IN A tough and unpredictable global economic environment, countries such as South Africa are searching for trade and investment opportunities to drive economic growth. The triple challenge presented by poverty, inequality and unemployment are not isolated to South Africa.
In President Jacob Zuma’s state of the nation address earlier this year, and more recently Finance Minister Pravin Gordhan’s budget speech, the National Development Plan compiled by the National Planning Commission was highlighted as a priority for the government. Key to the success of the NDP will be the support of all companies — public and private — for the development of infrastructure and industry.
But this support goes beyond funding. It also speaks to skills transference, business incubation, training and development, social support and mentoring. And the support needs to come from both local businesses and from international companies operating in South Africa.
A recent survey conducted by Nielsen, on behalf of the American Chamber of Commerce in South Africa (Amcham), revealed important insights into US investment in South Africa.
There are more than 500 US companies doing business with South Africa. As an important economic frontier for many of these companies, South Africa is not only a compelling market in its own right — representing more than 25% of Africa’s gross domestic product — but is also a staging ground to enter the rest of the continent.
Many US businesses manage their sub-Saharan African operations from South Africa, and South African companies are major investors in the rest of the continent. According to the Amcham survey, 74% of the respondents indicated their South African offices were responsible for spearheading their expansion into Africa. Many of these companies use South Africa as a base to operate in more than 10 African countries.
South Africa’s position as a gateway to the rest of the continent was reinforced in Gordhan’s budget speech. His proposed relaxation of a number of cross-border financial regulations and tax requirements on companies will make it simpler for banks, financial institutions and foreign companies to invest in African countries.
US companies contribute significantly to the South African economy in terms of output and turnover, directly employing more than 70,000 people and indirectly another 75,000 — the vast majority being South Africans. Just more than half the companies surveyed created almost 7,000 jobs last year, and 76% of the respondents had invested in or expanded their business in the past two years.
Corporate social investment (CSI) uplifts communities, with 69 of the US companies surveyed contributing R445m overall towards CSI.
The large companies represented in the survey contributed a combined annual revenue of R233bn to the South African economy in 2012, with an additional R8.6bn invested in new initiatives and expansions.
Amcham believes that foreign investment into South Africa is a positive driver of economic growth and that it creates sustainable and decent jobs. While South Africa is an attractive destination for trade, investment and tourism, the country can enhance its global standing and competitiveness by building its infrastructure. It is planning to spend more than R845bn on its infrastructure over the next three years, presenting an important opportunity for US expertise and investment.
There is probably no other place in the world where a partnership for business engagement is more important. However, according to the survey, the most significant issue facing US companies in South Africa is a lack of sufficient skills.
During 2010-11, US businesses contributed almost R500m to skills and development and spent more than R320m on training — over and above the 1.5% of payroll paid as a skills development levy.
Investment in training is important for US companies that bring new and advanced skills to South Africa. US businesses also contribute significantly to supply-chain and small and medium-sized enterprise development. At a recent incubation exhibition, more than 16 US companies displayed roughly 40 initiatives in this area.
Broad-based black economic empowerment was rated in the Nielsen survey as the second-biggest issue facing US businesses in South Africa.
Proposed amendments to the empowerment codes of good practice are now under review. These amendments must accelerate the transformation of the economy but avoid unintended consequences that will weaken South Africa’s competitive positioning. The path to transformation is a journey, and the US has embarked on this journey in partnership with South Africans.
Other issues highlighted in the survey include labour, specific industry regulations and policy uncertainty.
The challenges of poverty, unemployment and inequality have fostered great debate in South Africa on the future of economic policy, the role of the state in the economy and the standards that should be applied to employment, procurement and inward investment. Amcham and the broader American business community remain committed to South Africa.
The chamber will keep engaging the governments of both countries to provide constructive input on policies and help South Africa position itself competitively to attract trade, investment and tourism, and to help the commercial relationships between the two countries flourish.
For the NDP to be successful, public and private institutions — both local and from abroad — must seek partnership opportunities to demonstrate their support. As the representative for US business in South Africa, Amcham has called on companies from other nations to do the same.