Doing Business in South Africa 2018 Comparing Business Regulation for Domestic Firms in 9 Urban Areas and 4 Maritime Ports with 189 Other Economies © 2018 International Bank for Reconstruction and Development/The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business in South Africa 2018 Comparing Business Regulation for Domestic Firms in 9 Urban Areas and 4 Maritime Ports with 189 Other Economies Resources on the Doing Business website Doing Business in South Africa 2018 Subnational and regional projects http://www.doingbusiness.org/southafrica Differences in business regulations at the subnational and regional level Current features http://www.doingbusiness.org News on the Doing Business project /subnational http://www.doingbusiness.org Historical data Rankings Customized data sets since DB2004 How economies rank—from 1 to 190 http://www.doingbusiness.org http://www.doingbusiness.org/rankings /custom-query Data Law library All the data for 190 economies—topic Online collection of business laws and rankings, indicator values, lists of regulations relating to business regulatory procedures and details http://www.doingbusiness.org underlying indicators /law-library http://www.doingbusiness.org/data Entrepreneurship data Reports Data on new business density (number Access to Doing Business reports as well of newly registered companies per 1,000 as subnational and regional reports, case working-age people) for 136 economies studies and customized economy and http://www.doingbusiness.org/data regional profiles /exploretopics/entrepreneurship http://www.doingbusiness.org/reports Distance to frontier Methodology Data benchmarking 190 economies to The methodologies and research papers the frontier in regulatory practice and a underlying Doing Business distance to frontier calculator http://www.doingbusiness.org http://www.doingbusiness.org /methodology /data/distance-to-frontier Research Information on good practices Abstracts of papers on Doing Business Showing where the many good topics and related policy issues practices identified by Doing Business http://www.doingbusiness.org/research have been adopted http://www.doingbusiness.org/data Doing Business reforms /good-practice Short summaries of DB2018 business regulation reforms and lists of reforms since DB2006 http://www.doingbusiness.org/reforms iii AT A G Doing Business in South Africa 2018 LANC E The second subnational report of the Doing Business in South Africa series Full report: www.doingbusiness.org/southafrica D oing Business in South Africa 2018 focuses on business regulations and their enforcement across five borders through four of South Africa’s maritime ports. Doing Business measures aspects of regulation that enable or hinder entrepreneurs in starting, operating Doing Business areas. It goes beyond This report contains data current or expanding a business—and Johannesburg to benchmark eight as of May 1, 2018 and includes provides recommendations and good other South African urban areas comparisons with other economies practices for improving the business across four regulatory areas. It also based on data from Doing Business environment. measures the process of trading across 2018: Reforming to Create Jobs. Five Doing Business indicator sets covering areas of local jurisdiction or practice Dealing with construction permits Registering property Records the procedures, time and cost required Records the procedures, time and cost required for a small or medium-size domestic business to transfer a property title from one domestic firm to obtain the approvals needed to build a to another so that the buyer can use the property commercial warehouse and connect it to water to expand its business, use it as collateral or, if and sewerage; assesses the quality control necessary, sell it; assesses the quality of the land and safety mechanisms in the construction administration system; includes a gender dimension permitting system. to account for any gender discriminatory practices. Getting electricity Enforcing contracts Records the procedures, time and cost required Records the time and cost for resolving a commercial for a business to obtain a permanent commercial dispute through a local first-instance court, which electricity connection for a standardized hears arguments on the merits of the case and warehouse; assesses the reliability of the appoints an expert to provide an opinion on the electricity supply and the transparency of tariffs. quality of the goods in dispute; assesses the existence of good practices in the