3 August 2010

South Africa’s business environment compares favourably with its peer group of upper- to middle-income economies globally, according to a new World Bank report, which adds however that certain improvements are still needed.

These include raising the market share of efficient, high-performing enterprises, enhancing productivity, and increase export competitiveness for job-led, sustainable economic growth.

The report, entitled “South Africa: Second Investment Climate Assessment – Improving the Business Environment for Job Creation and Growth”, was prepared by a World Bank team in collaboration with the Department of Trade and Industry, and released by Trade and Industry Minister Rob Davies and World Bank country director for South Africa Ruth Kagia last week.

The report presents the results of a 2008 survey of 1 056 manufacturing industries, 68% of which are located in Johannesburg, 14% in Cape Town, 12% in Durban, and 6% in Port Elizabeth. Of these, 231 businesses were revisits from an earlier 2003 survey.

Strengthening business competitiveness

The report provides survey-based analytical advice to policy-makers, business leaders and civil society, with a view to strengthening business competitiveness in South Africa.

The report’s key messages are that:

• South Africa could improve its productivity and competitiveness by increasing the market share of efficient producers. Given the high concentration of South African industry, this requires further efforts to enhance competition through more activist and innovative policies.

• Investments in employee training in small, medium and micro-sized enterprises (SMMEs) should be increased with better targeted government support.

• South Africa could do more to improve access to finance by SMMEs and support productive informal enterprises.

“The findings of the report are very interesting, particularly where they refer to the business environment in South Africa – the ease of doing business, regulatory framework, and all the different steps that need to be gone through when one is doing business in this country – which actually compare favourably to those of other peer countries,” said Davies.

He said that the government actively promoted the above factors as one of the country’s competitive advantages, adding that it was something they wanted to preserve and even improve on, as it was clearly important to attracting new business.

“Furthermore, we acknowledge the challenges identified in the report, such as small business development and access to finance, and our department is working to address the challenges,” said Davies. “We welcome the report as a tool of dialogue, discussion and debate.”

African spillover

“Improving the investment climate in South Africa is critical for economic growth and job creation,” said Kagia. “For Africa’s largest economy, a better business environment will generate large spillovers benefits across the African continent.

“The challenge is to identify bottlenecks and take concrete actions.”

For the purpose of the survey, the comparator group of emerging economies was Argentina, Brazil, Chile, China, Malaysia, and Thailand.

These countries are natural peers of South Africa, as all are relatively high-performing, resource-rich middle-income countries which have experienced significant export-driven industrialisation.

SAinfo reporter

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