SACCI discusses matters of National Health Insurance, land reform, climate change, skills development, and the proposed local business tax

National Health Insurance policy

The National Health Insurance (NHI) policy paper outlines the reasons and general strategy for implementing the NHI.

The policy seeks to expand the scope of public healthcare and to provide for outsourcing of medical services to private sector providers. In general, this expansion will be funded by the government and will ultimately be drawn from the available resources of the Treasury.

Furthermore, all else being equal, the expansion will necessitate an increase in taxation in general or mandatory individual contributions to the NHI.

In principle, the South African Chamber of Commerce and Industry (SACCI) supports the government’s attempts to better public healthcare provision in South Africa. SACCI and its members are fully cognisant of the challenges faced by the Department of Health in delivering on its mandate, and recognise the need to restructure the public health sector to improve the health and lives of all South Africans. However, there are some shortcomings of this paper.

First, the paper makes no mention of the fiscal sustainability, adverse economic effects or funding model of the NHI. Specifically, the effect of possible higher taxation on household wealth and the cost of additional government bureaucracy are not even alluded to.

Second, the paper makes a number of striking and seemingly unsubstantiated comments on the sustainability of the private health sector. These comments seem purely anecdotal without reference to research or mention of stakeholder engagements on the topic. The comments suggest that the government knows – better than the private health sector – what is good for this sector and that the private health sector is somehow responsible for the dire state of public health.

Third, the paper makes a number of comments that appear to be ignorant regarding the working of the medical economy. The statements are out of touch with economic reality and vague on economic reasoning and details. This is worrying, since the NHI will ultimately confer more power on the government; the assumption is that the public sector will be able to understand the complexity of the medical economy.

Fourth, although there are various admissions of guilt on the poor health service delivery within the public sector, the private sector somehow is blamed for South Africa’s poor healthcare in general.

Similarly, the paper creates the image that the current problems facing public healthcare in South Africa are primarily due to a shortage of funding. This is incorrect and shifts attention away from the responsibility of public health. SACCI points out that a public good such as healthcare will only be valued if the quality is sufficient for the general population. In fact, there would be less demand for private health services if public health provided the necessary quality service.

SACCI welcomes the recognition that there is a large degree of mismanagement in the public health sector, but the paper appears to ignore this when discussing proposed policy. An honest and more balanced approach to the subject is required.

SACCI believes that all policy proposals must be subject to a Regulatory Impact Assessment (RIA) by an independent organisation or the National Treasury. SACCI therefore calls for such an assessment to be made and to be subjected to public comment before the policy is finalised.

Finally, the paper seems to push an agenda that promotes the NHI without recognising the contribution the private sector is able and willing to make to improve healthcare. While the objective of the document is to encourage comment and discussion, it is feared that it will rather hinder co-operation between the public and private healthcare sectors, as the focus is one-sided.

SACCI’s submission to the Department of Health will be available on the SACCI website at www.sacci.org.za.

Green Paper on land reform

The Green Paper provides an overview on the colonial and apartheid history of property expropriation without compensation, and explains the need for land redistribution to foster economic growth and social development. The paper further outlines new bureaucratic entities that will serve to formulate and administer forthcoming legislation and regulations on land reform.

SACCI is of the opinion that although the historical outline provides an important context to South Africa’s current social inequalities, the discussion is both too broad-ranging and detailed for an official policy document.

It is common cause that South Africa inherited a host of challenges from the apartheid regime, specifically related to spatial development and property rights, so an in-depth investigation into the history of dispossession and political theory is more relevant to an academic or political publication.

SACCI believes a redesign of land reform would necessarily contain legislative or administrative reasons that such a change is sought in the first place. The current document contains no such analysis and rather focuses on South African history and political theory as mentioned above.

The only mention of current problems in the government’s capacity to implement land reform is found in paragraph 9: Challenges and Constraints, where the paper states that the main challenges for future implementation are:

• “(a) Entrenched vested interest, in both the commercial and communal land spaces;

• (b) Poor co-ordination and integration of effort and resources among public institutions, and between public and private institutions; and

• (c) The main constraint is the poor capacity of organs of state to implement.”

SACCI believes the document must include a detailed analysis of the shortcomings of the current land reform regime (including the lack of an up-to-date audit of state-owned land), which may be commissioned to an independent consultant or to the National Treasury.