court system. Trading across borders Records the time and cost (excluding tariffs) to import and export goods. Three sets of procedures are assessed— documentary compliance, border compliance and domestic transport—within the overall process of exporting and importing a shipment of goods. Buffalo City (East London), Cape Town (Cape Town), Ekurhuleni (Germiston), Cape Town, 9 eThekwini (Durban), Johannesburg (Johannesburg), Mangaung (Bloemfontein), 4 Durban, urban Msunduzi (Pietermaritzburg), Nelson Mandela Bay (Port Elizabeth), maritime Ngqura, areas Tshwane (Pretoria) ports Port Elizabeth Advantages and limitations of the Doing Business methodology Doing Business does not cover: Focus on the law and practice Reliance on expert respondents ✗ Security Makes the indicators “actionable” because Reflects knowledge of those with most ✗ Market size the law is what policy makers can change. experience. ✗ Macroeconomic stability ✗ State of the financial system Use of standardized case scenarios Focus on domestic and formal sector ✗ Prevalence of bribery and Enables comparability across locations, Keeps attention on the formal sector, where corruption but reduces the scope of the data. firms are most productive, but does not ✗ Level of training and skills of the reflect the informal sector or foreign firms. labor force A collaboration of the World Bank Group (WBG) Global Indicators Group and the National Treasury of South Africa Cities Support Programme. Doing Business in South Africa 2018 was implemented as part of the WBG South Africa Urban Technical Assistance Program funded by the State Secretariat for Economic Affairs of Switzerland, SECO. iv Contents Overview 1 What are the main findings? 2 What has changed? 7 The way forward 10 About Doing Business and Doing Business in South Africa 2018 15 Dealing with Construction Permits 28 How does construction permitting work in South Africa? 29 What has changed? 34 What can be improved? 36 Getting Electricity 40 How does getting electricity work in South Africa? 42 What has changed? 48 What can be improved? 50 Registering Property 54 How does registering property work in South Africa? 55 What has changed? 62 What can be improved? 64 Enforcing Contracts 68 How does contract enforcement work in South Africa? 69 What has changed? 73 What can be improved? 74 Trading across Borders 78 How does maritime trade work in South Africa? 79 What can be improved? 86 Data Notes 91 Location Profiles 115 Buffalo City (East London) 115 Cape Town (Cape Town) 120 Ekurhuleni (Germiston) 125 eThekwini (Durban) 130 Johannesburg (Johannesburg) 135 Mangaung (Bloemfontein) 140 Msunduzi (Pietermaritzburg) 145 Nelson Mandela Bay (Port Elizabeth) 150 Tshwane (Pretoria) 155 v Port of Cape Town 160 Port of Durban 162 Port of Port Elizabeth 164 Port of Ngqura 166 Details on the quality indices 168 Acknowledgments 172 vi Overview MAIN FINDINGS ƒƒ This report—the second in the Doing Business in South Africa series—measures the same nine urban areas and four maritime ports covered in the 2015 study. It updates the data for the urban locations across four areas: dealing with construction permits, getting electricity, registering property and enforcing contracts. In so doing, it incorporates methodological enhancements designed to measure the quality of regulation. The study also applies the revised trading across borders methodology to the four maritime ports. ƒƒ Cape Town leads on two indicators and Mangaung on two others. However, none of the nine urban areas performs equally well across all indicators. That leaves room for all locations to learn from each other’s good practices. ƒƒ Compared globally, South African locations’ performance on the quality indices lags on most indicators. Because regulatory quality depends greatly on national instruments and actors, the central government can play a key role in improving local business conditions. ƒƒ Over the past three years, five locations implemented reforms making it easier to do business. Most reforms focused on getting electricity, with one related to registering property. The pace of reforms has been slow, but the successful reforms are notable for their significant impact. ƒƒ Good practices can be found in South Africa. As locations continue to engage in peer learning and take on new regulatory reforms, projects that address certain issues across indicators—such as internal coordination within the municipalities—will improve the prospect that reforms will bear fruit. 