A recent survey by The Economist Intelligence Unit ranked South Africa as highly profitable (10th out of 31 countries surveyed).
South Africa’s exchange rate makes it one of the least expensive countries to do business in, particularly one with first-world infrastructure and high standards of living. Although the strongest local currency has strengthened against other major currencies in recent years, the rand’s exchange rate still makes commercial and residential property, quality hotels and restaurants affordable by world standards.
South Africa’s energy costs are also among the lowest in the world. Eskom supplies electricity to most of Africa and is known for its superior supply quality. The country also compares favorably with oil prices, as the private sector and multinational oil companies refine and market nearly all imported petroleum products in southern Africa.
The licensing of a second fixed line operator is expected to reduce the cost of telecommunications in South Africa. The new operator is due to start operating at the end of 2006, giving state company Telkom its first contact with real competition.
South Africa’s unit labor costs are significantly lower than those of other key emerging markets, including Mexico, Hungary, Malaysia and Singapore. In addition, in recent years there has been an increase in labor productivity in the country. South Africa has comprehensive labor legislation, which facilitates labor relations and contributes to a marked decrease in the number of man-days lost due to strike action since 1994.
South Africa’s corporate tax rate (up to 29% in 2005/06) compares favorably with a number of developing companies, and prospects for further reductions are good.
Ease of doing business in South Africa:
South Africa ranks in the top 30 countries in the world for ease of doing business, according to a 2005 World Bank report. The finding suggests that South Africa is making progress in creating a conducive environment for investment, which the government has identified as key to achieve a growth rate of 6%.
The survey ranked 155 countries based on the number of procedures, time and costs involved in: starting a business; licensing processing; hiring and firing of workers; Property registration; obtaining credit; investor protection; tax payment; cross-border trade; reinforcement contracts; and close a deal.
South Africa was ranked 28th, ahead of Spain (30th), Austria (32), France (44), Russia (79), China (91) and Brazil (119). Overall, SA ranked highest for ease of business on the African continent.
Industrial capacity, state-of-the-art technology:
South Africa’s industrial production growth is well above the average for developing markets.
The country’s manufacturing output is becoming increasingly technology-intensive, with high-tech manufacturing sectors such as machinery, scientific equipment, and motor vehicles enjoying an increasing share of total manufacturing output since 1994.
SA’s technological research and quality standards are globally recognized. The country has developed a number of leading technologies, particularly in the fields of energy and fuels, steel production, deep-sea mining, telecommunications, and information technology.
Competitiveness:
Since 1994 a number of industrial support measures have been introduced to improve the competitiveness of South Africa’s industrial base. These include putting more emphasis on supply-side measures than demand-side ones (such as tariffs and costly export support programs).
The government has provided incentives for value-added manufacturing projects, support for industrial innovation, better access to financing, and an enabling environment for the development of small, medium, and micro-enterprises (MSMEs).
Industrial development zones have been established in close proximity to major ports and airports, offering world-class infrastructure, dedicated customs support, and low taxes.
South Africa has a well-developed and regulated competition regime based on international best practice. The 1998 Competition Law fundamentally reformed the country’s competition law, strengthening the powers of competition authorities along the lines of the European Union, the United States and Canada.
The law imposes various prohibitions on anti-competitive conduct, restrictive practices (such as price fixing, predatory pricing, and collusive bidding), and “abuses” by “dominant” companies (companies with a market share of 35% or more).
Authorities have been designated to monitor the implementation and enforcement of the law, and regulators have been assigned to oversee natural monopolies and promote universal access to public services.
I incorporating material from the South African Department of Trade and Industry.
