The World Bank ranks South Africa among the top 30 countries worldwide in terms of the ease of doing business, but it could boost its position up from 29 with just the “stroke of a pen”, according to bank economist Caralee McLiesh.
McLiesh is the programme manager of the bank’s Doing Business project, which investigates business regulation and the protection of property rights around the world.
“The message here is that it’s never enough for a country to keep its status quo,” said McLiesh. “Unless you are reforming, you’re going to be slipping back with reference to other countries.”
In the project’s recent report, South Africa slid from number 28 last year to number 29.
One regulatory cost that could be reduced with the “stroke of a pen” is the cost to register property. Although this cost has decreased from 10% to 9% of purchase cost last year, it is still much higher than in Ghana, where it is 2%, or Malawi, where it is 3%. Of the 9% cost to register property in South Africa, 8% is tax that could be “slashed”.
Reducing this tax would not necessarily reduce tax revenue, said McLiesh, explaining that in some cases revenue had increased because more people chose to officially register transfers of land, and property was less likely to be undervalued.
In her presentation, she highlighted three areas in which South Africa had performed the worst. These areas were trading across borders, employing workers and paying taxes.
In the case of trade, the report shows that it takes a business in South Africa 34 days to import at a cost of $850 a container. The business also has to fill out nine documents.
In the United Kingdom, by comparison, it takes 12 days to import, the cost is $756 a container and there are four documents to fill in.
“The big barrier to trading is not the hard infrastructure … but the soft infrastructure,” said McLiesh.To reform the regulation of trade across borders, the government could create a single window for fulfilling administrative requirements and reduce paperwork.
In the context of employing workers, South Africa should simplify the requirements for dismissals for operational reasons and allow greater flexibility in contracts.
She added that the government could consolidate and lower the corporate income tax rate and simplify the paperwork.
Nedbank chief economist Dennis Dykes agreed that corporate tax could be reduced. He said the bank had previously commented that the tax rate could be reduced from 29% to 25% with the retention of the secondary tax on companies. Alternatively, the second tax could be removed.
He also said government should expedite the process of registering new- and old-order mining rights because the delays in this process had stalled some mining projects.