SACCI is of the opinion that a redesign of land reform necessarily requires definite guidance on the future regime and the fundamentals on how the system will be changed. This information is lacking.

SACCI believes the document at present is too vague on the planned regime change to serve as policy groundwork for future stakeholder engagement and legislative drafting. The Green Paper would have to contain specific references to existing land reform policy, and the structures and plans to change it.

Specific comments

In paragraph 5: Current Challenges and Weaknesses – Rational for Change, the paper contains a list of alleged problems faced by the South African economy and their implications on social development. These individual problems are unsubstantiated and do not provide specific solutions to these problems.

The list includes the following “problem”: “(a) The land acquisition strategy/willing-buyer willing-seller model (a distorted land market)”.

SACCI is of the opinion that the willing-buyer willing-seller model cannot be scrapped. Any move away from this system will endanger property rights on the whole as entrenched in the Constitution, and negatively affect investor confidence and economic activity.

The eight-item list needs to be expanded in order to provide context to the so-called problems, specifically, the reasons these items are problematic and the precise solutions needed to be outlined in order to provide the necessary information for public participation.

In paragraph 6.4, the paper outlines a four-tier tenure system and specifically mentions the following: “(c) Land owned by Foreigners: Freehold, but Precarious Tenure, with obligations and conditions to comply with”.

SACCI believes a differentiation between property owned by the domestic private sector and foreign private sector would be damaging to foreign investor confidence, since it disincentives foreign firms from investing in South Africa.

The so-called “obligations and conditions” are vague and effectively nullify any legal certainty on South African property rights owned by foreigners. SACCI believes there should not be any difference in the legal treatment between foreign and domestic property owners.

In paragraph 6.5.2: Powers of the Land Management Commission (LMC), the paper outlines the authority conveyed to the so-called LMC, a new independent body that reports to the minister. The powers of the LMC, among others, are to:

• “(a) subpoena anyone and any entity, private or public, to appear before it, and answer any question relating to its landholding or land interest” and to

• (d) demand a declaration of any landholding, with all the necessary documentation relevant to such declaration”.

In Woodlands vs. The Competition Commission 2010 (6) SA 108 (SCA), the Supreme Court of Appeal held that: A generous interpretation of the commission’s procedural rights is not justified merely because it is difficult to establish the existence of prohibited practices. Such an approach to procedural rights would imply that the more difficult it is to prove a crime (such as corruption), the fewer procedural rights an accused would have, in paragraph 11.

The far-reaching invasive powers of the commissioner cannot be used for purposes of a fishing expedition without first having initiated a valid complaint based on a reasonable suspicion. It would otherwise mean the exercise of this power would be unrestricted because there is no prior judicial scrutiny, as it states in paragraph 20.

An initiation and subsequent investigation must relate to the information available or the complaint filed by a complainant. There is no reason to assume an initiation requires less particularity or clarity than a summons. It must survive the test of legality and intelligibility. Any interrogation or discovery summons depends on the terms of the initiation statement. The scope of a summons may not be wider than the initiation, at paragraph 34 and 35.

Applying the ratio of the case to paragraph 6.5.2(a) and paragraph 6.5.2(d) of the Green Paper, it is clear that the authority given to the LMC is too wide-ranging and needs to be qualified from the start in order to prevent abuse.

The powers of the LMC, among others, are also to:

• “(c) verify and/or validate/invalidate individual or corporate title deeds” and

• (f) seize or confiscate land gotten through fraudulent or corrupt means”.

This unlimited power to scrap or restrict property rights or seize property is clearly both unconstitutional and significantly deteriorating of the investment climate. If a bureaucratic entity appointed by the government can invalidate property rights as it sees fit, thereby bypassing the authority of the judiciary, then there is no certainty left over property rights in South Africa.

SACCI believes both clauses must be removed from the Green Paper, since such a provision would effectively move South Africa from a constitutional democracy to a centrally planned economy.

In paragraph 6.6, the Green Paper proposes the creation of a statutory body, the Land Valuer-General (LVG), which would perform the function of determining financial compensation in cases of land expropriation under the Expropriation Act or any other policy, or in compliance with the Constitution.

The Constitution explicitly provides that the role of determining financial compensation falls to the judiciary, thereby rendering the provision unconstitutional. In addition, the market-based willing-buyer willing-seller principle supported by the Constitution must be adhered to. Where expropriations do occur, it is constitutionally clear that compensation must be “just and equitable” and based on “the market value of the property”, among other factors.

