Invest SA One-Stop Shop: briefing by Department of Trade and Industry

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Trade and Industry

20 April 2016
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Invest SA One-Stop Shop is a new project within the Department of Trade which will be the focal point of contact in government for all investors to coordinate and facilitate with relevant government departments involved in regulation, registration, permits and licensing.It will shorten and simplify administrative procedures and guidelines for issuing business approvals, permits and licences, thereby removing bottlenecks faced by investors in establishing and running businesses. It will also reduce the silo mentality, turnaround times, red tape and improve service delivery. South Africa has made progress in the in the 2015/2016 World Economic Forum’s Global Competitiveness Report, moving up rankings from 56 to 49 out of 140 countries. South Africa fell in the ease of doing business according to Doing Business 2016, a joint publication of the World Bank and the International Finance Corporation, from 69 in 2015 to 73 in 2016 out of 183 countries. Currently the investment level in South Africa is about 19% of its GDP and the National Development Plan target is to grow this to 30%. There is a need to be more competitive and the ease of doing business rankings need to be in the upper quartile. South Africa needs to improve its investment climate through regulatory reform, procedures, business processes and turnaround times. All three spheres of government need to commit to continuous improvement yearly to improve the rankings and attractiveness of South Africa as a destination of choice for doing business.

Members asked questions ranging from the impact of energy and electricity shortages on investment in South Africa and the impact of drought, policy uncertainty, capacity in local government and the provinces and the ranking of the municipalities as regards the ease of doing business.

Meeting report

Invest SA One-Stop Shop: briefing by Department of Trade and Industry
The Director General, Mr Lionel October, introduced the members of his delegation and gave a brief introduction to the presentation. In his opening remarks, he emphasized the importance of investment and re-echoed its importance in growing the economy and job creation. For any economy to grow, it is necessary to have investment levels at about 25% of GDP. Currently the investment level in South Africa is about 19% of its GDP and the target is to grow this to about 30%. The investment pipeline of South Africa is about R50 billion but this year there is a plan to increase the investment drive to about R90 billion. In the last three months, over R10 billion of investments have been attracted to the South African economy. The two major areas of the economy that has witnessed massive investments are the Renewable Energy Independent Power Plants (REIPP) and the automobile industry. Over R190 billion has been invested in the REIPP and about R25 billion in the automobile industry. These investments are a result of the policy certainties of the government.

Mr Yunus Hoosen, Acting Head of Investment Promotion and Interdepartmental Clearing House at the dti, said that over R93 billion of investment has been attracted with about 88 projects in the investment pipeline for Q1 –Q4. 30% of this amount has already been committed to these projects. The Chinese government recently pledged a R50 billion investment towards industrialisation in SA. 2016 has seen a massive investment in the South African economy. Ford has launched a R2.5 billion plant in Gauteng in the month of April. In May 2016, Toyota will launch its R5.7 billion plant in KZN where it intends to produce a line of SUVs and Hilux vans. Acwa Power also invested over R5 billion in the Northern Cape in the month of March.

The President has established an Inter-Ministerial Committee on Investment Promotion to further improve the investor climate and support and this is chaired by the President, assisted by the Minister of Trade and Industry. The mandate of the Inter-Ministerial Committee is overall coordination, alignment and policy coherence on economic policy and regulatory framework, thereby providing clarity and certainty to investors, improvement in South Africa's investment climate in particular the ease of doing business and competitiveness of South Africa, coordination and roll out of the One-Stop Shop service across all levels in government. The One-Stop Shop service will fast track, unblock and reduce red tape in government. All departments in the three spheres of Government need to commit to a continuous improvement and service delivery. This Inter-Ministerial Committee is made up of 18 members with the Minister of Trade acting as the alternate Chairperson.The dti established a full division in March 2015 to focus on investment promotion facilitation and aftercare. On the 9 February 2016, the InvestSA One-Stop Shop was presented to business and adopted. It is a private public partnership and a presidential project implemented by the dti and housed within Investment South Africa. All investments need to be coordinated and aligned through the InvestSA One-Stop Shop. The One-Stop Shop will be the focal point of contact in government for all investors to coordinate and facilitate the relevant government departments involved in regulatory, registration, permits and licensing. It will shorten and simplify administrative procedures and guidelines for issuance of business approvals, permits and licences, thereby removing bottlenecks faced by investors in establishing and running businesses. It will also reduce the silo mentality, turnaround times, red tape and improve service delivery. It will fast track, unblock and reduce red tape in Government.

