adminunemployment, poverty and inequality.
The budget has largely been hailed as “upbeat”, with tax breaks and infrastructure development easing the burden on many while improving investment opportunities in South Africa. The minister reminded South Africans that the global environment is still highly uncertain and that even with signs of a revival in the US economy, much of Europe is in recession.
“Significant financial risks cloud the global economic outlook,” he said, but highlighted some historic shifts in economic power taking place globally right now which offer South Africa both opportunities and challenges.
Interestingly, a recent World Bank study predicts that emerging economies, including those in Africa, will grow on average by 4,7 percent a year, while advanced economies will grow by about 2,3 percent between 2011 and 2025. Emerging market multinationals are playing an ever-increasing role in reshaping global industry, with marked increases in South-South investment and foreign direct investment.
The upshot is that emerging economies like South Africa are generally on a growth path greater than that of Europe or the USA.
South Africa for investors
In South Africa’s first budget to exceed R1 trillion, Gordhan’s review lists 43 major infrastructure projects with a combined cost of R3,2 trillion. For the next three years, approved and budgeted infrastructure plans amount to R845 billion: R300 billion in the energy sector and R262 billion in transport and logistics projects.
South African business infrastructure is already generally well developed, and has traditionally been seen as a model for other African countries.
It offers an efficient physical infrastructure of roads, rail and air transport; a well-developed communications network; and a substantial financial support structure for companies established in the country, including a network of investment banks, brokers and financial services specialists. Foreign investors are permitted 100 percent ownership and the government treats this the same way it does domestic enterprise for various investment schemes like export incentive programmes and tariffs, tax allowances and the other trade opportunities.
South Africa offers foreign investors a substantial market with significant growth potential, a market-orientated tradition, access to the other markets in Africa, liberal repatriation of profits and earnings and availability of raw materials.
Almost all business activities are open to international investors.
In some sectors, however, ceilings have been placed on the permitted extent of foreign involvement — for example the banking industry, where foreign equity investment is limited.
Importantly, foreign investments in South Africa are largely treated the same way as domestic investments and qualify for various investment incentives like export initiative programmes, tax allowances and trade regulations.
Business-enhancing budget
In this latest budget, Gordhan has allocated R9,5 billion over the next three years to boost South African businesses through competitiveness incentives and investment in technology, enterprise development and agriculture.
The bulk of this amount — R5,75 billion — has been allocated to the Department of Trade and Industry as part of a manufacturing competitiveness enhancement programme, which will be implemented in April 2012.
A further R2,25 billion has been set aside in incentives for businesses that invest in special economic zones over the next three years.
l The writer is the chief executive of Brand South Africa, an organisation that helps create a positive and compelling brand image for South Africa.
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