Ease of doing business & One Stop Shop implementation: DTI briefing

Meeting report

Opening Remarks
The Chairperson welcomed the members and the delegation from the Department.

Apologies were tendered and the agenda was adopted.

The briefing by the DTI would address the outcomes of working groups on measures to improve the ease of doing business, including measures to address visa constraints, and on progress regarding the establishment of the outstanding provincial One Stop Shops. The Committee had visited the One Stop Shop of InvestSA in Cape Town, and stressed the need to remain seized of issues regarding the roll-out of One Stop Shops in rural provinces.

The Chairperson ceded to the departmental delegation

Briefing by the DTI
Mr Yunus Hoosen, Head of InvestSA, DTI, noted the presentation was split into two parts, one on the ease of doing business and one on the One Stop Shops. The presentation indicated the complexity of investment promotion in South Africa – there were over 30 investment promotion agencies at national and subnational level.

City support for investment was managed by National Treasury, whereas overall coordination was done by InvestSA. In March 2019, InvestSA initiated a programme with the World Bank to address investment indicators. The World Bank Ease of Doing Business programme focused on the ease of doing business and distance to frontier (from the best economy in the category). The World Bank measured Time, Cost, Quality and Number of Procedures. Policy, regulatory framework, and administrative processes. Improving score was a sustained process, not a once-off. When the programme was created in March, five working groups were established, on starting a business, paying taxes, registration of property, trading across borders and dealing with construction permits.

SA was ranked 84th by the Ease of Doing Business Survey, but was being outperformed by countries coming from a low base (for example Mauritius and Rwanda). Its distance to frontier was 65.4. Page 13 showed the indicators and South Africa’s performance since 2017. Private sector engagement had to be deep. There was often a misinterpretation of realities in the private sector. The report had to be validated by the private sector practitioners (in the case of cross-border trade, freight forwarders). InvestSA would focus on the second group of five indicators in 2020.

From each working group, an action and implementation plan for the short, medium and long-term was produced. Starting a business was the key indicator. SA in the current report was ranked 139th. The 7 steps for business registration used to take 40 days. InvestSA has created a paperless Biz-Portal online. Currently, a company could be registered in South Africa in 1 day or less. UIF, Compensation Fund and the CIPC had been put in one place, and a link to private sector banks had been established. Domain name registration and BEE certificates could also be done on this portal. This was what government had done – it had to be rolled out to the private sector through a PR and marketing campaign. There was a need for private sector to validate government’s claims if they were to reflect in the World Bank survey. InvestSA hoped to have this change reflected in the 2020 report (submissions closed in April 2020). The Biz Portal was one of InvestSA’s flagship reforms. A soft launch was held in November – to date, the Portal had registered 5683 companies within one day, including SARS certificates and BEE and UIF for those who applied.

On the “paying taxes” indicator, South Africa placed 54th. InvestSA aspired to be 25th. There was still room for improvement in VAT audits and refunds. Communication was also needed. SARS had done a service charter, improved its customer service, updated its website and improved turnaround time for VAT refunds.

In terms of “registering a property”: The President signed the Electronic Deeds Registration System Bill into law in September 2019. This paved the way for the deeds modernisation programme, which would take 5 years and be done by the Department of Land Reform, the National Deeds Office, and provincial and municipal offices. The City of Johannesburg (CoJ) was the proxy for SA in the World Bank Survey, as it’s an economic hub. It was a proxy for South Africa in property registration, construction permits and rates payments. Since November, InvestSA had talked to the new mayor and launched an e-rates clearance certificate. 98% of e-rates clearance certificates were now delivered within 24 hours. In the CoJ, there were 2000 conveyancers – property registration initiatives had to reach them. InvestSA had a plan and a programme to work with the CoJ over the following two years. The Deeds Office had improved transparency to property buyers, and launched the eRates Clearance system.

Regarding the “trading across borders” - this dealt with two parts: export and import time and costs. Export and import inspections took a long time and dealt with many entities (SARS, SAPS and others). Harmonising this would take time. In South Africa’s case, the test case was the export of vehicles, which was more complex than many other nations’ cases. Freight-forwarders counted 72 hours for vehicle stacking at the port, whereas Transnet only required 24hrs. When InvestSA opened the working group, it had to launch advocacy to advertise the correct figures. InvestSA had asked the World Bank to update its private sector respondents. Long-term issues of port efficiencies and inspection times persisted.

On the “construction permits” indicator: within the year, InvestSA wanted an automated construction permit system in the CoJ. The e-DRS was handled by the Department of Agriculture, Land Reform and Rural Development. South Africa was ranked 98th – it took 20 steps, 155 days and costed 1.9% of the warehouse price to earn a permit to build a warehouse in the CoJ. If InvestSA could implement its desired short and long-term interventions, it thought South Africa could go from 98th to 7th in the world. InvestSA noted the need to implement SANS 10400 standards and train municipalities and empower them in this regard. There was a High Level Plan for the CoJ to look at construction permits to June 2020 – it would only appear in the next year’s report. eRates Clearance would be fully rolled out in the CoJ.