Thus, SACCI believes the clause must be removed from the Green Paper.

In paragraph 6.7, the Paper provides for a Land Rights Management Board (LRMB) and Committees (LRMCs) that will mainly advise local communities on land rights issues and build institutional capacities.

SACCI is concerned that further misalignment of government policies may occur, as LRMCs will have an impact on the implementation of the Spatial Planning and Land Use Management Bill that currently resides in the National Economic Development and Labour Council. Further clarity on LRMCs is required.

Climate Change White Paper

SACCI highlighted that the success of the South African initiative for climate change mitigation is wholly dependent on co-
operation between the government and business; and while a behavioural change to energy usage may be necessary in some parts of the business community, the government needs to recognise that such a change must be realistic to businesses and not destructive to job creation nor economic activity.

Therefore SACCI raised a number of issues including the following:

• The lack of clarity in some policies;

• The alignment of the strategy with other initiatives such as the New Growth Path (NGP) and the second Industrial Policy Action Plan (IPAP2);

• Increased cost of doing business; and

• The proposed instruments including carbon budgeting and carbon taxes.

Readers will remember that comments on carbon taxes were submitted and a presentation made to the National Treasury earlier this year.

In particular, SACCI submitted the following non-comprehensive comments on the National Climate Change White Paper to assist the portfolio committee during their deliberations.

From the outset, it is important to state that SACCI fully supports the attempt by the government to address the threat of climate change and would like to stress the importance of policies to address these issues. Global warming is a serious threat and it needs to be addressed to stave off any further environmental degradation.

However, a number of concerns arise from the document and general policy direction, particularly relating to the issues related to implementation.

It should be noted that the success of the South African initiative is wholly dependent on co-operation between government and business. While a behavioural change to energy usage may be necessary in some parts of the business community, government needs to recognise that such a change must be realistic to businesses and not destructive to job creation or economic activity.

In this regard, the government needs to be aware of the particular energy requirements across the various spectra, and the business community must be able to test whether the government does indeed understand the issues facing the different sectors. This is especially true, since the current white paper is high-level and includes no details on actual implementation.

The clarification of the Copenhagen commitment is based on the bottom-up concept of implementing mitigation
actions that collectively will result in a deviation from business-as-usual emissions, and the extent of the deviation will be dependent on the support provided to developing countries. The approach to mitigation should therefore mirror the approach set out in the commitment, which essentially begins with mitigation action.

This is not the sequence of events set out in this section of the White Paper and, as such, is cause for concern.

Some specific comments

SACCI is concerned that a benchmark trajectory, which was not in the draft, has now been included in the final version. It is crucial that a comprehensive review of this trajectory must be undertaken before it can be used as the benchmark against which regulatory monitoring and evaluation is undertaken.

One of the key issues of concern to SACCI is the inability of the document to outline how the new plans and initiatives will be aligned to the industrial development frameworks such as the IPAP and the NGP.

The reliance on new plans is not only very resource-intensive, but also significantly adds to layers of bureaucracy and adding to the cost of doing business.

The process going forward will obviously entail detailed discussions, and the business community will require confirmation on the transparency from the government.

The relationship between the firm-level carbon budget and the desired mitigation outcomes need clarification. It is not clear how a carbon budget can provide flexibility and lessen cost mechanisms. A budget implies a limitation on the amount of emissions being allocated to companies.

Specifically, the precise methodology of setting a carbon budget at firm level needs to be concluded in co-operation with business. Furthermore, the actual setting of carbon budgets must be a bottom-up approach starting at firm level, then moving to sectoral level, which eventually can be aggregated to form a national carbon budget.

The concept of a range of economic instruments is supported. The section implies the carbon budget approach will not be applied to all emissions, but only to certain sectors; and which sectors these are needs clarification.

It is crucial that the national inventory must be as complete as possible if responsibility for emissions reduction is to be allocated.

Specifically, SACCI requires clarity on the policy tool to be used in introducing climate change mitigation. The White Paper does not explicitly state the interaction between the so-called firm-level carbon budgets and carbon tax. SACCI is against further taxes that would affect the competitiveness of business, and suggests spacious carbon budgets with the possibility of a carbon credit trading system. This would have a far more immediate impact on firms, since it would be to their net benefit to lower their energy usage.

