Chamber news updates, the annual national convention and exhibition, the programme breakdown, and an invite to attend the women in business, Chamber of the Year and National Associations of the Year awards

The South African Chamber of Commerce & Industry (SACCI) responds to current issues, including: spatial planning; comments on the Draft Municipal Property Rates Amendment Bill; the SACCI submission on Walmart-Massmart to the Parliamentary Portfolio Committee; the SACCI debate on nationalisation; and the Mpumalanga Economic Growth and Development Path, and SACCI’s engagement with the Mpumalanga Department of Economic Development, Environment and Tourism.

SPATIAL PLANNING BILL

SACCI commented on the Draft Spatial Planning and Land Use Management Bill and stated that, in principle, SACCI supports the implementation of a comprehensive set of legislation that streamlines the process of land management as a whole and provides for an efficient, effective and transparent regulatory framework for spatial planning.

SACCI believes, however, that the objective of the Act and its accompanying regulations must have a positive result on economic growth and on the ability of business to operate efficiently. For this reason, the Act must be implemented in a manner that is fair and which does not add to the current burden of red tape to which business – particularly small, medium and micro enterprises (SMMEs) – are subjected.

It is with this in mind that SACCI submitted its comments on the proposed legislation to the Department of Rural Development & Land Reform for
its consideration.

SACCI submitted comments, including the following, on the draft bill – trusting that the department will assist in the facilitation of appropriate drafting and implementation of the Act:

In general

It is imperative that the legislation specifies the relationship between the spatial planning and the Land Use Management System and other kinds of planning provided for in policies; to provide equitable and transparent principles, norms and standards for spatial development planning and land use management; and to promote greater consistency and uniformity in application procedures and decision-making structures for provincial and municipal authorities responsible for land use decisions and development applications, and for appeal procedures to enable investors to make long-term decisions in order to contribute to the sustained growth required to address South Africa’s unemployment problems.

In addition, SACCI submitted detailed comments highlighting a few that relate to, among other issues, the purpose of the legislation and position relation to the current legislative environment as well as the impact of the legislation on investment decision-making.

Par 6a (ii and iii)

While SACCI agrees that Spatial Development Frameworks and Policies (SDFP) should address the imbalances of the past, this should not be in contradiction to any other legislation pertaining to the environment or others.

Furthermore, it should not be contrary to the economic policies of both the national and provincial governments, including the Industrial Policy Action Plan.

Par 6a (vi)

The change in value of a piece of land due to a decision by the tribunal should be taken into consideration, as it is central to any investment decision and crucial for sustained growth and the participation of the private sector.

Par 6 (c)

SACCI fully supports the principle of efficiency as defined in the legislation.

Par 25 (1)

SACCI would rather propose that where the provisions of the adopted and approved land use scheme conflict with and are more onerous or restrictive than an existing scheme, the current conditions attached to that particular land – granted and approved under current legislation – should apply indefinitely if there is a current concern or material investment or intent (i.e. significant costs have been accrued in a current application process to facilitate some investment project).

However, a five-year sunset clause may be imposed if no or little development has taken place.

COMMENTS ON THE DRAFT MUNICIPAL PROPERTY RATES AMENDMENT BILL

SACCI commented on the Draft Municipal Property Rates Bill and noted in particular that the policy shifts in the draft bill mainly relate to the following:

• Properties used for trading in, and hunting of game, which will be regarded as agricultural property that will be subject to rates in the interests of equity and fairness;

• The need for greater uniformity across municipalities in rating houses owned by recipients of old-age pensions and disability grants; and

• Aspects of public service infrastructure that will be excluded from property rates because of their contribution to the country’s developmental needs.

The contentious issues, namely the commercial rating of second houses and the phasing out of publicly owned buildings contributing to municipal rates, were thoroughly addressed in the submission.

SACCI recognises that property rates constitute a very substantial portion of a municipality’s revenue; and that apart from a percentage of the profit that accrues from the sale of services and the sale of municipal-owned land, opportunities for local authorities to generate additional revenue are very limited. Many are in dire financial straits as a consequence of the limited size of the rates base.

Unfortunately, the rates base is not expanding at a rate to keep pace with the annual increases in costs for which municipalities have to provide. This has resulted in unreasonable rates increases in certain municipalities, particularly when the Municipal Property Rates Act was promulgated and advantage was taken of the fact that the transitional arrangements for the introduction of the new legislation did not provide the sort of constraints on municipalities that the Act imposed thereafter.

