Nov 04, 2011
Investment options across SA’s bordersBack
Bloemfontein|DURBAN|GABORONE|Johannesburg|Newcastle|Africa|Education|Industrial|System|Africa|Botswana|Lesotho|South Africa|United States|Energy|Global Competitiveness|Donald Mackay|Infrastructure|Proximity
© Reuse this
Investing in South Africa, which is ranked ninety-seventh out of 139 countries on the Global Competitiveness Index, comes with a rather comprehensive set of challenges. South Africa’s so-called strike season, a severely challenged education system and institutional hurdles provide just some of the narrow alleyways investors need to navigate. What options do investors have?
I keep wondering why we are not seeing more manufacturers simply relocating their businesses to Botswana or Lesotho. Gabarone is a mere three-hour drive from Johannesburg, making it closer than Durban, and Lesotho is actually inside our borders – not far from Bloemfontein. They certainly do have a few interesting things going for them besides their proximity to South Africa. One of these is their considerably more investment-friendly labour laws. Further, they are both members of the Southern African Customs Union (Sacu). The Sacu agreement allows goods to move freely, and most importantly, duty free, between all Sacu countries.
This means that, if an investor was to relo- cate a clothing factory from Newcastle to, say, Lesotho or Botswana, he or she could still sell items of clothing produced in Botswana or Lesotho in South Africa and not be subjected to the 45% duty on clothing that is currently in place. Further, the same investor will have even better access to certain global markets through better Generalised System of Prefer- ences rates, as well as better access to the US market through the African Growth and Opportunity Act (Agoa). Both Botswana and Lesotho qualify for special treatment under Agoa’s ‘special rule for apparel’, whereas South Africa does not.
Once you start exploring the options, the discussion takes a few interesting turns. The annual cost of labour unrest in rand terms and work hours and work days lost, along with the militancy, violence and damage to property (often caused by totally unrelated parties or private individuals) now associated with labour action in South Africa is significant.
Our well-organised labour movement has also cottoned on to the concept of ‘sympathy strikes’, crippling complete economic sectors or geographical areas not even directly affected by the industrial action at the centre of the dispute.
Yes, these countries may lack some of the skills we have, but people can be taught and a workforce that is actually working, and not striking, tends to learn faster. I have no doubt that these countries would welcome skilled professionals and infrastructure can be upgraded to meet the needs of industry.
This is almost the main reason for the exist- ence of organisations like the World Bank. A healthy growth injection will provide our neighbouring countries with a growing tax base and, while it may certainly take a while before energy- and infrastructure-intensive heavy industry finds its way to the out- skirts of Gaborone, more entrepreneurial small and medium-sized enter- prises, which are known to be the most prolific job creators, may make the journey over the Limpopo river a lot sooner.
Yet, with everything considered, why are we not seeing queues at the borders, with South African investors rushing to take advantage of these opportunities? Perhaps it is ignorance or prejudice, or simply fear of the unknown. But if we keep making life so difficult for the businesses within our borders, these options will, at some point, become more attractive. Sooner or later, companies will have had enough of the unnecessary cost and inefficiencies of doing business in South Africa and will look more seriously at our neighbours. The success stories will follow and the trend may not be all that easily reversed.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Other Pieter du Plessis & Donald Mackay News
Updated 1 hour 9 minutes ago Foreign direct investment (FDI) inflows to Africa fell by 3% to around $55-billion in 2014, amid an 8% fall in global inflows to an estimated $1.26-trillion, from $1.36-trillion in 2013. In its Global Investment Trends Monitor, the United Nations Conference on Trade...
Updated 3 hours ago A trading demonstration has showcased the applicability, functionality, utility and readiness of the well-established, commercial and financial electronic infrastructure provided by private-sector commodity registry Silocerts and the JSE as a potential platform for...
Updated 3 hours ago While South African consumers will get a reprieve on the back of a lower oil price, all the potential benefits could be overshadowed by the nation’s ongoing electricity shortages. A surprise cut to below $50/bl for crude oil would soften the blow of rising costs on...
Recent Research Reports
Liquid Fuels 2014 - A review of South Africa's Liquid Fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2014 Report examines these issues, focusing on the business environment, oil and gas exploration, the country’s feedstock supplies, the development of South Africa’s biofuels industry, fuel pricing, competition in the sector, the...
Water 2014: A review of South Africa's water sector (PDF Report)
Creamer Media’s Water 2014 report considers the aforementioned issues, not only in the South African context, but also in the African and global context, and examines the issues of water and sanitation, water quality and the demand for water, among others.
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
This Week's Magazine
Three-dimensional (3D) printers being sold in South Africa by electronics distributor Rectron currently print in two types of plastic, but have a clear upgrade path over the next five years to eventually print in wood, ceramics and metal-alloy materials, says Rectron...
The world’s two dominant commercial aircraft manufacturers, Airbus of Europe and Boeing of the US, both recently announced that they had made record aircraft deliveries in 2014. Boeing set a global record for the industry with 723 commercial aircraft delivered, while...
The Western Cape is shifting further into the renewable-energy space with the official opening of a factory specialising in solar inverters, a key component of solar photovoltaic (PV) plants. The investment in the manufacturing facility in Cape Town aims to boost the...
Business Leadership South Africa (BLSA) last month welcomed Cabinet’s establishment of a technical team war room to undertake various interventions to improve electricity supply security over the short- and medium-term, but added that the private sector also had a...
Despite a rapid rise in mobile connections and the economic and social benefits of such connectivity, more than half of the world ended 2014 unconnected. For this reason, industry commentators believe the biggest impact of mobile technology is still to come –...