InvestSA would look at the “getting electricity: indicator in the coming year, again working with the CoJ and City Power.

The work being done was complex, detailed and technical. InvestSA had started the building blocks and improved relations and PR with the private sector stakeholders. There had to be deep collaboration between government and the private sector. There was a lot yet to do, but a lot had been done as well. Recommendations for moving the current work into the next phase were detailed on page 38.

Regarding the One Stop Shops and visas: InvestSA provided a One Stop Shop approach on investment, looking at areas where it could expedite and unblock investment. The Minister informed all provinces of the intention to establish One Stop Shops in 2016. The Western Cape, Gauteng and KwaZulu-Natal branches were established, and InvestSA was moving into rural provinces. What it had learned from experience was that establishing a One Stop Shop took at least 12 months. Many stakeholders were consulted. InvestSA had a manual for corporate identity for provincial offices, which helped with marketing and communication. InvestSA published a number of documents regarding investments and sectoral value propositions on its website.

The Committee had requested an update on the Eastern Cape, Northern Cape and Limpopo branches. Sites had been established and refurbished. InvestSA hoped to launch the Northern Cape and Eastern Cape One Stop Shops by the second quarter, and the Limpopo branch by the end of the year. InvestSA had enhanced work on unblocking investment and reducing red tape. The One Stop Shop dealt with the full range of unblocking issues – municipal facilitation, labour, energy, licensing, permits and others. For Example: Nestlé in Buffalo City called a One Stop Shop about unsanitary conditions outside its plant, InvestSA talked to the local municipality and it was cleared within one day.

In terms of visas: there were various categories of visas and work permits. This spoke to the work of the Department of Labour as well as Home Affairs – the DTI established a three-department committee at the level of the DDG to meet and look at unblocking categories of visas. There were different categories of permits and it was difficult to change permits.

Mr Hoosen wanted stakeholders to engage with the InvestSA office on visas, which would help to facilitate communication with the Department of Home Affairs. The committee met once a month, and InvestSA was able to facilitate and expedite with Home Affairs on a day-to-day basis.

Discussion
Mr M Cuthbert (DA) asked how many reforms had been initiated since the Working Groups were established. One thing had been omitted from the presentation – South Africa had stayed in the same spot since 2019. It was telling that there hadn’t been movement since then. Surely there should have been some kind of action. Until South Africa secured property rights and electricity supply, the overall investment environment would not improve very much. This had to be looked at with other departments.

Mr F Mulder (FF+) noted there were some external factors influencing progress that InvestSA could not do anything about – how important were these? What effect would the fact that business confidence had slumped to its lowest level in 34 years have on the rankings? As far as volumes were concerned – the economy was under pressure. Did InvestSA find that its volumes were declining or increasing?

Ms N Motaung (ANC) asked for an update on establishment of the One Stop Shops in Mpumalanga, the North West and the Free State. Was there a marketing system in place for provinces?

Ms P Mantashe (ANC) sympathised with Mr Cuthbert. Only when there was trust in government could standards be improved. Practically it was impossible to change everything overnight. She asked what challenges have been faced in One Stop Shop establishment. On advocacy work InvestSA was doing: were there any statistics on provinces, businesses gone to etc? What challenges was InvestSA encountering in coordinating government departments and entities?

Ms J Hermans (ANC) appreciated the work InvestSA was doing. She recognised challenges underpinning work and progress. She echoed Mr Cuthbert’s question as to why South Africa was stagnating. If other countries were improving – was South Africa worse than them, or was it being judged differently than countries that come from a low base? On future projections in ranking, what were the factors determining this? What was the period in which InvestSA wished to reach the stated goals in the rankings?

Ms R Moatshe (ANC) asked how InvestSA was dealing with the issue of governance delaying processes in provinces. How could InvestSA capacitate the departments that had to be capacitated? When it came to information-sharing with provinces – was there a programme reaching people on the ground?

Mr W Thring (ACDP) valued the work done by InvestSA. He asked, however, why it had taken so long – 7 years ago, he visited Rwanda and it already had a one-day business registration portal. Why was South Africa only reaching this level today? He enquired as to what “distance to frontier” was, and asked how Environmental Impact Assessments affected the ease of doing business?

Mr Hoosen responded that for InvestSA, ease of doing business was an indicator, not an exact science. Why did it take so long for reforms to reflect? When InvestSA first engaged CIPC reforms, the people that filled in the private sector survey were not necessarily up to date with the current reforms. One of the people who had filled in the survey had registered a company manually 10 years prior – which was no longer the procedure. Engagements with the private sector had to create awareness of reforms. InvestSA had to engage the World Bank on who was being interviewed for these reports. The World Bank also changes the survey. In the coming year or two there would be 12 indicators, not 10. These new indicators may influence positions. But InvestSA’s job was to improve the investment climate for the good of the country, not to be obsessed with the rankings. Even its projections assumed things remain constant and other countries do not change. In Rwanda’s case, they digitised this process from a low base. Immediately, their ranking shot up. InvestSA had to look at how best it could work for South Africa. Nevertheless, InvestSA was cognisant that South Africa had to reform to keep up with other countries. Distance to frontier was a more reliable ranking as it showed one how far the country was from the best performer in the category.