The consequence of this, as well as numerous problems associated with revised valuation rolls, was that public confidence in the new legislation was seriously undermined. Moreover, municipal rates policies were not always subjected to satisfactory consultation, and many, if not most, lacked specifics – preferring to deal superficially with the relevant issues. Many were little more than repetitions of the legislation, and this left municipal councils with the freedom to make ad hoc decisions.

It is not surprising, therefore, that the proposed amendments have been viewed with suspicion in many quarters and that much of the criticism has been focused on one aspect of the proposals, namely the commercial rating of second properties, even though Deputy Minister of Co-operative Governance and Traditional Affairs Yunus Carrim has clarified this matter to some extent in his public concession that the proposed amendments require some revision to dispel the perception that every second residential property will be liable for higher commercial rates.

It is with concern that SACCI notes the government is phasing out its responsibility to pay taxes, as is clearly shown in some of the proposed amendments. This will place a greater responsibility on the municipality and, by implication, all ratepayers.

The new definition for “public service purposes” properties as well as the phasing out of rates on public service infrastructure will significantly contribute to further indebtedness in most municipalities.

In addition, the insertion of a provision to restrict a residential property owner to accommodate members of the public in his/her property is a cause for concern.

The legislation should take into account that there should be no discouragement to invest in one’s own property. Enhancement of value results in additional rates anyway, while it is also a means of saving – which is seen to be a priority in the country.

Furthermore, idle buildings become derelict and contribute significantly to urban decay and consequent local economic decline.

In general, therefore, while property rates represent a fundamental source of municipal income, they should not be punitive or inhibitive to the development of a vibrant property market. Indeed, although there are other mechanisms to encourage reinvestment in properties of which the condition has deteriorated, it should be possible for municipalities to add incentive through the use of rates.

Some specific comments included the following:

SACCI welcomes the provision that a rates policy must determine criteria for not only the increase, but for the decrease of rates.

SACCI further welcomes the fact that rates on specific categories of property must be limited to an amount in the rand as determined by the minister, with the concurrence of the minister of Finance. This should eliminate occurrences such as that existing in Matjhabeng Municipality (Welkom) where the current rates are in the order of 13 (or more) times greater than other towns of comparable size.

The fact that the amendments provide that a municipality may not recover rates in respect of a right of exclusive use registered against a sectional title unit from the body corporate is welcomed, as it will make the owner of the registered right responsible.

While it is noted that it is intended to make the period of validity of valuations five years, with the possibility of extending the period by a further two years, this must be seen in the context of the removal of the need to establish an appeals board in every local authority. SACCI is concerned that this will result in lengthy delays when appeals are lodged.

SACCI notes with concern the apparent phasing out of the government’s responsibility to pay taxes, with the phasing in of a prohibition on the levying of rates on certain types of infrastructure. This will place a greater financial responsibility on municipalities and, by implication, all ratepayers, as it will contribute to further indebtedness in most.

The phasing out of rates on public service infrastructure and the extension of exemptions to land reform beneficiaries, recipients of older persons’ grants or disability grants, while fully understandable and supported, will exacerbate this indebtedness.

In addition to requests for clarity on a number of issues, the following comments were made:

Insertion of the definition of “public service purposes”

The definition means property used by an organ of state for the rendering of services directly to the public such as health, education, libraries, police stations, prisons or courts of law. This will have a major impact on the income of municipalities from rates because municipalities currently levy business rates on these facilities.

The potential loss of revenue could have a significant impact on the levels of service delivery by local municipalities. Poor service delivery impedes the growth of business. It prevents the implementation of local economic development plans and makes business retention and expansion strategies difficult to introduce.

Furthermore, it acts as a deterrent to foreign direct investment, being a factor that is taken into account when such decisions are made.

It inhibits local investment: The direct outcome is reduced investment and economic growth domestically. The closing of this revenue stream without some revenue-neutral fiscal arrangement could seriously impact the capability of municipalities to deliver in these areas.

Substitution of the definition of  “residential property”

The insertion of a provision to restrict a residential property owner to accommodate members of the public in his/her property is a cause for concern. By excluding residential property used to accommodate persons other than the owner for gain – such as the subletting of flats that form part of the home, or the accommodation of boarders – could cause such a property to be placed in a business category.

In addition, by enabling municipalities to reclassify residential property as commercial property will not only place a significant burden on the administrative capacity within most – if not all – municipalities, but will arguably have significant impacts on owners of second residential properties, in many instances as investment assets where rent is already taxed.

Any significant increase could see price levels in the important rental market meaningfully affected.

