'Cut red tape' World Bank tells South Africa

17 February 2016

Policies which slash the regulatory burden on companies and promote competitiveness in markets could ignite investment and growth in South Africa, the World Bank’s South Africa Economic Update has said.

The remarks come at a time when the country is facing economic uncertainty.

The bank has forecast GDP to grow at a mere 0.8% in 2016, down from 1.3% in 2015 and lower than at any time since 2009.

Factors weighing down the economy include weaker commodity prices, lower Chinese demand and rising US interest rates, as well as policy uncertainty, infrastructure gaps and a severe drought.

An economic simulation where regulations governing the professional service sector were eased intensively showed the value of the sector would increase by between $1.4bn and $1.6bn.

Growth in 2017 is forecast at 1.1%, still considerably below the average growth rate of 4.5% for sub-Saharan Africa in 2016–17, and it is likely to lead to incomes falling and poverty rising.

The country’s National Development Plan, which aims to eradicate extreme poverty, reduce joblessness and double incomes by 2030, is now "further out of reach", the bank said.

The report also highlighted how the busting of a regional cement cartel, followed by the first entry of new firms into the industry in 80 years, lowered cement prices while generating investment and creating jobs.

Prices in the previously cartel-dominated cement markets are estimated to have fallen by between 7.5% and 9.7%.

The bank praised South Africa’s use of strengthened enforcement powers to detect anti-competitive behaviour.

But it added that more competitive bidding and efficient spectrum assignment policies in the telecoms sector could expand spectrum availability, allowing small network providers to enter the market and enhancing broadband speeds.

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