South Africa is best place for business in Africa – Grant Thornton
February 15, 2013: Despite socio-political challenges and the serial upheavals in South Africa’s mining and agricultural industries, Africa’s largest economy remains the best place to do business in Africa in terms of business destination, a research compiled by business Services Company Grant Thornton has shown.
The report, titled ‘Emerging Markets Opportunity Index: High Growth Economies’, ranked South Africa 14th out of 27 largest emerging economies surveyed (in terms of their potential for business investment ); significantly showing SA as the highest rated economy on the African continent.
The report includes data from Grant Thornton’s International Business Report (IBR), research from the World Bank, the International Monetary Fund, and the United Nations Human Development report with key indicators from factors like the economic size, population, wealth, involvement in world trade, growth prospects and levels of development.
“South Africa has climbed one place to 14th in terms of global rankings in the Emerging Economies survey, maintaining its position as the highest ranked African economy, ahead of Nigeria which climbed nine places to 17th,” the report reads.
The only other two African countries to be ranked in the emerging markets opportunity index were Egypt at number 22 and Algeria at number 26. South Africa is the only African country to be ranked in the top 15 emerging economies worldwide.
South Africa’s fellow BRICS member; China, India, Russia, and Brazil ranked the first four positions respectively in the emerging market index. “Although recent events in the mining sector have hurt our country’s reputation as a destination of choice for foreign direct investment (FDI), there are significant benefits that continue to attract investors,” said Deepak Nagar, Grant Thornton South Africa national chairperson SA.
However, with Nigeria at the ranking 17th globally; Nagar says “Nigeria is growing in strength day by day — if we continue to have problems internally and the government doesn’t get things right, very soon Nigeria will overtake us.”
“With Nigeria improving its ranking by nine places since the previous survey, South Africa will need to improve its competitive edge to maintain its leading ranking in the years to come,” Nagar said.
The survey highlighted that inflows of FDI into South Africa’s local economy have been volatile over the past decade. They peaked at 9 billion US dollars in 2008 before the financial crisis struck, recovering to $ 6 billion in 2011. Inflows over the first half of 2012 were down 44 percent compared with the same period in 2011.
Nagar said another key attraction for international investors is the country’s strategic geographic location. It acts as the gateway to Africa, a continent boasting many of the fastest growing emerging economies in the world.
“We are ahead of the game because we are a unique combination of being a highly developed first world infrastructure and a large emerging market economy,” Nagar said. He added that South Africa’s sophisticated and well-regulated financial system and world-class securities exchange were also part of its attraction to global investors.
“It is a well-known fact internationally that South Africa’s financial systems are sophisticated, robust and well-regulated, while its economy boasts a world-class securities exchange. The government has identified massive infrastructure projects as key to boosting the economic growth rate, as well as creating employment, and it is spending billions of rands on getting the investment ball rolling.”
However despite the positive attentions received by the country as the investment gateway to Africa; social unrest and political turmoil causing downgrades are making international investors cautious.
Nagar confirmed this saying a feedback received from a survey conducted by Grant Thornton on South African businesses indicated that the main challenges facing companies in the country were labour issues, followed by excessive red tape and uncertainty over government policy.
He therefore urges international investors to get to grips with the regulatory complexities in South Africa because the country has a host of rules and compliance requirements.
“Foreign companies looking to take advantage of what South Africa offers need to be aware that there are some negative administrative barriers as well as processes which lack consistency, efficiency and transparency — and which generally interfere with the operation of free markets,” he said.
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Source: Ventures Africa