Pretoria - A shortage of skills is the most pressing concern for South African companies, but few invest in worker training, a World Bank review of the country's investment climate has revealed.
Of the 803 mostly white-owned companies surveyed last year, 35% listed a lack of skills as their major problem, according to the report released in Pretoria on Tuesday.
Firms paid a premium for skilled and educated workers, with managers' wages twice those in Poland and three times those in Brazil.
However, less than half of skilled South African workers were trained through their firms, compared with 70% to 80% in China, Poland and Brazil.
More than 80% of SA workers reported having no formal training.
"Overall, these results suggest that government programmes designed to encourage training have not been successful," the review found.
"Fewer firms have training programmes than in other middle income countries."
Co-ordinated approach
This was concerning given that all employers paid a skills levy, presidential adviser Goolam Aboobaker said. Sectoral education and training authorities were sitting with a "huge surplus".
A joint initiative on "priority skills acquisition" would be launched by the government, business and organised labour next year to assess the country's needs and develop a co-ordinated approach, he said.
According to the review, companies were also concerned about volatile exchange rates, onerous labour regulations, and crime.
World Bank country director Ritva Reinikka said South Africa's export sector needed specific attention. Much more had to be done "to see how South Africa can achieve a more competitive and stable exchange rate".
The survey found the country's labour regulation rigid, with the hiring and firing of workers both costly and difficult.
Crime cost firms about 1% of sales - two-thirds in security costs, and the rest from direct losses.
The figure was higher than in many middle-income countries, but lower than "in the very worst countries".
Crime, labour costs
These findings were "more favourable than we had thought", said trade and industry department policy head Ravi Naidoo. "Yes, crime is a big problem, but in terms of doing business it isn't at such large cost."
The survey went on to reveal that labour productivity in South Africa was high, but labour costs were also high.
Labour productivity was high enough to ensure continuing profitability, it found. "But at an economy level, high profitability can also suggest a lack of competition - when markets are competitive and entry is possible, profits will typically be competed away."
Aids was a medium-term concern - its impact on investment potentially driven by rising uncertainty about its affect on productivity, market size and profitability.
Its greatest immediate impact appeared to be a rise in worker absenteeism.
Few firms rated infrastructure, trade regulation, taxation, corruption or the court system as obstacles to investment.
Most believed the courts were able to enforce property rights, and court cases appeared to be resolved relatively quickly.
Black-out losses 'modest'
Losses through power outages were "modest", and the cost of power low by international standards.
Tax rates were low and declining, and inflation moderate.
Few firms reported having to pay bribes to obtain services or win government contracts, ports functioned relatively well, and access to finance did not appear to be a major problem for most enterprises.
Questioning why a favourable climate had not resulted in more private sector investment in the past decade, the report suggested this might partly be a result of inadequate support for new market entrants and the allocation of a significant share of investment funds to finance black economic empowerment (BEE) transactions.
"In the main, these transactions relate to equity transfers and not investments in the creation of new capital stock," the report found.
Naidoo said many of the concerns identified were being targeted through the government's accelerated economic growth strategy. The impact of BEE on investment was an area requiring further analysis, he said.