An Assessment of the Investment Climate in South Africa by Vijaya Ramachandran, George Clarke, David E. Kaplan, James

By Vijaya Ramachandran, George Clarke, David E. Kaplan, James Habyarimana, Mike Ingram

So much points of South Africa's funding climate―the location-specific elements that form possibilities and incentives for corporations to speculate productively, create jobs, and grow―are favorable. the vast majority of huge, registered businesses think that the criminal procedure is ready to defend their estate rights. Infrastructure is trustworthy. Tax premiums are fairly low. the weight of legislation is analogous to different middle-income countrries. Few agencies pay bribes. And so much enterprises have sufficient entry to credits. in lots of dimensions, South Africa has a superb funding climate.

Consistent with this, huge South African organisations are very efficient. exertions productiveness is much larger than within the most efficient low-income nations in Sub-Saharan Africa and compares favorably with different middle-income nations reminiscent of Brazil, Lithuania, Malaysia, and Poland. And even if hard work productiveness in South Africa is a bit below within the most efficient towns in China, it truly is over 3 times greater than in China as a whole.

So, why hasn't South Africa been starting to be speedier? As this identify explores, whereas the funding weather is usually favorable, a few difficulties stay. businesses seem to be quite excited about 4 components: trouble hiring expert and trained employees, inflexible hard work rules, alternate price instability, and crime. utilizing rigorous statistical details on those and similar subject matters, the e-book goals to help coverage makers and personal area stakeholders in constructing reforms that might increase company functionality and development.

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Competing explanations include the exchange rate, skill shortages, public infrastructure, high rates of taxation, business regulation, and health policy. ICS results show that South African firms face a mostly favorable investment climate. Power is cheap and relatively reliable, the burden of regulation is not excessive, corruption is low, ports function relatively well, access to finance does not appear to be a major problem for most enterprises, and most people trust the court system. But if the investment climate is so favorable, why has the private sector’s investment response not been stronger?

Notes 1. The term investment climate, broadly defined, includes a country’s unique attributes or “geography” (climate, endowment of natural resources, distance 14 An Assessment of the Investment Climate in South Africa from important markets, and so on), as well as the state of its infrastructure, economic and social policies, institutions, and governance stability. This report uses a narrower definition that focuses on the endogenous determinants of investment—for example, “the policy, institutional, and behavioral environment, present and expected, that influences the returns, and risks, associated with investment” (Stern 2002b).

This rising trend appears set to continue. 1). 4 Gross Fixed Capital Formation by Private Enterprises, 1994–2003 (constant 2000 prices) 1994 Rand (millions) % change over previous year 77,789 — 1995 1996 86,279 92,974 11 8 1997 1998 97,463 95,586 5 Source: South African Reserve Bank 2002, 2004b. Note: Includes transfer costs. 5 Private Business Enterprise Share of Capital Formation, 1994–2003 Percent Gross capital formation Net capital formation 1994 1995 1996 1997 1998 1999 2000 2002 2002 2003 78 73 74 71 65 72 74 74 76 71 134 108 98 88 59 92 102 102 98 73 Source: South African Reserve Bank 2002, 2004b.

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