OBG talks to Zamo Gwala, CEO, Trade & Investment KwaZulu-Natal

Interview: Zamo Gwala

What do you see as the single biggest challenge facing new investors in KwaZulu-Natal (KZN)?

ZAMO GWALA: The single biggest challenge facing new investors in KZN would have to be the limited availability of serviced land. Industry trends are showing that investors have a preference for serviced land, as this allows for shorter lead times in establishing projects. KZN is primarily a rural province, and as such faces challenges in any type of bulk infrastructure roll-out. As a result, the province has taken a strategic decision to invest in infrastructure development.

What proportion of trade is with the partners in the immediate surrounding region?

GWALA: When breaking down KZN’s trade volumes by region, it is clear that the bulk is conducted with the 15 members of the Southern African Development Community (SADC). The SADC’s share of the province’s exports has increased to 13% over the last five years, compared to below 10% before that. We have also seen growth in trade with western, northern and eastern Africa at a rate of about 3-4% over the past five years.

How can the integration of trade with neighbouring countries be improved?

GWALA: Going forward, infrastructure connectivity will be key to improving trade integration with the rest of the region. This includes hard infrastructure, such as roads and rail, and soft infrastructure, like telecoms and banking services. Of course, facilitating cross-border flows will be vital as well, and we are hopeful that a free trade agreement will come to fruition sooner rather than later. We realise the importance of connectivity, and 10 of the top 30 African countries with the highest investment budget are in the SADC.

What scope is there for increasing private sector involvement in infrastructure development?

GWALA: Because of sluggish global and local economic progress, private sector business is still reluctant to invest, even in small business ventures. We believe getting involved in large infrastructural projects may not be as enticing for them in the current environment.

Nonetheless, well-packaged, promising projects, such as the Port of Durban expansion, which is a strategic integrated project under the country’s National Infrastructure Plan, are sure to reignite business interest. These projects should be vigorously promoted outside the borders of South Africa and KZN to international investors. The world believes in Africa now as the last frontier, and it is time we also believed in the unique endowments of our continent, country and province.

How competitive are costs, particularly labour, in KZN versus other provinces?

GWALA: KZN has some of the lowest labour costs in the country. In nominal terms, firms paid annual wages of nearly R80,000 ($8120) per worker in 2009, which increased to about R100,000 ($10,150) in 2014. Gauteng Province has the highest labour remuneration rate per worker, followed by North West and Western Cape. While it has the second-largest provincial economy in the country, KZN’s total labour costs are only sixth, estimated at nearly R92,000 ($8712) per worker in 2013.

In terms of some of the high overheads, I would say that, owing to the regulated minimum wage, the province and the rest of the country struggle with labour costs. Additionally, the price of electricity is increasingly becoming a challenge, and as a result of poor education outcomes, companies are faced with the cost of training their staff. The World Economic Forum’s “Global Competitiveness Report 2014-15” ranks South Africa 140th out of 144 in terms of the quality of the education system, and 18th in terms of the extent of staff training. Other overheads are related to medical insurance, as the country still struggles with health issues such as HIV and tuberculosis (TB). The business impact of HIV/AIDS ranked 136th, and that of TB also ranked 136th. Crime and violence also ranks high in business costs, as firms spend more on security.