South Africa’s Advantages

Richard Lapper, the FT’s Johannesburg Bureau Chief, writes:

A glance at this year’s tables measuring the ease of doing business and prepared by the International Finance Corporation – the business arm of the World Bank – highlights South Africa’s advantages. Of the 30 countries clustered at the bottom of a league table of 183 nations, more than two-thirds are from Africa.

By contrast, South Africa ranks 34th, only three places behind France, well ahead of other European countries such as Spain, Portugal and Italy and substantially ahead of fashionably large emerging markets such as Brazil, Russia, China and India.

Several factors explain the country’s exalted position. Investor protection regulations surrounding the registration of a property are relatively straightforward. It is easy to pay taxes and open a business.

South Africans and foreigners alike can rely on courts to enforce contracts and, if things go badly wrong, businesses can be closed down without too much fuss.

More broadly, business has access to a sophisticated legal system based on a mixture of Anglo-Saxon and Roman Dutch law. Ravi Pillay, public affairs manager at Nestlé, the Swiss company that has extensive operations in South Africa, says, for example, that “well-developed copyright, patents and trademarks law all help ensure the company’s intellectual property is protected”.

These advantages have been buttressed of late by a sound banking system that has remained largely unaffected by the meltdown in global financial markets, and by consistent macro-economic management. True, earlier this year there were fears that, under President Jacob Zuma, whose election campaign was backed by the left-wing trade union movement, the government might intervene more frequently. But, so far, Pravin Gordhan, the new finance minister, and Gill Marcus, the incoming central bank chief, look set to stick with established policies.

On top of that, investors like the fact that physical infrastructure is reasonably solid.