Government red tape scares away investors

DRDGOLD CEO Niël Pretorius has added his voice to the chorus of business leaders saying that South Africa’s regulatory environment is too burdensome for companies and prevents investment in the country.

Pretorius told BusinessTimes that applying for water licences “is like setting fire to tax”, as the gold producer took a R300 million hit from administrative delays. 

The company specialises in recovering residue metal from tailings retreatment and is 50.1% owned by Sibanye-Stillwater. 

“If you look at it in isolation, there is R300 million worth of revenue lost to this economy, of which a significant proportion would have been income tax. It is like setting fire to tax.”

DRDGOLD was required to change the design of its emergency spillage dam at Rooikraal on the East Rand before the licence was issued, resulting in months of delays. 

The company was able to soften the financial impact of the delay through greater efficiency in its other operations. 

“But if this was all we had and we did not have any other options, DRDGOLD would have been down R300 million because of the delay – not because an official was not doing their job but because the process is so burdensome,” Pretorius said. 

The efficient issuance of water licences has been a theme in President Cyril Ramaphosa’s State of the Nation Addresses. Ramaphosa has previously promised to cut the licence turnaround times from 300 days to 90. 

Pretorius said the application rules for water licences were too burdensome for an emerging economy. 

“We are finding that even for small pieces of infrastructure, these officials have to read through hundreds of pages of submissions, and they need to tick a thousand boxes before they can issue these water usage licences.”

“Unfortunately, it is a set of regulations that runs on its own logic. I am not suggesting the logic is flawed or necessarily wrong, but it is an absolute exclusive logic. It does not entertain data or science that is not consistent with that logic.”

MTN weighs in

Pretorius’ concerns about the regulatory environment in South Africa echo those of MTN CEO Ralph Mupita.

Mupita recently sharply criticised the telecommunications regulatory environment in South Africa, saying they contradict the President’s promises to encourage private sector investment to boost the economy.

He said South Africa’s increasingly complex regulatory environment could dent the profitability of the telecom giant’s South African unit and harm the country’s image as an investor-friendly emerging market.

He pointed to the Electronic Communications Amendment (ECA) Bill and a proposal from the Independent Communications Authority of South Africa (Icasa) that will change how mobile numbers are assigned and ‘recycled’ in the country.

The ECA Bill aims to create a wireless open-access network that will force operators to share their infrastructure and spectrum with third parties.

Mupita said this would eliminate the competitive advantages gained by operators that have invested heavily in their networks. This would dissuade investment in telecom networks across the country.

“Our perspective is that some of the requirements in the Bill are very challenging for maintaining a positive investment climate in South Africa,” Mupita said.

“Operators who have invested a lot of capital must open up their networks and be able to provide these to third parties.”

“That is challenging from an investment client point of view because when you invested, your assumption was that your investment could give you a competitive advantage.”

Icasa has proposed the Numbering Plan Regulations for mobile phone numbers, which aim to prevent the misuse and hoarding of numbers by customers who do not need them and free up more numbers for new customers.

One of the main changes in the regulations is introducing a new rule that deals with the activation, deactivation, and ‘recycling’ of numbers.

This relates to the ‘churn rate’ – the percentage of numbers customers no longer use within a given period.

Icasa wants to keep this rate low, so there are enough numbers for everyone who needs them.

The new regulation, therefore, also sets a rule stating that if a customer does not make any calls or send any messages for 20 consecutive days, the operator must notify them that they will lose their number if they do not use it soon.

The customer will have 10 more days to make a call or send a message to keep their number. If they do not, their number will be deactivated and quarantined for a month before it can be given to someone else.

Mupita criticised this rule, saying it would inconvenience customers and disrupt their communication.

He gave the example of a customer who goes on vacation for a month and does not use their phone during that time. Under the new regulations, this customer would lose their number.

Mupita suggested that a better solution would be to extend the numbering range, as done in other countries. This would allow more numbers to be available without having to deactivate numbers that are not being used.

Icasa has yet to make a final decision on the Numbering Plan Regulations. It is still open to public comment, as is the ECA bill.