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Industry Overview South Africa is among the top 25 chemical-producing countries in the world. It contributes significantly to the global chemicals industry. The chemicals sector is South Africa's largest in terms of value-added output and is the fourth largest employer in the manufacturing segment. The industry is dominated by basic chemicals, with major production of liquid fuels, olefins, organic solvents and industrial mineral derivatives. The domestic plastic industry caters to local demand and various export markets. According to the Plastics Federation of South Africa (PFSA), industry turnover is around ZAR35bn (US$3.96bn) a year, and is second only to the food sector in terms of turnover. In total, the industry employs around 18,000 people and contributes 5% of GDP. Annual market growth is usually around 6% a year, but industry sources expect it to be lower in 2009 and 2010 due to the impact of the global financial crisis and a slump in consumer spending. Indeed, according to Statistics South Africa, between September 2008 and February 2009, sales of plastics products only grew by 1.8%.
Competitive Advantage The country offers a competitive advantage in terms of raw materials and feedstock. There is an abundance of mineral feedstock for manufacturing chemicals. The rock phosphate available in South Africa is benchmarked as being of the highest quality. However, with the latest Oil & Gas Journal (December 2008) survey suggesting that South Africa holds just 15mn barrels (bbl) of proven oil reserves, the country does not have a major hydrocarbons resource base.
Industry Developments In March 2008, the biggest black empowerment share ownership deal to date was under way, with South African synthetic oils specialist Sasol, selling US$3.2bn of stock in the company at an 11% discount to the recent market price. Arguably the most strategically important company in South Africa, having supplied the country with oil produced from coal during the sanctions prevailing at the time of the apartheid regime, Sasol is selling 10% of its stock to black investors Industry Forecast The South African chemicals industry is likely to report growth throughout the forecast period, despite the impact of the global economic crisis. This is on the back of strong demand from government infrastructure spending, which is being stimulated by the construction of new football stadiums in the run up to the 2010 World Cup, as well as the building of the Gautrain Rapid Rail link. However, in the short term the industry is facing falling demand, in line with other chemical producing markets. Sales of petroleum-based products fell 14.1% in the quarter ending February 2009, compared to the preceding three months. Meanwhile, sales of basic chemicals fell by 21.4%. The plastics industry is still growing, rising by 1.8% in the period, although this is well under historical growth rates of around 6%.
South Africa Chemicals Report 2009: http://www.companiesandmarkets.com/r.ashx?id=5Y6W98D4T169556
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