SA’s cities making ease of doing business better, but still need to improve
‘Even though reforms have been few, where they have been measured they have led to striking results’
South African cities are making efforts to improve the ease of doing business, but the pace of reform has been slow over the past three years, according to a new report on doing business in SA by the World Bank Group.
Some South African cities are performing on a par with Organisation for Economic Co-operation and Development (OECD) cities but some are lagging among the bottom 20 globally, Paul Noumba Um, South African country director for the World Bank said. "Even though reforms have been few, where they have been measured they have led to striking results."
Noumba Um said closer co-operation is needed between national and local government levels to streamline the business environment.
Since the last study, Cape Town, eThekwini, Johannesburg, Mangaung and Nelson Mandela Bay have implemented reforms. Four of the reforms improved the conditions for businesses to obtain electricity, and one made it easier to transfer property. Cape Town, for example, leads in dealing with construction permits, which has improved by 18%, and in getting electricity.
The report, Doing Business in SA 2018, is a comparison of business regulations for domestic firms in nine urban areas and four maritime ports with 189 other economies. This is the second such report on SA since 2015 and provides a baseline from which to measure SA’s municipalities, especially metros.
The report analyses business regulations for domestic small-and medium-sized enterprises in nine cities: Buffalo City, Cape Town, Ekurhuleni, eThekwini, Johannesburg, Mangaung, Msunduzi, Nelson Mandela Bay and Tshwane. They are assessed against five areas: dealing with construction permits; getting electricity; registering property; enforcing contracts; and trading across borders. In the area of trading across borders, the report measures four of SA’s maritime ports: Cape Town, Durban, Ngqura and Port Elizabeth.
The national and city economies are overwhelmingly driven by decisions made by cities and households. More than two thirds of GDP is privately funded, with the ratio is even higher for city economies
Deputy minister of finance Mondli Gungubele, who delivered opening remarks, said the national and city economies are overwhemingly driven by decisions made by cities and households. More than two thirds of GDP is privately funded, with the ratio is even higher for city economies.
"We need to create an environment where those decisions are easily made," Gungubele said. "As the National Treasury, we have long emphasised that our cities are engines of our economy." They account for 2.4% of land area and 40% of total population and half of all employment, he said, adding that 56% of taxpayers resided in cities. "The potential for us to a make difference in this country mainly lies in our cities."
Executive mayors, city managers and other municipal representatives, representatives of the South African Local Government Association (Salga) and other national governments representatives, and international co-operation partners, as well as representatives of business and academia also attended the launch at the National Treasury offices in Pretoria.
The study also shows that no location has performed equally well across all areas measured. There was also room for peer learning.
Johannesburg performed well in the areas of registering property and getting electricity. Johannesburg, Cape Town and eThekwiniw have also started monitoring reliability of electricity supply, in line with international best practices.
In the area of registering property, Joburg has just a few procedures, making it one of the fastest locations in the country in this category. However, Joburg lags in issuing construction permits and contract enforcement.
Mangaung excels in property registration, with only seven procedures for property transfer. It leads in enforcing contracts, with the lowest cost for commercial litigation in the country, but lags in issuing construction permits. Msunduzi is also speedy with contract enforcement.
Cost reduction challenges
Challenges, however, remain in reducing costs and streamlining processes across cities. For example, all municipalities raised construction approval fees. Cape Town and Buffalo City has raised building plan approval costs by nearly two thirds over the past three years; this exceeds the rate of inflation for the same period.
At the ports, there was room for improvement in facilitating cross-border trade. Across the four ports, time and cost to comply with border requirements for exports is high compared to other economies exporting by sea. Durban, SA’s largest port in terms of volumes handled, is the slowest in handling goods.
The report’s launch comes ahead of the jobs summit scheduled for October 4-5 and the investment conference in the final week of October, following the medium-term budget policy statement presentation on October 24.
The investment conference will inform President Cyril Ramaphosa’s goal of attracting $100bn in investment over five years. His target of achieving 3% economic growth was dealt a blow after the economy slipped into a recession in the second quarter of this year following a surprise contraction in economic activity.