Given that electricity prices are due to increase significantly over the next few years, producers and high-energy intensive users are already under pressure to restructure or change production methods to be less energy-dependent. This will severely inhibit the effectiveness of a tax. This will therefore only impose an additional tax burden while the ability to change is already stretched as induced by the spike in energy prices.

Brief comments on carbon taxes

The carbon tax discussion paper as published by the National Treasury is highly problematic. Specifically, although the paper provides a discussion on the theoretical basis of imposing a carbon tax, the main critique of the paper centres on the lack of analysis of the current regulatory environment, the lack of co-ordination with other government policies (which is the ‘isolated’ design of the proposed tax) and the lack of analysis on the significant impact on many high-employing firms.

In addition, the paper overwhelmingly gives the impression that simplicity is preferred without taking into account the possible impact on productivity. This is very serious, indeed, as South Africa cannot put potentially thousands of jobs on the line through the imposition of unacceptable economic costs. This may even result in a decline in long-term political support as the unintended economic consequences become evident.

The use of carbon taxes as a mitigation tool may be supported as part of a suite of instruments, but a more rigorous analysis is needed to establish the impact, including possible unintended consequences. SACCI will continue arguing for a revenue-neutral approach, to prevent further increase in the cost of doing business.

Finally, the paper fails to take into account or provide sufficient analysis of the energy market and the various rigidities that exist. This is a fundamental flaw, as the energy sector can arguably not be seen as a market, but as a strongly regulated environment – significantly impacting on the efficiency of a tax to influence behaviour as free market forces lack.

As an example, the discussion paper argues for the principle that the tax should be uniformly applied and that all taxpayers should face the same rate. However, the paper does not address any of the current market rigidities imposed by the regulatory regime in the energy industry. These rigidities clearly prevent the tax incidence occurring on all those responsible for emissions in a uniform manner, and distort the potential application of
this principle.

Brief comments on carbon budgeting

The need for a flexible approach is welcomed. However, practical implementation of such an approach remains unclear, and it must be emphasised that any initiative (including the analysis outlined in 6.5.3), although supported by SACCI, could only be successfully undertaken in partnership with business.

The carbon budget approach requires challenging technical work which, in turn, requires a challenging approach to the methodology. This is not reflected in the document.

In conclusion

SACCI made the following remarks:

South Africa is a developmental state and as such the priority remains firmly on issues such as job creation, youth unemployment and sustainable growth. It is therefore imperative that all policies should be aligned with the shared objectives of a developmental state.

Further, SACCI is of the opinion that South Africa does not need to take a global lead on this issue; rather the focus should be on job creation and development. It emphasises the critical importance of reducing the high energy dependence of the South African economy, but stresses that the socio-economic impact of policy should be aligned with the government’s broad objectives.

The lack of clarity and the ad hoc nature of policy-making make it very difficult for business to make any long-term investment decisions – a crucial element of job creation and sustainable growth.

The current lack of co-ordination between the relevant government departments and the different pieces of policy only serve to exacerbate the issue. By imposing additional burdens on the economy, without arguably creating the additional offsetting incentives, the impact on job creation and economic growth will be negative. This does not only not complement the outcomes of job creation and sustained economic growth envisaged in the NGP, but also fails to echo South Africa’s focus on driving competitiveness through job creation, infrastructure development and increasing exports.

Finally, these developmental objectives of South Africa may render it crucial for an exclusion of the electricity generation sector from these initiatives. The cost of electricity affects all businesses, and any plan to mitigate for climate change must preferably not affect additional electricity price increases or, alternatively, must operate in a revenue-neutral manner. Similarly, the use of a carbon budget for electrical generation must be high enough to assist with the developmental outcomes and primary priorities.

Skills Development Amendment Bill

The original Skills Development Act of 1998 introduced sector education and training authorities (Setas), which replaced the traditional apprentice system in South Africa. Through prior consultation with members and interested parties, it has become clear that the current Seta system is dysfunctional and is in need of urgent amendment or complete revision.

Although the amendments deal mostly with administrative issues relating to the transfer to the Department of Higher Education and Training and other obsolete parts of the legislation, the introduction of an Accounting Authority for each Seta may present a significant operational change to the management of the Seta system.

The Accounting Authorities may help in resolving long-standing issues of non-payment and bureaucratic inefficiencies. As such, SACCI welcomes this inclusionary initiative by the minister, subject to receiving extensive clarity on the general powers of the Accounting Authority, and specifically related to its oversight over the chief executive officer and the usage of funds.

