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
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
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 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
"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
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 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
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
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