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Western Cape's business and investment climate
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Western Cape's business and investment climate


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  • 1. “An economy’s competitiveness cannot be reduced only to GDP andproductivity because enterprises must also cope with political,social and cultural dimensions. Therefore nations (and regions)need to provide an environment that has the most efficientstructure, institutions and policies that encourage thecompetitiveness of enterprises”- IMD World Competitiveness Yearbook 2012
  • 2. Measuring the business and investment climate• The business climate and the investment climate are well-established concepts in macroeconomics• They usually refer to national rather than local and regional dimensions• Increasingly, they are being applied to city and regional levels
  • 3. The role of business and investment climate performance indicators • Promote learning and orientate stakeholders toward results • Provide information to enhance decision-making – For business to determine and validate investment plans and to assess locations for new operations – For government to benchmark policies – Analysts evaluate how nations (and regions) and enterprises compete on world markets • Promote participation, capacity development and good management practices • Improve transparency and enhance accountability
  • 4. Example: Factors that determine the quality of a businessclimate - International Economic Development Council, 2011 Business tax Workforce Energy costs levels availability Quality of Market size Cost of living services Environmental Permitting & Quality of life regulation licensing Access to Real estate costs Infrastructure financing, capital and availability & incentives
  • 5. Example: World Bank Ease of Doing Business Index, 2011 Enforcing Protecting Starting a contracts investors Business Dealing with Trading across construction Getting credit borders permits Registering Closing a Paying taxes property business
  • 6. Example: 12 Pillars of Competitiveness– World Economic Forum 2011/12 Global Competitiveness Report
  • 7. South Africa competitiveness ranking 50/142 – World Economic Forum 2011/12 Global Competitiveness ReportStrengths Weaknesses• Market size (25th) • Labour market efficiency (95th) • Rigidity of employment practices• Quality of institutions (139th)• Property protection (30th) • Lack of flexibility in wage determination by companies• Property rights (30th) (138th) • Significant tensions in labour-• Accountability of private employee relations (138th) institutions (3rd) • University enrollment (97th) • Infrastructure upgrading (62nd)• Goods market efficiency • Business costs of crime and (32nd) violence (136th) • Police unable to provide protection from crime (95th) • Health of workforce (129th)
  • 8. Ranking the ability of nations to create and maintain an environmentin which enterprises can competeExample: World Competitiveness Yearbook 2012 – IMD World CompetitivenessCentre, Four competitiveness factors, 20 sub factors, 329 ranking criteria
  • 9. South Africa competitiveness ranking 50/59 - IMD World Competitiveness CentreStrengths Weaknesses• Fiscal policy (8th) • Unemployment rate 25%• Prices (7th) (59th)• Effective legal environment • Labour market (56th)• Quality of corporate • Basic infrastructure (55th) governance • Education (50th)• Dynamism of the economy • State competency• Open and positive attitudes • Research and development • Skills of workforce
  • 10. Example: Creation of conditions in which SMEs can thrive – OECD Istanbul Declaration, 2011 Stable EnablingLaws & systems macroeconomic regulatory of governance policies frameworksSME assistance & Reduced barriers Human resource development to SME access to policies programmes global markets Access to financing of SMEs
  • 11. Example: Specific focus on human capitalPeople Risk Index – AON Consulting, 2010
  • 12. Example: Vietnam Provincial Competitiveness Index – DAI and The Asia Foundation, 2011 Land access Transparency Entry Costs and security of and access to tenure information Time costs of Proactivity of Informal regulatory provincial & charges compliance local leadership Business Labour and Legal support training institutions services
  • 13. Example: The characteristics of business-friendly cities and regions – Greg Clark, 2011 Local & regional Local & regional Delivery of business business climate business climate services (product) (image)• Economic potential • Business & • Networking and• Cost effectiveness investment climate capacity building• Commercial promotion • Inward investment incentives & • Existence of facilitation regulatory promotion effectiveness strategy• Quality of life • Number of staff• Human resources & programmes• Infrastructure • Number of global events
  • 14. Multiple dimensions of business and investment climate success – Greg Clark, 2011Scale specific • B&IC success is determined by processes that are international, national and sub-nationalSector specific • For example, export businesses will have different needs to SMEs in services sectorBusiness type specific • Needs of MNCs, SMEs, entrepreneurs and informal sector differMore than regulation and legal frameworks • Connectivity, quality of life, cost, human capital, markets, environmentMore than FDI attraction • Establishment, growth and retention of existing businesses as important
  • 15. Conclusions• Economic governance matters!• Measuring the regional business & investor climate, and acting to continually improve it, requires an inter- governmental, transversal and cross-sector partnership approach• There is no optimal design for a performance indicator system – we must set clear regional objectives before we determine factors and criteria to be measured• There is a need to differentiate those factors which fall within the ambit of sub-national government and those which are part of national government
  • 16. Initial inputs to Cape 2040 Index •Technical and Educated •Numeracy and Tertiary education •No of patents Cape literacy enrolment • Time and costs ofEnterprising regulatory compliance • Innovation • Employment levels Cape starting a business • Basic connectivity • TechnologicalConnecting • Networks and infrastructure – infrastructure & Cape collaborative capacity transport & broadband readinessLiving Cape •Basic infrastructure • Health and safety • Quality of life • Energy stability and • Water security and • Carbon footprintGreen Cape cost cost Leading • Proactivity of local •Transparency and •Institutional change and provincial leadership access to information maturity
  • 17. Next steps• Workshop in July to be hosted by Western Cape Government Red Tape Reduction Unit (under auspices of Economic and Infrastructure Steering Group)• EDP Business and Investment Climate working group to be established
  • 18. How do we improve theperformance of the regional What is the shared vision?economic development Vision and What are the key transitions?system? strategy How do we navigate theseHow do we assist transitions successfully?organisations to deliverbetter on their ownmandates? Leadership is required to open spaces for Regional experimentation and economic innovation, identify Data and delivery system trade-offs, make the intelligence performance tough choices, and to persuade and inspire What do we currently measure? What data is available? Why do we measure? Business & Who is doing the measuring? What should we measure? investment Do we agree on the data? How should we rank climate How do we apply the data? performance?