success is, human resource management. It has transformed into a duty by human resources management to focus on employee uniqueness and leveraging their assets with reference to the company’s goals. This shift away from the idea that human resources is a mere pool of compensation, workforce functions, legal issues and work force problems has led professionals to invest much more into human resources in South Africa, as it lends opportunity for competitive advantage.
South Africa is becoming more and more involved in international trade because they are more open to foreign investment as they are trying to increase their competitiveness in the world market. In order to do this they have recognized that their port and mass transit systems need to be able to accommodate higher demands, so they have begun to invest more money into reconstruction of the Dube Port, which is now becoming a large site for international trade. The new logistical system in South Africa affects not only the United States but several other major countries that trade with South Africa. South Africa is finding that they have to change their business strategies, especially in Human Resources (HR), in order to be more flexible in working with the coming and going of foreign business.
Conclusion
As you can see apartheid has had a major impact on South Africa and it continues to impact all aspects of the South Africa even today. The United States old regulations of racial segregation still impact them today as well, though not as severely. This paper has shown that even though the United States and South Africa share a similar history, they are still very different right now in terms of, Competitiveness, Foreign Direct Investment, Labor Inequality, Regional Economic Integration, Trade Policies, Research and Development, and Human Resources among other things.