Durban - Durban and KwaZulu-Natal boast attractive infrastructure and a good social environment, which are positive factors for investment, however, service, infrastructure problems, red tape and corruption remain challenges that could hamper investment growth.
This is according to a study conducted by Deloitte late last year, along with Durban Investment Promotion and Trade & Investment KwaZulu-Natal (TIKZN), which aimed to provide a picture of the challenges and opportunities for investing in the region.
To complete the study, a benchmarking analysis of Durban and KZN against other South African locations was done and a survey carried out with foreign and local companies’ views of investment challenges and future opportunities in Durban and the province.
Interviews were also conducted with executives from foreign and local companies.
The study found that 56 percent of respondents planned to invest in Durban in the coming years and 60 percent would invest in KZN.
Only 28 percent said they would move some of their operations out of Durban and 25 percent out of KZN.
In terms of the attractive infrastructure indicator -which looked at property, utility, transportation and technology infrastructure - Durban scored higher than Johannesburg, Pretoria and Cape Town, particularly on attractive office rentals and industrial electricity rates.
It also scored favourably, along with Cape Town, for low transport costs.
Another important plus for the city and province, was access to the ports of Durban and Richards Bay.
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Regarding the social environment, Durban and KwaZulu-Natal scored favourably, the city ranking 85th in Mercer’s 2016 Quality of Living Rankings out of 230 cities globally, ahead of Cape Town and Johannesburg.
Its recreational offerings and high-quality housing, with average residential housing prices, were seen as attractive when compared with the highly priced Johannesburg and Cape Town. Durban is also seen as less congested in terms of traffic and has good schools.
However, it lagged behind Joburg and Gauteng on economic growth, developed financial markets and access to a skilled workforce.
The workforce problem was attributed to the migration of people from Durban to Joburg and other cities and the percentage of adults being lower in Durban when compared with Joburg, Cape Town and Pretoria.
The five main challenges for the city as identified by respondents were: poor municipal management and service delivery; a general lack of political stability and leadership; a deteriorating and incomplete infrastructure; unnecessary red tape and bureaucracy; and a high level of corruption.
Speaking on the findings, MEC for Economic Development, Tourism and Environmental Affairs Sihle Zikalala said the department “took seriously” all honest commentary and assessment of KwaZulu-Natal’s ability to attract investment, promote trade and grow the economy.
“We believe the findings present an opportunity for us to introspect and to address perceptions that may even scupper the prospects of the economy from achieving accelerated and inclusive growth.”
Regarding the challenges identified, including deficiencies in infrastructure, red tape and corruption, Zikalala said an infrastructure development work group had been tasked to compile a provincial infrastructure master plan.
“This plan has helped to identify all infrastructure development projects, across municipalities, which need to be prioritised.”
This would go a long way to improve the development and maintenance of infrastructure, he said.
The work group would also monitor the roll out of these projects. He said that the
provincial government had tasked TIKZN with leading a process of establishing a “one-stop-shop” for investors.
“This centre will host various government entities and departments such as the SA Revenue Service, Home Affairs and others, whose mandate is to assist investors in setting up companies.”
With regard to political leadership, Zikalala said there was stability and there had been a seamless change in political leadership in the province and Durban.
Independent economic development researcher Glen Robbins said the survey accorded with other research about the national and local investment climate.
“In a context of very poor national economic performance, it is very difficult for businesses in KwaZulu-Natal to thrive. The survey speaks to these issues of low business confidence as well as concerns about governance and service delivery matters.”
Robbins said while the province had a solid base of many great businesses and a strong entrepreneurial spirit, beyond port-related logistics businesses, the province had struggled to secure meaningful investment growth that brings new employment.
Economist Bonke Dumisa said there were many business owners who consciously decided to operate from Durban and KZN because it optimises social life while providing attractive infrastructure.
“It is for these reasons many businesses have located their operations along the Durban North, Umhlanga,
La Lucia Ridge, Westville,
Hillcrest, and other such areas.”
With regard to Durban and KZN lagging behind Joburg and Gauteng on economic growth and the availability of skills, Dumisa said this was understandable as several businesses had their head
offices in Gauteng and the province was accountable for more than 40 percent of the South African gross domestic product (GDP).
“People who work in the province (Gauteng) earn as much as a 30% premium salary for equivalent jobs in other provinces, hence they easily attract the best of the highly skilled workforce.”
Dumisa said the challenges identified regarding municipal management and service delivery, infrastructure problems, red tape and corruption were not unique to Durban and KwaZulu-Natal.
“These are general problems that are problematic throughout South Africa.”