It should be remembered that the owners of second properties, whatever their use, are subject to capital gains tax; and whatever they may do that yields income is also taxable as income tax.

SACCI advised that this clause has occasioned a good deal of criticism. While it is understandable in principle that properties purchased for purposes of business profit and dedicated to the occupation of paying visitors or guests should be rated in terms of commercial rates, it is thought to be extremely problematic that a property in which the owner is resident should be subject to commercial rating, even if paying guests or visitors are accommodated in the property as well. Many older people whose families have left home seek to augment their income by letting out a room or two, or perhaps an outside room that was not built for this purpose originally.

A similar problem exists in the case of people who own holiday properties that they and their families use from time to time while letting them out to guests on other occasions.

These are essentially residential, not commercial.

There is also concern that many bed and breakfast establishments, even in dedicated premises, in reality are micro or small enterprises. Many have been established by previously disadvantaged people who find the establishment of this type of enterprise the easiest way of gaining access to the tourism sector.

In light of the government’s identification of the importance of this sector for the country’s economic growth, and the imperative to transform this sector of the economy by increasing the number of black participants, it would be unfortunate to impose an obstacle by increasing the amounts they would have to pay in rates.

It is suggested that municipalities could determine the appropriate classification at the time when a licence to operate a boarding house or B&B is issued. This could be based on the particular circumstances of the case; and the nature of the licence issued would specify whether commercial or residential rates were payable.

SACCI further submits that there is a difference, not recognised in the proposed amendments, between a home business and a business run from a residentially zoned property. It would be grossly unfair when a business is operated from a property on which residential rates are paid, while another, perhaps across the road and which could be a competitor, is subject to the payment of the commercial rates.

On the other hand, an individual who bakes or does craft work for sale from his/her home is not trading in the same way and must be treated equitably as well. This kind of enterprise should not be discouraged by increased taxation.

SACCI believes that differentiation should lie in the realm of by-laws and the proper enforcement of zoning in terms of a municipality’s spatial development framework and plan, rather than national legislation on property rates. If a municipality judges a property to be residential, the residential rate should be paid.

The extra taxation of home businesses could have a significant impact on entrepreneurship and job creation.

Amendment of Section 3 of Act 6 of 2004

SACCI regards this amendment as positive and encouraging. It provides a municipality with the opportunity to contribute positively to economic growth by giving some relief to the rates burden for those who need it under certain circumstances.

SACCI SUBMISSION ON WALMART/ MASSMART TO THE PARLIAMENTARY PORTFOLIO COMMITTEE

SACCI supports the encouragement of foreign direct investment into South Africa. It further supports the various endeavours to create jobs and to improve the skills base in South Africa. This is clearly in line with SACCI’s commitment to the New Growth Path.

SACCI refers to the advertisement inviting public submissions and argues that the agreement between Massmart and Walmart is not a merger, but a foreign investment in a South African-registered company, albeit with a majority stake.

SACCI questions why the Portfolio Committee is undertaking this exercise, particularly at this time. The matter is still to be considered by the Competition Appeal Court and could thus be regarded as sub judice. Any public discussion has the potential to impact on the appeal hearing.

Furthermore, in terms of the Competition Act, only the Competition Appeal Court can alter or reverse the Competition Tribunal’s decision.

In order to maintain trust in the system, the Competition Commission and Competition Tribunal must at all times be seen to be independent. Any intervention on the part of any organ of government could distort the perceptions of this independence and have a negative influence on the perceptions of potential foreign investors.

At a time when South Africa needs to send a unified message that it is not only open for business, but eager to do business, the three economic constituencies are sending conflicting signals:

• Business is signalling that it is open for business, but finds itself in survival mode with limited capacity to engage toward stronger business activity;

• The government is signalling that South Africa is open for business, but only on its terms; and

• Labour is signalling that it is only open for business that serves its constituency and that it will cause South Africa to be closed for business in other circumstances.

The publicity and events surrounding the Walmart investment in Massmart are illustrative of these mixed signals.

Business needs a predictable and transparent environment in which it may operate. At a time when domestic and international economic activity is low, and when South Africa remains dependent on foreign capital, we need to more actively cultivate a nurturing and supportive environment for business as opposed to an environment that may be perceived as complex and inhibitive.

SACCI assumes that the Portfolio Committee’s motivation for the invitation lies in a genuine desire to ensure the procedures followed were appropriate and that the Commission was not influenced by extraneous factors that could have swayed its decision.

