Client: Western Cape Trade and Investment Promotion Agency, City of Cape Town
The purpose of this study was to assess investor confidence on Cape Town as an investment destination based on the findings of primary research (i.e. surveys, interviews). The research findings are intended to inform conclusions and recommendations which strengthen Cape Town’s value proposition to current and prospective investors as well as improvements to Cape Town’s incentive policy. The research methodology used a cross-sectional study design which included both qualitative and quantitative data collection methods including a survey of four groups of investors (Existing Foreign investors who have operations in Cape Town; Foreign investors who do not have operations in Cape Town (Potential foreign Investors); Domestic/South African Investors who do not have operation in Cape Town (Existing Domestic investors); and Domestic/South African Investors who have operations in Cape Town (Potential Domestic Investors). A total of 69 investors were surveyed (25 foreign investors and 44 domestic investors). A total of 32 Key informant interviews were conducted with selected investors.Overall, 78% of all investors approached, were either somewhat confident or very confident in Cape Town as a business destination. However, 33% of investors currently operating from Cape Town indicated that they were less confident in Cape Town as a business destination compared to the time their business started operating in Cape Town. The main reasons provided by investors for the recently declining levels of investment confidence are as follows (in no necessary order of importance but moving from national level issues to local level issues): Instability and unpredictable fluctuations in the international value of the South African Rand / exchange rate; Slow and declining levels of South African national economic growth/ domestic market growth; Department of Home Affairs Immigration policy changes which are negatively affecting companies who want to bring in foreign skilled workers which are necessary to start their investments and to train local labour. Department of Labour work permit regulations and decisions are also seen to be excessively time consuming with it often taking 6 months to obtain a work permit decision; Challenges in complying with a wide range of regulations regarding BBBEE and local ownership requirements which dilute foreign ownership and hence return on investment and control over investments made; Lack of skilled labour (poor education system which is resulting in poorly skilled school leavers and university graduates) resulting in poor productivity and excessive training costs; Electricity supply disruptions and load shedding. Key conclusions were that: Investor confidence in Cape Town is good however investor confidence in South Africa has been declining due to a range of national level factors. Improving confidence in Cape Town will require a combination of actions which address national level issues (legislation, labour unrest, quality of the education system, visa and work permit problem and including developing a National Policy on Foreign Direct Investment) and Cape Town specific challenges which involve better supporting existing investors to access national and African markets (strengthening regional transport connectivity and the efficiency of the Port) and supporting the competitiveness of existing investors through addressing input costs (energy/ electricity, telecommunications and broadband) and business environment productivity issues (rapid regulatory approval decision-making time-frames; improved supply and access to labour force skills, public transport effectiveness, and greater national government investment in critical economic infrastructure and systems such as the port, Atlantis Special Economic Zone, fibre-optic infrastructure). There are also under-exploited investment opportunities which require greater focus and resources to unlock including in business process outsourcing such as financial, insurance and legal back-office administration services.