Government needs to develop a better understanding of how business functions, and work on the mechanisms to develop public-private partnerships (PPPs) if the full benefits are to be realised.
According to the soon-to-be-released Commonwealth Business Council’s Business Environment Survey 2007 report, South Africa’s economic activity has been fast-paced and its short-term prospects are broadly positive.
As long as the PPP issues are addressed, efforts directed at public expenditure on investment and social programmes will address the country’s core problems, boosting investment in infrastructure and addressing key issues such as unskilled labour, HIV/ AIDS and education.
Dr Mohan Kaul, director-general of CBC, explains: “The overall outlook for Africa looks good. Africa attracted $38-billion in 2006, up from $15-billion in 2005. Large investments have been made in oil and other minerals sectors by both developed and developing countries.
"South Africa’s outlook too looks positive. CBC commends the South African policy frameworks and regulatory changes that are in process. South Africa is considering liberalisation of capital outflows.
"In the past, portfolio outflows were not permitted, while capital outflows and individual offshore investments were limited to specific amounts. The government plans to remove restrictions and create better regulations for monitoring. A new model for corporate income tax has been piloted, with a new value-added tax model expected soon. These are all the right moves in the right direction needed for a better business climate.”
The survey indicates a much more positive outlook than previous years, significantly better than 2005. Business enablers are the most improved factors in the business environment with two factors ranked as more than adequate. Financial frameworks faired better than in 2005 and have progressed from being inadequate to more than adequate.
However, despite the brightest outlook for businesses since 2003, corporate ethics and governance ranking remained statistic. According to the survey the private sector has taken note of the positive changes in the business environment in South Africa.
Infrastructure has experienced gradual progress but has not yet reached the adequate standards required. According to the business sector, there is a marked change in policy framework effectiveness in 2007 than in 2003.
Corruption perception ranking worsened in 2005 and has remained the static. On the Transparency International’s Corruption Index, it jumped from 44th position in 2004 to 51st position in 2006.
Private sector opinions on openness and accountability factors are marginally lower and inadequate. Freedom of the media is the only factor which is more than adequate. It is of concern that the ranking of government and business relations factors has continued to decline in ranking since 2003.
The private sector expressed that the mechanisms in place to develop private-public partnerships are insufficient and that government needs to have a better understanding of how business functions.
Some industry sectors lack cohesion and representation and even when this exists, representatives are not prepared to confront the government. The Black Economic Empowerment process is still regarded as discriminatory and haphazard. Respondents ranked efficient administration as the lowest out of all the factors in the 2007 survey. Poor administration and lack of accountability leading to a breakdown at local government level were the reasons provided.
Businesses cited government and business relationships as a priority necessary for them to do business. The worst disincentive for doing business is the lack of skilled labour force, followed by government effectiveness and accountability.
CBC recommends action points to attract investment and provide a favourable environment for business. These include creating opportunities and incentives for the private sector’s training of a skilled labour force, strengthening consultation between government and business representative bodies on business policy and private-public partnerships, providing more resources for provincial authorities and local government to operate effectively, ensuring transparent reporting and accountability for all government processes.
The report lauds South Africa’s implementation of the Accelerated and Shared Growth Initiative for South Africa (ASGISA), a strategy to achieve better economic growth in the medium term. It is designed to maintain economic growth, reduce unemployment and poverty and support macro-economic and financial stability.
The strategy is expected to raise GDP to 4.5% by 2009 and a further 6% between 2010 and 2014. If the ASGISA strategy is effective as anticipated, South Africa will be able to monitor its vulnerable aspects and adjust the strategy accordingly long-term economic growth.