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). South Africa ranks 25th out of these 33 countries, marking an improvement on its 2021 ranking of 32nd out of 35 territories.
This reflects positively on the country’s Economic Reconstruction and Recovery Plan which, as part of structural reforms aimed at helping the economy recover from COVID-19, 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 (ranked 26th), Slovakia (27th), Croatia (28th), Bulgaria (29th), Greece (30th) and Romania (32nd). 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.”
Duncan Adriaans, PwC Africa Private Leader
Our index ranks South Africa in the middle third of countries, placing it between 12th and 22nd across five categories, namely: tax and regulatory environment; public health; education, skills and talent; technology infrastructure; and startup ecosystem.
The tax and regulatory environment is South Africa’s leading attribute on a sub-category level, with the country ranked 14th out of 33 territories. This is comparable to countries like Malta (ranked 12th) and Switzerland (15th) 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.
“In recent years, we have seen noteworthy changes at the South African Revenue Service (SARS) which has had a positive impact on the interaction between private companies and the tax collecting authority. This includes restructuring of the organisation and the allocation of resources — including people and technology — to re-capacitate SARS. We elaborate more on this in our Taxing Times 2022 Survey.”
Elle-Sarah Rossato, PwC Africa Tax Controversy Leader
While the improvement in South Africa’s overall ranking from 2021 is noted, several business environment challenges still need to be overcome. When it comes to three categories in particular, namely: macroeconomics; Environmental, Social and Governance (ESG) metrics; and the private business landscape, South Africa finds itself in the bottom third of territories (placing between 23rd and 33rd). These rankings are consistent with the challenges experienced in South Africa. For example, if South Africa is greylisted, the private sector will face increased international transactional and compliance costs, with rising interest rates adding pressure on the private business sector.
Nonetheless, South Africa’s place in our EMEA index for the percentage of global multinational corporations registered locally (ranked 13th), number of investors (15th), number of deals recorded (17th), and Foreign Direct Investment (FDI) net inflows (18th) actually reflects a stronger investment environment than the overall ranking for the private business landscape (25th) would suggest.
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. (Our recently released report Net Zero Economy Index 2022: South African Perspective explores South Africa’s decarbonisation in more detail.) In contrast, the country performs well regarding the gender pay gap, ranking 11th on this particular component.
“Private companies are 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. Having a robust and responsive sustainability policy provides private companies with a competitive advantage in a purpose-led environment.”
Lullu Krugel, PwC Africa ESG Leader
While South Africa’s ranking in our private business operating environment assessment has shown improvement, we know that the business environment for private, family and entrepreneurial business owners is never easy. Even though our latest comparative analysis indicates that South Africa has been able to improve the operating environment to a level superior to those of several EU countries, we are more engaged than ever with our clients in helping them navigate the challenges and opportunities found in the South African economy.
Methodology
PwC’s EMEA Private Business Attractiveness Index rankings are based on scores across 51 metrics, which were then divided into eight different categories. We used credible, publicly available sources that measure tangible, on-the-ground activity in each country, both quantitatively and qualitatively. The eight categories capture key factors that shape a jurisdiction’s attractiveness to private businesses:
- Macroeconomics
- Private business landscape
- Tax and regulatory environment
- ESG regime
- Public health
- Education, skills and talent
- Technology infrastructure
- Startup ecosystem
We balanced and weighted these categories to reflect their relative importance to private businesses based on feedback received from our clients.
