An Assessment of the Investment Climate in South Africa

by Ramachandran, Vijaya; Clarke, George; Kaplan, David E.; Habyarimana, James; Ingram, Mike

• ISBN13: 9780821368985
• ISBN10: 0821368982
• Format: Paperback
• Copyright: 2007-05-10
• Publisher: World Bank Publications

Summary

Most aspects of South Africa's investment climate-the location-specific factors that shape opportunities and incentives for firms to invest productively, create jobs, and grow-are favorable. The majority of large, registered firms believe that the legal system is able to protect their property rights. Infrastructure is reliable. Tax rates are relatively low. The burden of regulation is comparable to other middle-income countrries. Few firms pay bribes. And most firms have adequate access to credit. In many dimensions, South Africa has a good investment climate.Consistent with this, large South African firms are very productive. Labor productivity is far higher than in the most productive low-income countries in Sub-Saharan Africa and compares favorably with other middle-income countries such as Brazil, Lithuania, Malaysia, and Poland. And although labor productivity in South Africa is slightly lower than in the most productive cities in China, it is over three times higher than in China as a whole.So, why hasn't South Africa been growing faster? As this title explores, while the investment climate is generally favorable, some problems remain. Firms appear to be particularly concerned about four areas: difficulty hiring skilled and educated workers, rigid labor regulations, exchange rate instability, and crime. Using rigorous statistical information on these and related topics, the book aims to assist policy makers and private sector stakeholders in developing reforms that will improve firm performance and growth.

Table of Contents

Acknowledgments	p. xi
Executive Summary	p. xiii
Abbreviations	p. xxv
Macroeconomic Background	p. 1
Economic Growth	p. 3
Investment and Savings	p. 4
Interest Rates and Inflation	p. 10
Exchange Rate	p. 11
Conclusion	p. 12
Notes	p. 13
An Analysis of Firm Performance	p. 15
Productivity	p. 16
Profitability	p. 31
Exporting	p. 32
Notes	p. 37
Characteristics of the Labor Market	p. 41
Worker Characteristics	p. 42
Remuneration and Determinants of Wages	p. 43
Employment Growth	p. 55
Training	p. 61
Labor Regulation	p. 64
Conclusions	p. 70
Notes	p. 71
Access to and Cost of Finance	p. 73
Finance as an Obstacle to Enterprise Operations and Growth	p. 73
Perceptions about Access to Finance by Firm Type	p. 78
Objective Indicators on Access to and the Cost of Finance	p. 79
Notes	p. 85
Other Aspects of the Investment Climate	p. 87
Perceptions about Investment Climate Problems	p. 88
Major Constraints on Enterprise Operation and Growth	p. 91
Other Constraints on Enterprise Operations and Growth	p. 100
Notes	p. 114
References	p. 115
Index	p. 123
Figures
Cross-Country Comparison of per Capita Growth, 1994-2003	p. 3
Cross-Country Comparison of Gross Fixed Capital Formation, Average 1994-2003	p. 6
Nominal and Real Overdraft Rates, 1991-2004	p. 11
South Africa's Real Exchange Rate, 1998-2004	p. 12
Cross-Country Comparison of Labor Productivity (in the Garment Industry)	p. 17
Cross-Country Comparison of Labor Costs	p. 20
Cross-Country Comparison of Unit Labor Costs	p. 21
Cross-Country Comparison of Capital Intensity	p. 22
Cross-Country Comparison of Capital Productivity	p. 23
Cross-Country Comparison of Capacity Utilization	p. 24
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