SACCI further assumes that the motivation was influenced by a desire to provide certainty for business in its interactions with the Commission, and to encourage further foreign direct investment.

It is on these assumptions that SACCI submits its comments to the Committee, about the impacts of the investment:

Employment

The undertaking that was given to the Competition Tribunal gives an indication of the willingness of Walmart to comply with conditions relating to employment, skills development and training.

The continued contribution that Walmart will make to skills development will contribute positively to the skills pool in the retail sector. Normal staff turnover and attrition will make it imperative for new employees to be trained.

Walmart will furthermore contribute to skills transfer.

The bulk-buying facility that Massmart currently provides will in all probability be retained and expanded. This facility is currently used by small retailers. Should the facility be further developed, SMMEs in the retail sector – such as the spaza shops – will benefit by having improved access to goods.

Industrial development, local manufacturing and economic development

It is difficult to empirically determine the impact that there will be on industrial development, local manufacturing and economic development. However, Walmart has undertaken to procure locally and to contribute in a positive manner to the development of potential small and medium enterprise (SME) suppliers.

Currently, Massmart has a substantial geographic footprint. Predictably, the operations of the Massmart-Walmart organisation will be even larger.

Local procurement will encourage local economic development, an important aspect of local economic development policy in South Africa. Global experience has shown that local economic development is an important growth generator and hence an engine for job creation.

While it cannot be expected that there will be immediate returns at this level, the medium- to longer term impact could be substantial.

Conditions imposed by the Competition Tribunal

SACCI appreciates that the conditions imposed were in the interests of protecting employment in South Africa and in the interests of SME development. Walmart’s commitment to re-hiring workers who lost their jobs at Massmart in the last year was most commendable. This, at a time when SACCI’s trade models indicate very low prospects for employment in this sector.

The imposition of a retroactive condition in the regulatory approval is open to question, as the job losses were not related to Walmart’s operations at the time. SACCI would be loathe to consider that retroactive conditions become a permanent feature of the regulatory landscape.

The “public interest” component assessment of regulatory determinations is broad and nebulous. Without greater clarity on regulatory determinations on this basis, South African regulatory authorities risk the perception that a predetermined regulatory decision is made and that the justification for such decision is developed thereafter. If such a perception were to perpetuate, it would be harmful to doing business in or with South Africa.

Conclusion

SACCI believes that South Africa must encourage foreign direct investment.

The publicity that has accompanied the process has been unfortunate, in that the spin-off could have negative implications for further investment.

South Africa relies too heavily on portfolio investments that are subject to exogenous shocks in the global arena. Government policy should be aimed at direct foreign investment. The Walmart investment in Massmart provides not only such direct foreign investment, but also, in terms of its undertakings, will contribute positively to job creation, skills transfer, local manufacturing, and industrial development and local economic development.

At a time when competition for funding and investment is strong, particularly among emerging markets, South Africa needs to signal a transparent and predictable regulatory environment and an investor-friendly business environment.

SACCI DEBATE ON NATIONALISATION

SACCI hosted a robust debate on nationalisation on 5 August 2011. Topics included what has led to the nationalisation debate gathering popular support, the consequences of pursuing a policy of nationalisation for South Africa, and economic alternatives for addressing socio-
economic imbalances.

Speakers from business associations, labour organisations and research institutions addressed delegates, resulting in the presentation of views ranging from strong opposition to a statement that nationalisation was going to happen – the issue being not the “if” but the “how”.

Some of the highlights of the debate included the following:

• “If business needs certainty on this issue, they should be certain that the ANC is not researching the feasibility of nationalisation -- it is researching models of implementation.” – chief economist of the Congress of South African Trade Unions, Professor Chris Malekane

• “Prescribing nationalisation as the medicine to cure South Africa’s economic problems is not going to work -- it will kill the patient.” – Roger Baxter, chief economist at the South African Chamber of Mines

Much time was spent on getting behind the reasons for the calls for the nationalisation of mines.

Frans Cronjé, head of risk analysis at the South African Institute of Race Relations, told the conference that two vacuums had been allowed to develop in the country: “You have an economic vacuum, whereby people are shut out of the economy due to poor education and lack of access to the labour market; and a political vacuum, where there is no party to represent the voice of the black youth.”

Krister Janse van Rensburg, deputy general secretary of the Federation of Unions of South Africa, contended that there was “no easy way out”.

“We must avoid shortcuts and expensive experiments, and be careful of race-based and ideologically inspired arguments,” he said.

Broadly speaking, delegates were in agreement on the root causes of the economic ills facing the country, but not on the best policy options to address these.

