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South Africa still open for business

Updated: 2015-02-01 15:06
By Rob Davies (China Daily Africa)

Despite developing-nation challenges, the country continues to improve as an investment destination

South Africa is committed to improving its global competitiveness and reputation with a view to delivering on its growth and developmental imperatives. South Africa continues to compare well with other emerging markets.

According to the restrictiveness index of the Organization for Economic Cooperation and Development, South Africa ranks among the most open jurisdictions for foreign direct investment in the world. Openness is reflected in the overall trend of growing foreign direct investment into South Africa over the past 22 years.

South Africa's stock of FDI now accounts for around 42 percent of GDP. Over the past five years, South Africa accounted for the bulk of new investment projects in Africa, with investment arriving from the United States, some member states of the European Union and increasingly from China, India and other Asian countries.

The country attracted around 24 percent of all the FDI projects in Africa between 2007 and 2013. In this light, and notwithstanding the challenging global economic conditions, in August 2013 the Financial Times voted South Africa overall winner for best investment destination in Africa for 2013 and 2014.

The 2014 AT Kearney Foreign Direct Investment Confidence Index ranked South Africa 13th among 25 leading economies, moving up two places from 2013. South Africa ranks higher than countries such as Switzerland, Sweden and the Netherlands. Research by Stephen Gelb, the international investment initiative director at the University of Bern's World Trade Institute, shows that more than 130 foreign firms either entered South Africa or expanded their investments there during 2013; that is about 2.5 foreign firms a week announcing an investment in South Africa.

Trade and Investment South Africa, our investment team, has developed an investment pipeline of 60.5 billion rands ($5.3 billion) of potential investment projects for 2013-14.

Certainly, the draft Promotion and Protection of Investment Bill has generated some negative comments. The reality, however, is that this bill will ensure that all investors domestic and foreign will be treated equally on the basis of the principle of non-discrimination and substantial protection of investor rights, based on the constitution.

The 2015 Ease of Doing Business report that ranks 189 countries has been issued by the World Bank. The report shows that South Africa's overall performance in the index dropped from 41st to 43rd this year, and this comes at a time of subdued GDP outlook.

The report attributes the drop in rankings to South Africa's poor or limited access to electricity, which is one of the biggest hurdles to doing business in the country, where it takes on average five procedures and 226 days to get connected to the grid.

Despite this, South Africa has improved in a range of indicators:

Starting a business: 64 to 61

Registering Property: 99 to 97

Trading across borders: 106 to 100

Enforcing contracts: 80 to 46

Paying taxes: 24 to 19.

The improvement in the trading across borders indicator is a critical area that affects the performance of a range of manufactured and mineral products shipped from South Africa to international markets.

South Africa's fall in the rankings can also be attributed to counterproductive credit policies, namely making access to credit information more difficult by requiring credit bureaus to remove negative credit information from their databases.

The 2015 Ease of Doing Business Report suggests that South Africa has some work to do in creating an enabling environment to attract inward flows of investment. The challenges, however, are not insurmountable, and many are already being addressed by the authorities. South Africa's global competitiveness is our collective responsibility and, in line with the National Development Plan, we need to begin to collectively respond to creating the conditions that improve our competitiveness.

According the World Bank, "the 20 economies at the top of the ease of doing business ranking perform well not only on the doing business indicators but also in other international data sets capturing dimensions of competitiveness".

As a developing nation, South Africa will be continually confronted with considerable socio-economic challenges that need to be resolved. However, the development of powerful interventions such as the National Development Plan and the New Growth Path provide broad yet strong blueprints for dealing with these structural issues, and the focus should remain firmly on the implementation of such plans for the good of the country and all its citizens.

The government is committed to creating an enabling environment that will facilitate investment, job creation and growth. Appropriately calibrated and enforced regulations provide business with certainty and a stable business environment. Regulations are also essential to reducing the harmful effects of illicit trade in many forms. These activities are not only harmful to workers and consumers but also constitute unfair competition to South African companies that are law abiding.

We must not lose sight of the things we are getting right. Government and society need to work in genuine partnership to pursue the country's current economic vision with conviction and vigor. In the meantime, South Africa needs to continue to send a message to the world that it is still very much open for business.

The author is South African minister of trade and industry. The views do not necessarily reflect those of China Daily.

 

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