The World Bank’s Doing Business Report 2014, which ranks countries across the globe according to how easy or difficult it is for businesses to operate, recently revealed that when it comes to trade across borders, South African regulations are having a negative effect on trade, and as a result, the country has been ranked 106 out of 189 countries.
According to Hennie Heymans, MD of DHL Express South Africa, these negative rankings are as a result of stringent trade barriers, such as regulations and import costs, as well as the lack of infrastructure present in the region.
Heymans says that the report also revealed that the average time to export a product in South Africa is 16 days, and the average time to import is 21 days. “Businesses that depend on imported or exported products therefore often need to wait more than a month for products to arrive, which, should the product be in high demand, could result in business owners losing customers and profit.”
According to the World Economic Forum’s Global Enabling Trade Report 2013 report, although barriers to trade have fallen dramatically, the costs associated with international transactions remain much higher than those that arise within countries. Heymans says that this is particularly true in South Africa, and points to the informal threshold of R500 for duty-free imports, which remains a significant obstacle for the country.
In addition, the 2012 report included questions around the most problematic factors for exporting and importing in its Executive Opinion Survey. The results showed that “tariffs and non-tariff barriers,” as well as “burdensome import procedures” ranked 1 and 2, respectively, on the list of factors identified by respondents.
Heymans says that the recent statement from Government around its efforts to strengthen infrastructure planning in South Africa is welcomed by the logistics industry, as the lack of quality infrastructure in the region creates various challenges for local businesses and economic growth. “Infrastructure is one of the key factors investors look at when considering South Africa as a destination, and can greatly assist local business to grow beyond borders.
“Improved infrastructure should also lead to shorter transit times, and a more efficient supply chain leads to a more efficient and thus productive economy.”
He says that in terms of local business, improved road infrastructure will result in less wear and tear on vehicles, and, in addition, better railway infrastructure will result in less heavy weights transported on roads. “This will not only make our roads safer, but also ensure that they remain in a better condition for longer. It is a well known fact that overloading is a major issue in South Africa which puts enormous pressure on our road infrastructure.”
Heymans says that these challenges are hindering investment into the continent, as infrastructure and competitiveness are key factors which influence investment, and are right up there with issues such as corruption, labour stability and land ownership.
He says that the commitment by government to improve infrastructure will not only encourage direct foreign investment, but also improve our rankings when it comes to the ease of doing trade across borders.
“An example of this is Nigeria and Kenya, which have both made enormous strides of late to become more competitive, and have had great success. South Africa still boasts the best infrastructure on the continent, but continues to lose ground in terms of the overall package, which includes the recent labour market issues and the continuous noise around land ownership. These issues will continue to work against South Africa attracting foreign investments and the recent decision by BMW to stop all further investments in South Africa is a prime example of this.
“We therefore welcome this commitment, which reflects our own commitment on infrastructure improvement. South Africa remains the lead country on the continent and as such we should ensure that we remain current with our offering to investors, both locally and internationally. A modern infrastructure system will lead to a more efficient supply chain, and this is key for the growth of any economy,” concludes Heymans.