Country Forecast South Africa August 2017

Country Forecast South Africa August 2017

  • August 2017 •
  • Report ID: 2557177 •
  • Format: PDF

Policy towards private enterprise and competition


2017-18: Policy is broadly pro-business, but favourable moves, such as new special economic zones offering tax incentives, are accompanied by tighter competition laws and stricter black economic empowerment (BEE) rules.


2019-21: Efforts to speed up land reform intensify, although the government rejects expropriation without compensation. Investment incentives in selected industries (such as automotive manufacturing) remain in place.


Policy towards foreign investment


2017-18: A new foreign investment law risks limiting access to international arbitration, and a new mining charter is likely to impose new regulations. A draft expropriation law, which could affect levels of compensation, re-emerges from parliament.


2019-21: The government continues to encourage foreign investment and public-private partnerships but remains opposed to the privatisation of state assets in most cases.


Foreign trade and exchange controls


2017-18: Some remaining exchange controls on capital flows are relaxed but others are retained. Selected trade tariffs are raised to protect vulnerable industries (such as steel). Efforts to build closer trade ties with key emerging markets continue.


2019-21: Progress towards regional economic integration in Southern Africa makes some advances, but barriers persist.


Taxes


2017-18: Tough fiscal conditions lead to higher direct and indirect taxes, although corporation tax rates remain unchanged. A carbon tax is introduced, but many details are still pending.


2019-21: Efforts continue to streamline and modernise the tax system, and expand the tax base.


Financing


2017-18: A rise in borrowing costs across the economy accompanies the loss of South Africa's investment-grade credit rating. Local banks remain sound and profitable on aggregate, and continue to be a key source of corporate financing.


2019-21: The central bank's continued independence helps to preserve financial system stability. Interest rates stabilise before edging lower, leading to cheaper borrowing.


The labour market


2017-18: Labour laws stay inflexible, despite the negative impact on employment, because of trade unions' political power. Rising wages (including a proposed national minimum wage) and the risk of strikes deter business from creating jobs.


2019-21: The labour market remains tough, owing to skills shortages and BEE targets.


Infrastructure


2017-18: Investment in transport and electricity boosts capacity, although bottlenecks persist. The rollout of domestic fibre-optic cables boosts telecommunications provision and cuts costs.


2019-21: The phased start-up of new base-load electricity-generating plants facilitates fresh investment in energy-intensive sectors, but rising power tariffs remain a deterrent.



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