SACCI intends to use the inputs received in the development of its position, which it will feed into the ANC Research Team that was recently appointed to investigate the subject.

MPUMALANGA ECONOMIC GROWTH AND DEVELOPMENT PATH

In August, SACCI hosted a bilateral engagement on the draft Mpumalanga Economic Growth and Development Path document with the provincial MEC for Economic Development, Environment and Tourism Norman Mokoena, and officials of this department (the DEDET).

SACCI pledged its support to the Mpumalanga DEDET in its main objective of creating approximately 719 000 jobs by 2020 in order to bring unemployment down to 15%.

Through the chamber movement, SACCI will facilitate further engagements with the department on the drafting and design of an industrial strategy for the Mpumalanga province.

SACCI believes that only through increased co-operation and communication between local business and the government will the SME sector – in conjunction with big business – be able to create the necessary employment opportunities to eradicate poverty as well as reduce the levels of unemployment.

The establishment of local technical task teams that consists of local businesses as well as government and other stakeholders will significantly contribute to the viability and practicality of industrial policies, incentives and initiatives designed to create employment.

SACCI looks forward to future engagements with the department.

SERVICE TO SACCI MEMBERS

The Protea carp-angling team participates yearly in the Carp Angling World Championship by representing South Africa. The competition normally takes place in Europe.

For the past four years, I have been involved with the arrangement of the ATA Carnet documentations.

Protea Team: England ‘10

The personnel at SACCI who provide the service to us form an integral part of the management process of the team. The logistical support received from the SACCI members ensured that after all these years, we have not once had any freight or customs problems.

Without this support from SACCI, the Protea team would never have been so successful.

Invitation to participate in the SACCI Chamber of the Year Award 2011

SACCI is proud to present the call for entries for the SACCI Chamber of the Year Award 2011. We would like to encourage all our member Chambers to enter this award.

There will be a special recognition award based on a strong motivation from the participating Chamber. The Chamber must motivate why it should be considered for the award by demonstrating a range of achievements during a period of 18 months.

SACCI has remarkable Chambers in its membership, which are:

• providing services of bottom-line business value to the businesses in their communities;

• promoting SMME growth; and

• contributing to local economic and community development.

The awards intend to publicise the entrepreneurial diversity in the SACCI membership, the purpose being to promote the value of Chambers to business and the communities, and to inspire other Chambers to similar achievements.

The winners will be announced at the SACCI National Convention Gala Dinner to be held on 3 October at the Sandton Convention Centre in Johannesburg.

The winner will be entered into the International Chamber of Commerce Chamber Awards in 2012.

For information on the 2011 winners of the ICCWB Chamber Awards, visit www.iccwbo.org/wcf/index.html?id=43704.

For information on the World Chamber’s Competition Guidelines, go to www.iccwbo.org/Competition/2011/Home

The rules and criteria as well as entry forms can be obtained from Sandra (011 446 3800). Nominations must reach SACCI by no later than 19 September 2011.

Invitation to participate in the SACCI Annual Award for Women in Business 2011

Nominations are sought for the SACCI 2011 Annual Award for Women in Business.

The award is designed to recognise and celebrate a special businesswoman within the SACCI membership, who has shown integrity, entrepreneurial spirit, originality and business acumen; who has found time to contribute toward the development of entrepreneurship and economic development in one way or another; and who would be a good role model to inspire other women to similar achievements.

The winner will be announced on 3 October at the SACCI National Convention Gala Dinner at the Sandton Convention Centre.

The rules and criteria as well as entry forms can be obtained from Sandra (011 446 3800). Nominations must reach SACCI by no later than 19 September 2011.

Invitation to participate in the SACCI Annual National Association Award 2011

SACCI is introducing an annual award to acknowledge an outstanding association member for his/her service and commitment over the preceding 12 months.

The Association of The Year Award will be awarded annually to associations which, through their actions and commitments, are outstandingly promoting the interdependent relationship between business and the community through their business-worthy actions.

Nominated associations are outspoken advocates of ethical and responsible business principles, and of social responsibility in corporate governance.

The nominees for the award have developed and cultivated successful international or national businesses in a manner that is recognised and appreciated by the communities within which their businesses act, and which they affect.

The association has shown leadership and outstanding support to the community, and has contributed to the development of SACCI.

You are invited to enter this year’s National Associations Awards and to share your success with all South Africans.

Contact Sue at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or 011 446 3800 for copies of the rules & criteria and nomination forms. The deadline for nominations is 19 September 2011.