Economic and Commercial environment

South Africa has the largest economy in Africa, with a business sector that dominates the continent. The country boasts an affluent market and business hub, with ample high-quality commercial property available in all the major centres at affordable rates.

There is also a well-developed financial services infrastructure, and a strong and highly efficient business community, consisting of technology vendors, resource agencies, consulting companies, facilities suppliers, etc.

South Africa's business environment is positive, with a low political and security risk, says London-based business risk assessment consultancy Control Risks Group.

The South African economy grew by 3% in 2002, slightly ahead of the industrialised countries and the world economy, and it is expected that growth rates will continue to average at about 2,7% p.a. until 2017.

The Consumer Price Index (CPI) was 6,3% for 2003 and is likely to remain at this level for some time before reducing further to about 5% by 2007.

Higher levels of competition in the economy and greater moderation in demands by labour have contributed to this.

When ranked against other economies, South Africa's global competitiveness has consistently improved over the last few years, regardless of whether it is measured in terms of business efficiency, government efficiency, infrastructure or economic performance.

The South African Government and all the major political parties promote foreign investment and a free-market economy to achieve growth. In order to foster international trade, the Government is reassessing a large number of restrictive regulations. At the same time, the Competition Board regulates or prevents monopolistic situations and restrictive practices.

The findings, in RiskMap 2005, an annual study and forecast of political and security risks across the globe, follows a much publicised debate between South African President Thabo Mbeki and Anglo American CEO Tony Trahar.

Trahar suggested in an interview that political risk was still an issue in South Africa, a view subsequently challenged by Mbeki.
Now the internationally respected Control Risks Group says violent crime is low in SA, that the authorities provide effective security, and that there is virtually no political violence.
The study says business in South Africa will benefit from the government's macro-economic policies, and indicates that its empowerment policy will help the government achieve economic redistribution.

"Low security risk" means assets and personnel are not at risk - except from isolated incidents or petty crime - making normal business operations tenable. "High security risk" is when there are severe risks to assets or personnel.

On the negative side, the study says there is room to improve the delivery of basic social services to the poor - including housing. It has also criticised the roll-out antiretroviral drugs for people with HIV/Aids.

But the group says South African businesses are promoting good governance, and seem to recognise that good governance and transparency set the trend for the rest of Africa and promote foreign investment.
In Africa, Somalia is the only country still rated by Control Risks Group as an extreme political and security risk. Burundi, Côte d'Ivoire, Guinea, Liberia, Togo and Zimbabwe are all rated high political risk, Business Day reports.

According to a recent World Bank report, South Africa is more efficient than developed countries such as Germany, France and China when it comes to registering a new business.

The report, Doing Business in 2004: Understanding Regulation, collects and analyses data on over 130 countries.

The analysis is based on assessments of each country's laws and regulations, with input from local experts who assist entrepreneurs with starting and closing businesses, hiring and firing workers, enforcing contracts, and securing credit.
According to the report,

South Africa takes 38 days to register a new business, whereas France takes 53 days, China 46 days and Germany 45 days.

Australia, Canada, New Zealand, Denmark and the United States - two to four days to open a new business - were found to be the most efficient countries.
On the other end of the scale, a new business takes 122 days to be registered in Zimbabwe, 146 days in Angola and 153 days in Mozambique.

In South Africa, there are only nine procedures that must be undertaken to register a business, fewer than in France, Japan and the United Arab Emirates.

South Africa also scored favourably in the employment laws index, with 36 points. The index takes an average of three indices - flexibility of hiring, conditions of employment, and flexibility of firing - and assigns a value between 0 and 100, with higher values indicating greater regulation.

Singapore was the least regulated country in respect of employment legislation, with 20 points, followed by the United States (22 points), Denmark (25) and Malaysia (25). Zimbabwe scored 27 points.

When it came to enforcing business contracts, South Africa was less efficient, taking 207 days to go through the legal process - slower than Zimbabwe, Zambia and Cote d'Ivoire, but a lot quicker than extreme cases such as Guatemala and Slovenia, where it can take more than four years to enforce a contract!

The survey found that poor countries tend to regulate business the most, and that "heavier regulation typically brings bad outcomes".

Cumbersome regulation, the report finds, is associated with greater inefficiency in public institutions, longer delays and higher costs, and often results in higher unemployment, increased corruption and less productivity and investment.

Overall, poorer countries such as Mozambique and Burkina Faso regulated business the most, while wealthier ones, including Australia, Canada, the Netherlands and the UK, regulated the least.

"The report provides policy makers and the public with quantitative measures on business regulations - data that will facilitate the reform efforts of governments", said Michael Klein, World Bank vice president for private sector development.