Clarity is specifically sought on the powers of the Accounting Authority in awarding moneys from the National Skills Development.

Local Business Tax

The South African Local Government Association is expected to submit a proposal to the National Treasury to request the introduction of a local business tax (LBT) nationwide in all municipalities. Such a tax will have a direct impact on all business and job creation. It is expected that the National Treasury in due course will interrogate this request as mandated and SACCI will participate in this discourse.

However, in order to assist the National Treasury by drawing its attention to the most salient points and particular concerns of the proposal, SACCI is in the process of providing commentary on the LBT proposal.

SACCI identified a number of concerns relating to the design of the proposed tax, the timing of the proposal, and the impact it undoubtedly will have on businesses. The draft submission is currently out for comment by SACCI membership.

The background to the comments made by SACCI on the issue includes the following:

Poor service delivery at local level is often equated with lack of funding. For this reason, the need for additional revenue at local government level, where most service delivery takes place (or should take place), is acknowledged. It is noted, however, that:

• Only 11% of national revenue is allocated to local government. In view of the responsibilities carried by municipalities and the limited nature of their bases for generating revenue, this is palpably inadequate. For example, the annual value of unfunded mandates performed by eThekwini is R728 million (according to the 2011 Integrated Development Plan);

• It has been revealed that a very substantial amount of property rates, due to municipalities by other levels of government, is in arrears. The proposed Municipal Systems Act Amendment Bill proposes that all public buildings be exempt from rates and taxes. This would add an additional tax burden to businesses and individuals.

This provides a clear case for a fiscal redesign on a national level, in order to clarify the obligations of government departments and public entities as residents of municipalities and to award larger transfers to municipalities from the fiscus.

Although not all businesses are registered as companies, the requested funding level of R18.6 billion of the LBT represents 11.4% of corporate income tax revenue. To raise an equivalent amount from the existing corporate income tax base would require a rate increase from 28% to 31%! The introduction of an LBT would be nothing less than a disguised increase in the corporate tax rate.

A 2%-3% cost saving on national department budgets will provide similar funding available than resorting to the proposed LBT.

While formulating a position on the LBT proposal, SACCI did a survey among member on the issues of service delivery and municipal funding. These were the main findings contributing to the basis of the SACCI position:

Poor service delivery frustrates economic development directly by adding to the cost of doing business, and indirectly by lowering the amount of possible clients.

The survey results show that specific economic sectors have placed emphasis on the need for quality on different local government services. Poor electricity distribution is the largest problem for manufacturers, and road upkeep is the biggest problem for business services and retailers.

The extent to which businesses are affected by service delivery problems is related to the types of services they use the most (for instance, manufacturers are more energy-intensive and retailers are more dependent on the proper functioning of road networks). This implies the level of discomfort due to a failure to provide local services is not equal across all businesses, and that sector-specific remedies to its worst problems may have large cost differences.

Although the gross majority of the sample would not contribute to further local business taxes in order to fix the problems, the perceived share of municipal income tax to total income tax for businesses shows that most businesses are unaware of the true ratio between the two. It seems businesses would prefer more funding to local governments, but that such a fiscal redesign should remain tax-neutral.

Businesses may be more amenable to an introduction or increases to local business tax if these businesses are made aware of the ratio of municipal income from business to total tax income from business. However, the strong resistance to a local tax indicates that if such a tax were considered, it must have a neutral tax effect.

SACCI compiled comprehensive comments that were submitted to the National Treasury.

Highlights from the SACCI 2011/2012 Annual Report and Outlook

European economic growth is expected to remain muted for at least the first half of this year (1.1%), with wide differences between healthier economies such as Germany (1.3%) and France (1.4%) and financially unstable ones such as Italy (0.3%). The reduction in government spending and higher taxes in Greece will play a large role in dampening any remaining vigour in the domestic market.

The United States may do better in 2012 than 2011 due to the slow but steady restructuring in its manufacturing and service exports and a return to financial stability. The US is therefore expected to grow just below an optimistic 2%, provided that budget cuts do not cut too deeply into the spending power of middle-class America.

Chinese officials are hoping that property prices will not go into free fall. Despite these hazards, China is expected to grow above 8% in 2012 and may even edge above 9% by the last quarter of 2012 if demand from Europe and the US strengthens.

