Despite recent moves to cut red tape – especially for small and medium businesses – analysts and trade experts say the Department of Trade and Industry and Competition (DTIC) is actively ‘kneecapping’ investment in South Africa by trying to force businesses to do things its way.
Chief executive of consultancy and advisory group XA Global Trade Advisors, Donald MacKay, told the Sunday Times that the department’s meddling in all aspects of trade and business has effectively deterred investment in the country at an unknown scale, leading to an economy that is “almost unfixable”.
He said that the government wants investment, to boost the economy and create jobs, but refuses to compromise – trying to force businesses into impossible contracts when seeking tariff relief or agreements that would benefit a business.
MacKay said that these contracts force businesses into “frightening commitments” for three years, like investment, price control and employment commitments.
He said that instead of incentivising investment by creating a more appealing business environment – cutting red tape, fixing infrastructure, restoring power, getting rid of corruption – the government is shifting all the responsibility onto businesses.
The trade expert used the June 2021 Burger King acquisition as an example, where the deal was blocked over a lack of BEE. The deal only went through after harsh commitments from the new owners to invest further, and not cut jobs.
The same thinking is behind the government’s push for localisation and other trade matters, MacKay said, adding that this is a fundamental ideology within the department and the government as a whole that will continue to deter investment.
Trade issues
The government at least seems to be aware of this particular stumbling block at some level, with recent moves from the department cutting back on some of these requirements.
The department this week published new regulations for public comment to cut back – or rather, provide exceptions – on restrictions on horizontal and vertical practices for small and medium businesses.
This was in response to president Cyril Ramaphosa’s announcements that his administration would cut red tape for certain businesses in sectors that are struggling post-Covid-19.
However, the department recently published new proposed regulations seeking to tighten up the country’s scrap metal trade.
It said that the regulations would address widespread copper and other metal theft in the country and disincentivise the practice by making the process of importing equipment to do so more difficult and also requiring registration and licencing for legitimate dealers.
This has also been met with criticism.
Legitimate dealers in scrap metal – which stolen metals are ultimately exported as – would be burdened with more red tape, and the entire industry would suffer as a result. Meanwhile, the European Union has also taken issue with the plans, saying that they do not abide by the World Trade Organisation’s rules.
The business community has been critical of the government’s meddling in business and its failure to do the simple things necessary to get the economy back on track.
Investec chief executive Fani Titi and local banking operations boss Richard Wainwright recently said that if the government does not implement structural reforms, the overall macro economy will not grow to a significant degree in the long term.
Wainwright cited an ‘avalanche’ of regulations, particularly for small and medium-sized businesses, which he said was strangling the economy. The two also raised concerns about the precarious state of Eskom and the continued delays in procuring additional power from independent power producers.
“We are not competitive — and its basic things, as opposed to rocket science,” he said. “We’re not trying to land men on the moon or go to Mars. Just get electricity that works that isn’t a constraint on the economy.
“Just get goods from one point to another so the economy can function properly. Just allow businesses to do what they need to do without overburdening them. It’s simple things.”
Business Unity South Africa CEO Busi Mavuso, meanwhile, has flagged issues around Home Affairs and other departments where the government simply can’t get its act together as being a massive push factor for businesses – local and foreign – trying to operate in the country.
MacKay said that the government talks big about boosting business and making it easier to do business with South Africa – but at a policy and ideology level, it does the exact opposite.
“The underlying philosophy is still ultimately one of government deciding what the private sector should do. And I don’t see how that ever works,” he said.
Read: Government’s new plan to crack down on copper theft in South Africa