In the current financial year, there will be three functional One-Stop Shops. One located within the dti and at provincial levels. The One-Stop Shops will be fully operational in the Western Cape, Gauteng and KZN. Their core functions will be issuance of business permits, licensing of businesses and registrations. Senior executives at the level of Chief Director or Director will be seconded to the One-Stop Shop and be dedicated focal points to provide specialist advisory service, receive applications and fast track, facilitate and reduce red tape in their departments. Focal Points that have been appointed will function as a virtual centre in the interim and seconded to the physical One-Stop Shop in Q3.

In the Global Competitiveness Index, South Africa climbed up 7 places from 56 to 49 countries of 140 countries in 2015/16. These were in the areas of: health and primary education (up 6 places), efficiency (up 6 places), technological readiness (up 16 places), and innovation (up 5 places). In the ease of doing business rankings of 2016, South Africa ranked 73 from 189 countries dropping from 69 in 2015. The top three countries were Singapore, New Zealand and Denmark. The sub national rankings in terms of ease of doing business for starting a business showed that Ekurhuleni, Johannesburg and Tshwane all had the shortest time frame, while for getting electricity, Buffalo City in East London has the shortest time frame which stands at about 66 days. The Nelson Mandela Bay takes the longest number of days for getting electricity when starting a new business. Cape Town takes about 83 days in dealing with construction permits and 169 days in Tshwane. Registration of a property takes 23 days in Johannesburg and over 52 days in Mangaung. For enforcing contracts, Msunduzi has the shortest enforcement time of 469 days while Buffalo City has the longest enforcement time of 696 days. In terms of the time it takes to export, Durban has the shortest time of 16 days while it takes 17 days in Cape Town. Government departments in all spheres need to improve on these rankings and turnaround times. The World Bank has made various recommendations to improve the ease of doing business across South Africa.In addition to the reforms highlighted by the World Bank in ease of doing business, investors have highlighted some areas that need to be improved on. These areas are:
- Environmental Impact Assessments
- Mining Permits
- Visa and Work Permits
- Water Licences
- Land Zoning and Transfers
- Company Registrations
- Municipal Services.

In South Africa more than 18 national government departments plus provincial, local, and SOEs are involved in policy regulatory, permits, licensing and registration of business. Hence there was a greater need for coordination, alignment and facilitation on investment. According to research by investment specialists, as much as 70% of new investments are re-investment/expansion of existing companies which means investor aftercare is paramount. Invest South Africa is encouraging a healthy competition between the various provinces to improve their cities ranking and turnaround times in the next World Bank Cities report in 2018. The Department of Trade and Industry (DTI) has requested technical assistance to promote investment and entrepreneurship in South Africa by clarifying, simplifying and automating investment-related administrative procedures, and improving information on investment opportunities.

The Business Facilitation Project (BFP) aims at overhauling South Africa's services for investors and entrepreneurs through the creation of a Virtual Integrated Investment Portal (VIIP) combining innovative user-oriented online services which includes e-regulations, e-registrations, and i-guide. Furthermore, an i-simplification program will be deployed to assist the Government's efforts to streamline the regulatory environment for investors and this project is to begin in 2016/17 over a period of two years. Invest South Africa working in collaboration with the Companies and Intellectual Property Commission (CIPC) rolled out 44 self-service terminals (SST) in 2015 and plans to roll out a further 12 in 2016 and the turnaround time has improved from two to three weeks to two to three days. As of 1 April 2015, some of the companies and businesses which have been assisted with work permits and business permits are BBC TV, Heineken, Toyota, Warner Brothers and a few others. In fast tracking and red tape reduction, examples of companies assisted as of 1 April 2015 are Tega Industries which enjoyed energy facilitation at Ekurhuleni Municipality, Unilever community engagement in Lords View and Samsung got registered with the CIPC, SARS, National Regulator for Compulsory Specifications (NRCS), Customs and Special Economic Zones (SEZs). Nestle has four plants in Babelegi, Escourt, Harrismith and East London and municipal facilitation, energy facilitation, phytosanitation and infrastructural assists have been rendered.

Discussion
Mr B Mkongi (ANC) appreciated the presentation stating the presentation brings hope. He asked about the impact of energy and electricity shortages on investment in South Africa and the impact of drought. He wanted to know the possibility of streamlining the function of the Inter-Ministerial Committee to matters relating to industrialization as it affects investment in South Africa.

Mr D Macpherson (DA) stated that the success or failure of the programme lies in policy certainty of the government, pointing out that some areas still did not have this certainty or could be made better. He asked what was being done to address policy uncertainty especially the Private Security Industry Regulation Amendment Bill. He suggested using the embassies and foreign missions as investment houses for South Africa by hunting for potential investors for the South African economy. He asked about the marketing strategy employed for getting investors. He expressed concerns about the ease of doing business. One of the challenges is cutting through bureaucracy and he asked what executive authority Invest South Africa had to cut through this.

