by Miriam Isa

Investment risk

Businesses are hesitant to invest in South Africa

A survey has revealed a reluctance to invest in SA
Investment

A recent global survey has revealed a reluctance in businesses to invest in South Africa. This is despite stringent efforts made by government to dispel private sector concerns.

About half of business leaders surveyed said they were delaying important decisions while a quarter said they were considering investing in a more stable country.

This highlights the difficulty government faces in boosting economic growth to levels that foster job creation, reduce poverty and ease social unrest.

"The issue is mainly policy uncertainty," said Grant Thornton SA chairperson, Deepak Nagar. "Business would like to see government creating an environment which is conducive."

Prospects of additional mining taxes and the strikes in the sector over the past few months had fanned uncertainty, which had spread to other sectors in the economy, he added.

Last week, Randgold Resources chief executive Mark Bristow said his company would not invest in South African mines because of government’s plans to extract more revenue from the already embattled sector.

South African Chamber of Commerce and Industry chairperson, Neren Rau, said that companies did not expect to deal with the level of policy risk they saw in South Africa. This included prospects of further government intervention in the economy, the possibility of higher taxes, and impending changes to labour legislation and the rules governing black economic empowerment.

"SA needs to take seriously the fact that multinationals regularly review their domestic investments with regard to their total portfolio - both in terms of whether to keep their operations here or maintain their head office here.

"We don’t fare very well in relation to some African countries, which are positioning for the placement of head offices," Rau said.

Companies are hoarding more than R530 billion in cash and low-yielding instruments due to their reluctance to invest, according to estimates from Nedgroup Investments last year.

Core constraints that directly affect business expansion plans include socio-economic factors such as crime and corruption, the lack of available skills in the workforce, and poor government service delivery.

The survey comprised responses during the fourth quarter of last year from CEOs, chief financial officers, and chairpersons of 150 local companies with a staff complement of 100 to 400.

Nearly half the business executives said that a lack of skilled workers was their main growth constraint, well above the 36% average for the Brics group of emerging economies: Brazil, Russia, India, China and South Africa.

A startling 58% of medium-sized businesses said they were affected by poor government service delivery - referring mainly to electricity supply, but also to billing issues, poor roads and slow payment.

More than 40% of executives felt that over-regulation and complex red tape constricted business growth and the day-to-day functions of companies, the survey further showed.

Crime was still a big concern, with three out of five top South African executives reporting that their immediate families or staff had had their personal security threatened through a contact crime in the past 12 years.

Contact crime was defined by the survey as housebreaking, violent crime, road rage or car hijacking.

"The impact that crime has on SA as a whole is unacceptable … much more focus needs to be given to this scourge once and for all to ensure that crime does not continue to impact on our daily lives," Nagar said.

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