/ 24 June 2014

Nene: Government is reducing cost of doing business in SA

Numsa claims government technocrats share its concerns that Transnet's R50-billion locomotive tenders were awarded to foreign firms.
The strike at the rail, road and pipeline company is continuing after unions and Transnet met until the early hours of Tuesday morning

Speaking at a business lunch in Johannesburg, Finance Minister Nhlanhla Nene said there were several plans in place to make it “easier to do business in South Africa”. 

These included increasing investment in infrastructure and reducing regulatory burdens for businesses, boosting trade with the rest of Africa and putting a number of industrial incentives in place.

“The 2014-2015 budget commits R847-billion over the next three years for infrastructure investment as [part of the] National Infrastructure Plan, the bulk of which will be for power generation and freight logistics,” said the minister. 

A large portion of that will likely be allocated to the escalating costs of mega coal stations Medupi and Kusile, the expected completion times of which have been moved out repeatedly. At last count, the price tag for Medupi had reached R105-billion and it was projected to come on line in the second half of this year, two years after the original completion date. 

Boosting small business 
The government had allocated R6.5-billion in the medium term to fund small and medium-sized firms, said Nene. There was tax relief on the cards for small businesses as well. 

“The budget accepted two recommendations from the Judge Davis tax committee that will ease the compliance burden of small business, namely the turnover tax regime will be amended to further reduce the tax burden on micro-enterprises and replacing the graduated tax structure for small business corporations with a refundable tax compliance credit is under consideration,” he said. 

Some industry players and opposition parties criticised President Jacob Zuma recently for introducing a small business development ministry. The sole mandate of the department will be to represent and deal with the challenges faced by small and medium businesses in South Africa, on which many believe the key to economic growth is hinged. 

At the time that Lindiwe Zulu was sworn in as the minister overseeing the department, the Cape Chamber of Commerce and Industry said there were “better ways to boost small business than by creating yet another ministry”. 

“We already have too many ministers and a whole new department with both a minister and a deputy minister seems excessive,” said chamber president Janine Myburgh. “There was a danger of more regulations and increased administrative burden, which small businesses were ill-equipped to deal with.” 

But Zulu said recently that her aim was to decrease this. “We will focus on providing effective support for small businesses to ease the regulatory and compliance burden on small businesses,” she told the Sunday Independent over the weekend. “That does not mean that people must no longer comply. We need people to understand that compliance is important for stability. But we are saying we must not make it difficult for small businesses to comply.”

The government aims to ease rules related to accessing foreign capital, said the minister. This will “enhance support for entrepreneurial development”.

A key talking point around foreign investment has been the development of the so-called Promotion and Protection of Investment Bill, which was introduced in November last year. 

The Bill aims to cancel longstanding bilateral treaties with several developed economies, including Germany, Belgium, Spain and Switzerland. It has raised the concern of foreign diplomats, with the American Chamber of Commerce saying that the draft Bill would not offer investors assurance that “predictable and stable policies are a government priority”.

But others have defended the move, saying that similar processes have been followed in several European countries. 

Trade with the rest of Africa
The government plans to boost the trade and investment environment for companies wanting to do business in the rest of Africa, said Nene. 

About a quarter of South Africa’s manufactured exports are destined for the sub-Saharan market. South African direct investment makes up about 5% of the country’s gross domestic product, he said. 

“So, the simplified tax and foreign exchange framework for companies with operations on the continent and elsewhere has been extended to unlisted companies, and the cap of such benefits for listed companies will be increased,” he said.