Competitiveness and investment attractiveness of the South African Essay

Competitiveness and investment attractiveness of the South African food retail industry - Essay Example By 2012, the SAFRI is expected to have a value of $98.1 billion which will be an increase of 32.7 percent over 2011 (Appendix A). While the above figures demonstrate the attractiveness of the market for investments, further evaluation would be conducted to determine the competitive advantage in investing in South Africa. This would be conducted through the extended model of Porter’s National Diamond. 2. Porter’s National Diamond The competitive advantage of an industry, according to Porter, derives from the national ‘diamond’. These four diamonds are the four determinants of competitive advantage created within the home base of the nation state – factor conditions, demand conditions, related and supporting industries, and firm strategy, structure and rivalry. The extended model of Porter’s National Diamond includes government and chance events. An important key feature of the model is that the determinants are supportive of each other and oper ate as a system (Clancy, O’Malley, O’Connell and Egeraat, 2001). This implies that there should be effective flow of information about needs, techniques and technology. Here geographic concentration is important because proximity facilitates flow of information. ... While the basic factors pertain to demographics, location and climate, the advanced factors include communications infrastructure, sophisticated skills and research facilities. South Africa’s population has surpassed 50 million and more than 90 percent of its population is non-white (Arisaig, 2012). Unemployment rate is 25.2 percent and the average life expectancy is only 57 years. Unequal distribution of wealth has resulted in the poorest ten percent earning just one percent of the total national income. Poor education system can be attributed to high rates in unemployment. However, the country has modern infrastructure and the retail sector is sophisticated although dominated by local products (Ntloedibe, 2012). The country also has a well developed communications network and electricity supply is also reliable. In addition, South Africa also has a network of merchant banks, brokers, and financial services specialists. Investments in technology and telecommunications are inc reasing which will enhance business infrastructure thereby enabling the companies to compete with the countries in the West (Maxwell, 2013). The southernmost country on the African continent, South Africa is one of the most economically prosperous nations in southern Africa due to its coastal location and presence of gold, diamonds and natural resources (Briney, 2012). However, climate change is prominent in South Africa and this impacts sourcing and transportation of agricultural products for retailers. One way to handle this is through adaptation by sourcing through several suppliers in vulnerable categories. Despite its coastal location, water is scarce and water security is a fundamental challenge faced by retailers. This requires the retailers to actively engage with suppliers for