Gauteng Business 2016 edition

SPECIAL FEATURE The cost

SPECIAL FEATURE The cost of doing business in Gauteng The cost of doing business in Gauteng is of key interest to investors and business owners looking to explore opportunities within this diverse economy – and the good news is that it is cheaper to do business here than in many of its overseas competition. With an average petrol price of US.06 per gallon (approximately R11.75 per litre), South Africa ranked 19th out of 60 countries in a 2013 study comparing petrol prices. According to the study, petrol in South Africa is more expensive in comparison to Egypt (ranked 3rd) and Nigeria (ranked 6th), the other African countries included on the list. South Africa fares somewhat more favourably when compared with her BRIC counterparts (except Russia): petrol prices are higher in Brazil (ranked 21st at R12.54 per litre), similar in India (ranked 18th at R11.61 per litre) and China (ranked 15th at R11 per litre), and considerably lower in Russia (ranked 10th at R8.06 per litre). Electricity supply and tariffs With infrastructure spend of key importance to government, every effort is being made to create as competitive working environment as possible in the bustling greater Gauteng region, to stimulate further growth and aid job creation. This article explores some of the daily costs that companies and commuters can expect to pay. Petrol prices and other transport costs In recent years, South Africa’s electricity supply capacity has come under increasing pressure, with moribund infrastructure and capacity shortages necessitating the introduction of loadshedding around two years ago. As a result, Eskom, South Africa’s state-owned power generator and transmitter, has faced growing pressure amid ever-increasing demand for electricity. Labour, water and communication costs A 2012 report by UBS indicated that in 2009, Paris (France) had the shortest annual working hours of 1 558 hours a year. Johannesburg (South Africa) reported an average 1 887 hours a year, whereas Seoul reported 2 308 working hours a year. Comparing telephone costs for local calls globally, South Africa charged 7 US cents per threeminute call. The United Kingdom, on the other hand, charged 17 US cents for the same call. GAUTENG BUSINESS 2016 40

Transport options Motor vehicle: As much as R23-billion has been spent on upgrading the road network across Gauteng. South African National Roads Agency Limited’s (SANRAL) Gauteng Freeway Improvement Project (GFIP) represents a key element of this programme of upgrades, and is set to drastically reduce travel times and traffic congestion along key routes within the province’s urban centres. It will also improve accessibility into Gauteng and inject approximately R29-billion into the economy. Rail and bus In recent years, a great deal of attention has been placed on upgrading the capacity of South Africa’s rail network and infrastructure. The Passenger Rail Agency of South Africa (PRASA) is set to spend R123-billion in the acquisition of 7 224 new trains, which will be added to its fleet at a proportional rate every year over the next two decades. General Electric is also partnering with Transnet to produce new locomotives for use within South Africa. A variety of public transport bus services are available in major urban centres within Gauteng. These include the Rea Vaya BRT System, Metrobus and Gautrain bus services. In Johannesburg, the one-way cost of a Rea Vaya bus ticket ranges from R5.50 on inner city circular routes and R8.50 on trunk routes (the main routes from one destination to another), to R12.00 for the full trip from the feeder routes to the Central Business District (CBD). Taxi Metered taxi cabs in Gauteng typically charge R10 per kilometre with a flag rate of up to R50, although this can vary significantly depending on the company. This is relatively expensive when compared with equivalent fares charged by taxi cabs in other large cities internationally. For instance, the standard taxi fare in New York City is around US.50 upon entry and an additional US###COLUMNCONTENT###.5 for each one-fifth of a mile, which equates to a flag rate of approximately R23 and an additional charge of R5 for every 1.6 kilometres. Office rentals Rental rates for commercial property in South Africa are relatively affordable by most international comparisons. In 2010, the cost of rent for the average store owner in Johannesburg amounted to just 4 percent of that paid by his or her counterpart in London’s West End. In that same year, Johannesburg, together with Durban and Cape Town, were ranked as the most affordable destinations in terms of the cost of office rentals out of 55 cities worldwide, with rental rates varying between R110 per square metre and R140 per square metre. Starting a business in Gauteng SPECIAL FEATURE There are various types of business structures available in South Africa, namely sole proprietor, private company, public company, partnership, business trust, non-profit organisations, joint ventures and an external company (which is a branch of a foreign company). Ease of doing business comparisons with other countries At the global level, South Africa performs relatively well along a number of cross-country measures of competitiveness and the ease of doing business. In 2010/11, the World Economic Forum’s Global Competitiveness Report ranked South Africa in 54th position out of 139 countries. In the latest Doing Business report produced by the World Bank, South Africa was ranked first out of 185 countries for the ease of acquiring credit; and also ranked relatively highly in terms of investor protection (10th). 41 GAUTENG BUSINESS 2016