The One Stop Shop was primarily for investment. In terms of volumes, InvestSA had a report every quarter on these numbers from the 3 provincial and one national One Stop Shops. What InvestSA found was that, in volumes, businesses shutting down or going into rescue were common, but more investors came to the One Stop with issues of unblocking investment than before. The Presidency created two initiatives before the Investment Conference in 2019. One was the Investment and Infrastructure Office which helped to coordinate on the Infrastructure Fund. With this office, InvestSA had been able to coordinate with the District Development Model and the CoJ to improve indicators. The other was the Unblocking Office that worked with InvestSA to unblock investment on a policy level. The SONA announcement on water usage licenses within 90 days was an important development in this regard. InvestSA was going to look at Environmental Impact Assessments (EIAs). In the CoJ and Gauteng, an EIA could be received within 4 months. If Gauteng could do it, the rest of the country could. InvestSA managed to unblock regulatory impediments for Tshwane Automotive Zone within 6 months.

Some of the challenges were seen in capacity across the state. Governance was also an issue. With the Treasury’s City Support Programme – the report on city ease of doing business came out every 2 years. InvestSA was attempting to capacitate by looking at best practices, for instance, Mangaung had a quick turnaround for electricity connections. InvestSA was looking at how it would assist municipalities in bulk infrastructure for instance. If it could successfully establish the e-construction permit system in the CoJ, it could carry this across to all other municipalities.

Regarding the One Stop Shops in the North West, Free State and Mpumalanga, InvestSA was quite far down the road with the Free State. It had spoken to Mpumalanga – there had been changes in the agency, but the process had started. The North West branch was at a fairly infant stage. This would be worked on in 2020. In executing the One Stop Shop, InvestSA worked with the province, but it also had to look at the state of readiness of national partners, especially national departments. It was very keen to finish the Eastern Cape, Northern Cape and Limpopo branches this year, and 2 provincial One Stop Shops the year after.

Mr Hoosen stressed the issue of the respondents to the World Bank Survey. If the respondents did not respond accurately to the survey, the ranking would never go up.

The Chairperson commented on the location of One Stop Shops, noting the importance of the issue of accessibility. Speaking to unblocking, there could be issues of public awareness. There was lots of important info and communication – but how far did it reach? There was the key issue of interdepartmental work, and coordination and communication would be vital.

Mr Cuthbert reiterated his question on the total number of initiatives. He also argued it was disingenuous to attack World Bank methodology as all countries were subject to the same methodology.

Ms Mantashe appreciated the progress. She was mindful of need for urgency, and hoped the work could be sped up, especially in terms of advocacy work for all stakeholders.

Mr Hoosen replied on some of the lessons learned, emphasising the necessity of a physical One Stop Shop. He was cognisant of discussions with the World Bank – all countries faced the same scenario and had the same questions for the Bank. Having formalised the programme, InvestSA now knew what the World Bank was looking for. The one equation missing in the previous two years had been engagement with respondents from the private sector, which was vital. InvestSA had started the building blocks. The World Bank cycle was very short for the report. If reforms were not in by April, they would only reflect in the following year. The starting of a business had been totally reformed. InvestSA had to do a lot of PR in this regard. E-Rates clearance certificates had been achieved at a pilot stage. This would only reflect in the following year’s report. The issue of trading across borders in terms of vehicle stacking time had been subject to engagement with private sector. A lot of reforms were present in the presentation, but there was a need to go deeper to actually get them into the report. Modernising the deeds office website as the start of a process to get points for reform. Mr Hoosen had been tracking what India had done – India’s reform programme began in the first term of the current Prime Minister, but had only began to be reflected in the second term. The process was a longer-term initiative.

Mr Cuthbert accepted that the BizPortal had not been lodged in 2020 report. He clarified that the 2020 ease of doing business leader was Colombia, also a developing country that managed to put together 37 reforms in one appraisal period.

Mr Mbuyane wanted clarity on engagements with Mpumalanga, North West and the Free State on provincial One Stop Shops.

The Chairperson asked Mr Hoosen to conclude, noting Mr Mbuyane’s comment on the three provinces without OSS progress.

Mr Hoosen said he would provide a schedule on the 6 One Stop Shops to be established. The lesson learned from the One Stop Shop approach was that when investors came into the country, the One Stop Shops were useful in terms of service delivery and turnaround time. Officials provided an advisory service, but also a fast-tracking and unblocking service in terms of impediments to investment. The success of a One Stop Shop was in how it could improve service delivery and turnaround time.

The Chairperson thanked Mr Hoosen for the presentation, and acknowledged and accepted that South Africa may be compared to those not exactly in the same kind of environment and exposure. It was important to see how regulations in the survey changed, to see how South Africa was managing, adjusting, or catching up compared to other countries. Those doing better may be different from what South Africa was. The committee needed to know so it could compare South Africa with others and know what the differences were.

The Committee Secretary noted that the Department of Science and Technology could not present on Intellectual Property issues the following day, as it had been requested to brief its line committee.

The Chairperson noted the programme would proceed.

The meeting was adjourned.