The yen appreciation is now encouraging larger domestic consumption, which may lead to a return to normal-trend property price increases. Japan is expected to grow by 2.5% this year.

Oil price uncertainty will continue to be a major risk factor for economic growth in the near term. African oil exporters – notably Nigeria, Algeria, Angola and Sudan – are benefiting from the oil price boom.

Not so Libya. While having Africa’s largest oil reserves, the country’s political turmoil has caused a sharp decline in oil production and output. While oil exporters benefit from windfall gains on output, net exports and government revenue, oil-importing countries are suffering from losses in output and a worsening of current accounts. This is a particular problem for highly indebted poor countries.

The outlook for Africa is promising. The expected slower recovery in the developed world, offset by the growth in China and India, will support the continent’s mining and agricultural dominated exports. Macro-economic prospects for 2012 are generally positive. Average gross domestic product growth is forecast to be 5.0% in 2011 and 5.1% in 2012.

Several factors that supported the recovery in 2010 are expected to continue their support; however, growth is expected to remain below pre-crisis rates. A possible further slowdown of global growth, caused by the weaknesses in developed economies, poses an important downside risk and would affect both demand for and prices of African exports.

Another risk is posed by possible retreats in fiscal stimuli and public investment in infrastructure.

A stabilisation of financial markets in the developed world should support increased investment into Africa, with commodities strongly positioned to benefit from these flows. The strong growth expectations for the continent should see institutional investors searching for higher yields in
developing regions, including Africa.

More investment in infrastructure as well as light manufacturing and agro-processing is expected.

Expected higher commodity prices into the second half of 2012 will support various sectors in Africa, particularly the oil exporters and the listed investment companies strongly dependent on agricultural exports to the European Union and the US.

The economic outlook for South Africa for 2012 is dependent on a number of variables including the global situation, particularly the concerns relating to the European economy; and other possible geopolitical tensions that could impact on commodity prices, particularly the price of oil.

Despite this, SACCI is relatively optimistic regarding economic growth over the short- to medium term. An expected return of consumer confidence in the euro area during the latter half of 2012 will stimulate domestic demand in especially domestic retail as well as the manufacturing sector, which is dependent on high value exports to the EU.

A stabilisation in the EU markets and the US economy will see institutional investors again attracted to the higher yielding emerging markets, with South Africa a traditional beneficiary of these flows.

Growth is thus expected to average just below the 3% mark, with acceleration in the latter half of the year on the back of increased activity, stronger capital formation due to pent-up investment funds, and technical base effects. GDP expansion should reach 4.8% in 2014 ; this will still be below the full growth potential due to regulatory impacts and other measures increasing the cost of doing business.

SACCI expects the current account deficit to GDP to grow consistently over the next few years.

The key concern for the national economy remains exposure to portfolio flows and the vulnerability to which the economy is exposed when these flows shift in favour of other economies. The currency will remain volatile and should strengthen toward the long-term levels against the dollar in the R7 to R8 range.

External supply-side factors have resulted in a worsening of the domestic inflation forecast, and the risks remain to the upside with food inflation together with sustained high oil prices contributing to this outlook. Although expected, the breach of the upper target range of 3% to 6% may be longer than initially anticipated. Inflation breached the upper end of the target range in the final quarter of 2011 and is expected to peak in the first quarter of 2012, declining gradually and returning to within the target range in the final quarter of 2012.

Consumer price index and producer price index inflation are most likely to increase into the first quarter of 2012, and will mostly be driven by the recent uptick in food and oil inflation; whereas second-round producer inflation should be dampened due to global orders dropping off. Price levels are expected to remain near the upper limits of the target range due to a number of cost push factors including the scheduled Eskom tariff increase in 2012.

Significantly, the Department of Energy (DoE) is considering an approach to delay the tariff increases. This could be achieved by allowing a lower return to the utility, which would result in Eskom moving toward the long-run marginal cost position in a period longer than five years.

Such a change would only be considered during the next tariff determination, for the period starting in 2013, and is unlikely to affect increases that had already been approved by the National Energy Regulator of South Africa under the second multi-year price determination period, or MYPD2. During that period, three increases of around 25% a year had been approved for 2010/11, 2011/12 and 2012/13.

