Despite President Ramaphosa's optimistic message about South Africa's business environment, experts warn of the complexities that deter potential investors.
Image: Timothy Bernard/Independent Newspapers
President Cyril Ramaphosa said that he wanted to continue to open the economy for investment during his State of the Nation Address (SONA) but doing business in SA is not easy according to one payment provider.
In his speech, the president said that he wanted to send a strong message that South Africa is open for business and tourism.
"We are seeing positive results in the improvement of the functioning of our network industries as well as the investment opportunities that are opening up and are being taken by investors leading to job creation," he added.
Cornelius Coetzee, a Director at cross-border payment provider, Verto questioned whether Ramphosa knows if the country is open for business.
“How can we be open for business but it is so hard to do business with SA given the exchange control burden,” he stated.
Coetzee said that it is an exhausting and extremely complex endeavour to navigate the complex exchange control regulations South Africa has.
Moreover, this creates a barrier for companies to enter the country.
“Entrepreneurs, start-ups and SMEs are desperate to participate in the global village,” he said.
“Growing the agri and commercial sector is pivotal to South Africa’s growth, but we all know that our bread and butter is plated abroad,” he added.
Coetzee lamented the fact that cross-border trades on average take 3-5 days to land in recipient bank accounts due to South Africa’s control regulations.
“Extensive lead times pose forex risks on businesses trading on already tight margins. The banking infrastructure, although the best in Africa, still faces the burden of navigating complex exchange control reporting before even considering the release of a transaction,” he noted.
“Exchange control in itself is difficult to understand, let alone implement. Having to wait close to 6 weeks for the Reserve Bank to approve a relatively simple transaction can present severe challenges for a country that is “open for business”.
Coetzee said that the magnitude of rejections, often based on a misinterpretation of reporting leaves even the largest of corporations in a difficult financial position.
“Without reform, we won't be able to take the world by storm,” Coetzee added.
The Foundation for Rights of Expression and Equality (Free SA) also responded to Ramaphosa's address and criticised the president’s emphasis on Public-Private Partnerships (PPPs).
The foundation said that PPPs for infrastructure investment sound promising, but without a serious commitment to privatisation, these partnerships will likely face the same bureaucratic inertia that has hindered past initiatives.
"The continued refusal to privatise failing state-owned enterprises (SOEs), even as a new SOE Reform Unit is created, proves that government is more interested in protecting ideological sacred cows than in pursuing real economic growth," Free SA said.
The foundation also criticised the R20 billion "Transformation Fund," and said this was another repetition of failed redistribution policies rather than the market-friendly reforms needed to create sustainable jobs and investment.
Lastly, the foundations said that Ramaphosa's plan to fast-track the Public Procurement Act would only worsen the inefficiencies and corruption already rampant in state contracts.
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