Mr A Williams (ANC) asked when the One-Stop Shop will be opened. Talking about the competition between cities in the drive to become more business friendly, he asked if the smaller cities were being looked into.

Mr A Alberts (FF+) stated that if the process is gotten right then it will be good for the economy but the worry is fitting policy certainty into regulatory certainty. One of the areas where there is uncertainty is the area of private property protection and security. The government needs to put measures in place to look at this. He also talked about the various business engagements in South Africa asking what was being done to work with other foreign chambers of commerce and foreign investors.

Mr M Kalako (ANC) had just one worry and that was the capacity in the local government and provinces. This is one of the discouraging elements to investors due to their inability to process some areas relating to investments. It is important that government applies a very heavy hand in dealing with local government and provinces in this area. He asked about the secondment of officials to the One-Stop Shop, hoping there would be no red tape associated with that as is the practice with departments of government.

Ms P Mantashe (ANC) asked about the rankings of municipalities in the area of ease of doing business and the cause for the downgrade in that area. She talked about investments inland and asked when there will movements to inland.

The Chairperson was of the view that aftercare was very important in the investment drive. She wanted to know if Invest South Africa will look into this by organizing forums where discussions could be heard. She asked how easy it will be to facilitate the ease of doing business in South Africa.

The Director General, Mr October, in his response to the impact of energy and drought, stated that those impacted the most were intensive users of energy. The steel industry was cited as an example. The problems relating to energy are not necessarily load shedding issues but that of the municipalities. Nestle for example, had 30 stop workages due to electricity protection and provision from the municipality. Drought impacts the agro sector of the economy negatively. He agreed that the Inter-Ministerial Committee set up by the President can combine investment drive and industrialization together because they go hand in hand. The uncertainty surrounding the mining legislation has been raised and this is been worked out to bring certainty to that sector. On the marketing strategies, a lot of efforts are being put into economic diplomacy, special meetings and conferences with heads of missions are being organised, with economic diplomacy as the focal point of discussions.

Mr October replied that on the executive powers of Invest South Africa, it has been agreed with the Presidency that only people in the cadre of directors or chief directors would be seconded so that there would be no issues with executive authority. It is important to develop an Investment Act to put this into legislation. In terms of the rankings, a lot of work still needs to be done with respect to property rights. South Africa has moved up seven places. On the question of foreign chambers, a lot of collaboration is being done with foreign partners especially the American Chamber of Commerce which is responsible for the equity equivalent programme under the black economic empowerment programme. The European chamber is still discussing how to develop its black economic empowerment programme but the Americans are more proactive with companies like IBM, Microsoft and Caterpillar investing massively in the black empowerment programme. On moving investment into the inlands, a lot of work is being done in that regards because there is a big disjoint between where people live and where the investments are located and this is because of the dynamic nature of the South African economy. It is important to create safe operating conditions for investors in the inlands.

Mr Hoosen replied that one of the major reasons for establishing the Inter-Ministerial Committee on investment was to look into policy certainty and the implementation of the Nine Point Plan of government as its affects investments, preparation for a higher level of investment and the way the red tape on investments can be unlocked. On marketing, the brand was accepted by business and work is being done on the marketing side. Engagement has been ongoing with local chambers of commerce to tackle aftercare. There is a strong partnership with sister agencies around the world, MOUs have been signed and implementation plans developed to tackle all issues relating to aftercare. On the capacity issue, the National One-Stop Shop will be located in Pretoria while there will be coordination at the provincial levels and there is a technological plan in place where these shops at the municipalities will be connected directly to the National shop. This is where the I-Guide and I-Simplification comes into play. For the rankings, it only gives a basic indication of where the country stands and what needs to be improved on. These rankings are based on reforms carried out. On the business side, the President is interested in how business investments can be up scaled and he has demanded a quarterly report on this from the Inter-Ministerial Committee.

Mr Macpherson recommended that rather than waiting for investments to come to South Africa, there should be an aggressive push for those investments using the foreign missions and embassies abroad. He recommended that Invest South Africa come back at least two more times to give an update to the Portfolio Committee.

Mr October, talking about foreign direct investments into the country still growing, commented that the records show that there is outflow of foreign investments from the country. However, this is not exactly negative because some South African companies are expanding and buying up foreign investments here. This s a big plus for the economy though this is recorded as an outflow from the economy because such foreign companies are exiting the country.

The meeting was adjourned.

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