South Africa’s business environment ranking for private companies has improved largely due to structural reforms aimed at helping the economy recover from the Covid-19 pandemic.
The EMEA Private Business Attractiveness Index 2022 ranks the relative attractiveness of private business environments across 33 countries in Europe, the Middle East and Africa (EMEA).
PwC yesterday released a report showing that South Africa was now ranking 25th out of these 33 countries when measured across 51 metrics within eight different categories.
PwC Africa Private Leader Duncan Adriaans said yesterday that South Africa marked an improvement on its 2021 ranking of 32nd out of 35 territories, reflecting positively on the country’s Economic Reconstruction and Recovery Plan.
The plan pledged to make it easier for private businesses to operate in South Africa.
“South Africa is now ranked as a more attractive operating environment for private business compared to several members of the European Union (EU), including Hungary, Slovakia, Croatia, Bulgaria, Greece and Romania,” Adriaans said.
“It would appear that the initiatives taken by our government to make South Africa more business friendly are beginning to bear fruit. For private companies, this provides an opportunity to grow and contribute to employment creation at a national and community level.”
The index ranked South Africa in the middle third of countries, placing it between 12th and 22nd across five categories which are: tax and regulatory environment; public health; education, skills and talent; technology infrastructure; and start-up ecosystem.
The tax and regulatory environment was South Africa’s leading attribute on a sub-category level, with the country ranked 14th out of 33 territories.
This ranking is comparable to countries like Malta which is ranked 12th, and Switzerland at 15, who are traditionally viewed as tax-friendly jurisdictions.
On a more practical level, South Africa ranks 17th with regard to the time senior management spends dealing with requirements imposed by government regulation.
While the country’s ranking has shown improvement, PwC said that several business environment challenges still needed to be overcome.
PwC said that South Africa finds itself in the bottom third of territories when it comes to three categories: macroeconomics; Environmental, Social and Governance (ESG) metrics; and the private business landscape.
South Africa ranks 25th out of 33 countries on ESG metrics, largely attributed to poor comparative assessments for corruption, its share of non-fossil fuel sources for energy, and the slow pace in reducing CO2 emissions.
In contrast, the country performs well regarding the gender pay gap, ranking 11th on this particular component.
PwC Africa ESG Leader Lullu Krugel said these rankings were consistent with the challenges experienced in South Africa.
For example, Krugel said if South Africa is greylisted, the private sector would face increased international transactional and compliance costs, with rising interest rates adding pressure on the private business sector.
She said private companies were not subject to as many disclosure and regulatory requirements relating to ESG factors.
“This, however, provides an opportunity to focus on creating sustainable value for stakeholders and intentionally crafting actions to impact on society and the environment,” Krugel said.
“Having a robust and responsive sustainability policy provides private companies with a competitive advantage in a purpose-led environment.”
BUSINESS REPORT