Labour regulations and official red tape tops a list of key constraints hampering South Africa’s economic growth, a Bureau for Economic Research (BER) survey showed on Wednesday.
Other constraints identified are state leadership and capacity (policy support and municipal services), infrastructure deficiencies and costs and labour skills.
The special survey, conducted during the second quarter of 2006 among the business sector, noted that the economy’s rapid growth had exposed the constraints which could deter the country from achieving even higher economic growth rates over the medium to longer term.
”Between 30-45% of all the respondents rated these factors to be serious to debilitating issues in terms of the operation of their business,” read a BER statement.
It said a ”second-tier” of constraints was also identified — the volatility and strong level of the exchange rate, lack of competition (such as monopoly pricing), tax administration and road travel deficiencies.
The economic think tank, attached to the University of Stellenbosch, said analysis across firm-sized groups, sectors and regions revealed interesting patterns.
For instance, small firms were often at a disadvantage with labour regulations and exchange rate volalitity, while large firms suffered ”relatively more” in terms of infrastructure deficiencies and skilled labour shortages.
”Manufacturing firms report serious problems regarding the strong rand and monopoly pricing, building and construction firms suffer extreme skilled labour shortages, and services firms have more serious problems with high communications costs and electricity outages,” said the BER.
It said the Western Cape, and to a lesser extent, the Eastern Cape, reported the most serious impact from electricity supply problems, but generally the Western Cape reported less serious growth constraints compared to the other provinces.
Gauteng reported the most serious impact in terms of labour regulations; KwaZulu-Natal firms noted monopoly pricing and exchange rate volatility as serious issues and the smaller provinces reported road travel deficiencies and lack of municipal services as key issues.
”Given the evaluation by business executives of the listed growth constraints, the intensity of most of the factors is such that any relief in any of these areas is likely to contribute positively to economic growth,” said the bureau.
It said the government was on the right track by addressing these constraints in terms of its Accelerated and Shared Growth Initiative for South Africa (Asgisa) strategy.
However, it suggested that ”great urgency” was required particularly with the government’s interface with business in the areas of labour regulations, red tape, tax administration and others.
”Furthermore, a more competitive currency and skills training can go a long way in improving the economy’s growth rate,” BER said in its statement. – Sapa