At present, a weaker rand exchange rate and the high oil price pose the biggest risks to the short-term inflation outlook, but the South African Reserve Bank has room to increase the interest rate should there be a renewed risk of high inflation by the start of 2013. Growth concerns will, however, take a significant share of the deliberations of the Monetary Policy Committee.

The relationship between employees and employers is a major hurdle to large-scale employment creation. According to a recent report by the Department of Labour, South Africa lost more than 20 million working days in 2010 due to industrial action – the highest ever recorded loss of workdays. Due to less striking action in the public sector, however, the number of work days lost this year totalled only 5.4 million over the first three quarters of 2011.

The official South African unemployment rate eased to 25% in the third quarter of 2011 – from 25.7% in the second quarter and from 25.3% in the first quarter. This is due to an impressive increase of 238 000 employees in the formal non-agricultural sector and a 26 000 increase in the agricultural sector. The expanded definition of the unemployment rate is still well above 30%.

South Africa improved in this year’s World Bank’s Ease of Doing Business global rankings, from 36th to 35th place. Some encouraging findings are the number-one ranking for ease of getting credit and 10th place in protecting investors. From the report, however, it is evident that South African businesses are being held back by problems relating to infrastructure.

The international benchmarking reports show a clear need for the appropriate government action to improve business efficiency in South Africa.

South Africa is set to spend over R802bn on developing infrastructure over the next three years as part of a government infrastructure development programme. This report outlines the medium-term budget policy on public-sector investment spending.

Infrastructure spend increased from 4.3% of GDP in 2005 to 7.5% in the first half of 2011, and remains central to the economic development plans of the government.

With electricity supply expected to remain under pressure for the foreseeable future, and prices to increase significantly this year, domestic sustainable energy solutions will remain a fast-growing sector.

The DoE currently aims to procure 1 850MW of onshore wind, 1 450MW of solar photo voltaic power, 200MW of concentrated solar power, 75MW of small hydro, 25MW of landfill gas and 12.5MW apiece of biomass and biogas capacity. It has officially disclosed the names of the first 28 renewable energy independent power producer preferred bidders, which now have until June 2012 to take their projects to financial closure.

The extent of corruption and fraud in the government is particularly troubling to the South African business community, as it frustrates efforts to grow the economy and create jobs.

In 2011, President Jacob Zuma authorised 18 investigations by the Special Investigating Unit, targeting R9.1bn in government contracts and R3.4bn in conflict-of-interest matters.

The unit has – and is still – investigating state organs, with a heavy focus on procurement in the Department of Public Works and fraud in the Department of Rural Development and Land Reform.

The main barometer for civilian safety, the murder rate, fell by 5.3% annually to 15 940 in the 2010/11 fiscal year.

The Admissions Temporaire / Temporary Admission (ATA) Carnet – what exactly is it, and what can it do for one’s business?

The ATA Carnet System is an international customs document for the facilitation of temporary admission of goods into member countries. The system is accepted in 73 countries.

The ATA Carnet covers temporary import of commercial samples, exhibition goods, and professional equipment into a country that is a signatory to the conventions governing ATA Carnets.

It disposes the need for raising bonds or depositing duty at customs posts in different countries, and contains the appropriate customs clearance documentation, which is preferred by customs authorities.

In South Africa, the sole issuing and guaranteeing authority for the ATA Carnet is SACCI, which is affiliated with the International Chamber of Commerce (ICC) based in Paris.

The ATA Carnet system was drawn up by the Brussels-based Customs Co-Operation Council (renamed World Customs Organization) with the assistance of the ICC, and operates under the following international conventions on temporary admission:

•ATA Convention;

•Istanbul Convention;

•Professional Equipment Convention;

•Fairs and Exhibitions Convention;

• General Agreement on Tariffs; and

• Trade (GATT) Convention on Samples (1952).

These conventions govern the requirements for temporary duty-free admission of a reasonable number of goods from participating countries.

Items not covered by the ATA Carnet are goods intended for processing or repair or, among others, perishable goods.

The ATA Carnet System is accepted by 73 countries, and recent additions are Mexico, the United Arab Emirates, Bosnia and Herzegovina.

Some of the more well-known companies that make frequent use of the carnet system include companies such as BMW, SABC, SAAB Grintek, Pioneer Freight, Film Freight, Bae Systems, AngloGold Ashanti as well as SuperSport.

In short, the ATA Carnet enables travellers with commercial samples or exhibition goods to pass through several customs authorities during the course of one trip with a single document. Well worth it!