By Richard Lapper
Published: September 30 2009 15:44 | Last updated: September 30 2009 15:44
After working for seven years in the UK, Tyron Whitley last year made the move back home to South Africa with some trepidation. But 18 months on, his company– the South African Car Import Agency, which helps other returnees ship their vehicles back from émigré destinations – has been a success and the 34 year old now feels pretty positive about his native land.
“When we first came back, we wondered what we were doing. Crime was a concern and initially power cuts meant that we found ourselves sitting in the house with candles studying how generators worked,” he says. “But doing business here has been a breeze.”
His experience illustrates the contradictory character of South Africa as a place to work. On the one hand, its legal system, banking and financial facilities and road infrastructure compare favourably with those of the developed world. On the other, the supply of electricity can be as erratic as it is in the country’s poorer African neighbours. And the incidence of crime, especially violent crime, is among the worst anywhere.
A glance at this year’s tables measuring the ease of doing business and prepared by the International Finance Corporation – the business arm of the World Bank – highlights South Africa’s advantages. Of the 30 countries clustered at the bottom of a league table of 183 nations, more than two-thirds are from Africa.
By contrast, South Africa ranks 34th, only three places behind France, well ahead of other European countries such as Spain, Portugal and Italy and substantially ahead of fashionably large emerging markets such as Brazil, Russia, China and India.
Several factors explain the country’s exalted position. Investor protection regulations surrounding the registration of a property are relatively straightforward. It is easy to pay taxes and open a business.
South Africans and foreigners alike can rely on courts to enforce contracts and, if things go badly wrong, businesses can be closed down without too much fuss.
More broadly, business has access to a sophisticated legal system based on a mixture of Anglo-Saxon and Roman Dutch law. Ravi Pillay, public affairs manager at Nestlé, the Swiss company that has extensive operations in South Africa, says, for example, that “well-developed copyright, patents and trademarks law all help ensure the company’s intellectual property is protected”.
These advantages have been buttressed of late by a sound banking system that has remained largely unaffected by the meltdown in global financial markets, and by consistent macro-economic management. True, earlier this year there were fears that, under President Jacob Zuma, whose election campaign was backed by the left-wing trade union movement, the government might intervene more frequently. But, so far, Pravin Gordhan, the new finance minister, and Gill Marcus, the incoming central bank chief, look set to stick with established policies.
On top of that, investors like the fact that physical infrastructure is reasonably solid.
Nevertheless, South Africa also provides frequent reminders that it is still a developing country, and, in terms of average income levels, some way behind the other former British dominions with which it is often compared, such as Australia and Canada. The poor quality of public education remains a big problem, contributing to pronounced shortages of technical skills.
Complying with South Africa’s black economic empowerment rules – under which companies are effectively obliged to cede a share of ownership and management positions to the majority black population – can also be problematic.
Energy is a potential worry. Power cuts became a regular feature of life for several months in the first part of last year, largely because the state-owned utility, Eskom, had failed to build enough generation capacity. Last but not least, crime remains a significant preoccupation.
Mr Zuma at least recognises the extent of South Africa’s difficulties in this area. In August, he appointed Bheki Cele, a close associate from KwaZulu Natal, to be South Africa’s police chief, filling a vacancy unaccountably left open for 18 months by former President Thabo Mbeki.
Mr Mbeki’s decision had done little to help the fight against serious crime but recent statistics have only served to underline the scale of the task faced by Mr Cele. Although the murder rate continues to fall – it has now nearly halved since the dark days of the late 1990s – in the 12 months between April 2008 and April 2009, robberies of businesses increased by an alarming 41.5 per cent.
Source :http://www.ft.com/cms/s/0/21ee3fba-ac87-11de-a754-00144feabdc0.html?nclick_check=1
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