Hope and Glory.

(From Financial Director)

Byline: Richard Willsher.

South Africa seems like an attractive place to do business, but alongside the opportunities, there are risks.

Market analysts are upbeat about the country's macro economic policies, central bank, local capital markets - the Johannesburg Stock Exchange is one of the world's 10 largest - and political stability. In general, South Africa offers a business-positive culture. However, there are business risks for foreign investors and may account for the sluggishness with which foreign direct investment has found its way into the country post-Apartheid.

Exchange rate volatility presents particular uncertainties. At R11 to the US dollar in late 2001 - roughly R16 to GBP1 - South African business assets, property, labour costs and local tourism looked cheap. At the current level of R6 to the dollar - R11 to GBP1 - much less so. What is unclear, given there was no overpowering economic reason for the rand to appreciate so sharply, is why it happened.

Paris-based OECD suggests it might have been driven by "a surge of offshore transactions in rand derivatives (especially swaps)". The exchange rate still presents a risk.

Although a significant step forward in telecoms deregulation is set to take place from February, this will not happen overnight. In addition, there is still an Africa premium on IT, both in capital cost and buying in IT expertise due to a skills shortage.