2 DOING BUSINESS IN SOUTH AFRICA 2018 A wave of optimism continues to FIGURE 1.1  The second Doing Business in South Africa study measures the same nine wash across South Africa as the urban areas and four maritime ports as the first country benefits from renewed political stability and improved global URBAN AREAS MEASURED PROVINCE CAPITALS ZIMBABWE Tshwane Lorem economic conditions. Since the end of the NATIONAL CAPITALS OTHER CITIES PRETORIA MPUMALANGA MPUMALANGA MPUMALANGA B O T S W A N A Johannesburg commodity super-cycle and the severe Ekurhuleni Johannesburg PORTS MEASURED Johannesburg Germiston DISTRICT BOUNDARIES MOZAMBIQUE drought between 2005 and 2006, infla- PROVINCE BOUNDARIES GAUTENG LIMPOPO GAUTENG 0 50 Kilometers INTERNATIONAL BOUNDARIES Polokwane tion has remained low. The South African rand has also strengthened, and investor See inset Nelspruit confidence improved after the recent Ma keng MPUMALANGA change in government leadership.1 Add to NORTH WEST GAUTENG ESWATINI this an economy that is already globally positioned, sophisticated and diversified,2 NAMIBIA F R E E S TAT E and the case for optimism is sound. Kimberley KWAZULU-NATAL Bloemfontein L E S O T H O Msunduzi Pietermaritzburg Mangaung Durban However, South Africa faces significant NORTHERN CAPE eThekwini challenges if it is to turn this optimism into meaningful change. More than EASTERN CAPE ATLANTIC half of the population lives in poverty, OCEAN Bhisho while 6 million people are without jobs.3 East London Bu alo City South Africa is one of the most unequal Cape Town WESTERN CAPE Ngqura I N D I A N O C E A N Cape Town Port Elizabeth countries in the world, where the top 1% Nelson Mandela Bay of households own 70.9% of the wealth.4 IBRD 41576 | AUGUST 2018 This map was produced by the Cartography Unit of the World Bank 0 260 Kilometers Group. The boundaries, colors, denominations and any other While South Africa’s growth rate has information shown on this map do not imply, on the part of the World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. been revised upward, to 1.9% for 2018,5 it remains well below the level needed to tackle absolute poverty, unemployment connections and more reliable electric- businesses and encourage entrepreneur- and income inequality. ity supply. However, the locations that ship (box 1.1). Ultimately, progress made reformed show that significant improve- on this front will help build a more pros- In addressing these challenges to growth, ment is within the reach of all locations. perous and inclusive society. entrepreneurship can play a crucial role Where reforms have been implemented, in creating jobs and tackling unemploy- results have been striking. Mangaung, for ment.6 South Africa’s entrepreneurship example, automated municipal processes WHAT ARE THE MAIN levels are well below those found in many and slashed the time to transfer property FINDINGS? emerging markets. Moreover, govern- by more than half, from roughly seven and ment policies and bureaucracy—as they a half to three weeks, moving from lowest The results show that business regula- affect small and medium-size enterprises to best performer on the registering prop- tions and their implementation vary —are among the lowest-performing erty indicator. across the locations, and no location does factors in an assessment of South Africa’s equally well across all areas measured. entrepreneurship environment.7 By highlighting good practices found Six locations (Cape Town, eThekwini, within the country and benchmarking Johannesburg, Mangaung, Msunduzi and Reforms to improve the regulatory locations with others across the globe, Tshwane) make the top third of the rank- environment for businesses have been Doing Business in South Africa 2018 ing in two areas measured (table 1.1), yet slow to take hold in the last three years. aims to inspire better regulatory prac- they are also in the bottom third on at least Additionally, the potential for improve- tices to improve the experiences of small one indicator. Buffalo City and Nelson ment has been limited by other changes making it more difficult to do business— such as national and local fee increases. Of By highlighting good practices found within the country the nine urban locations measured (figure and benchmarking locations with others across the globe, 1.1), only five have recorded improve- Doing Business in South Africa 2018 aims to inspire better ments and only in two regulatory areas assessed—with reforms centering on more regulatory practices to improve the experiences of small efficient property transfers and electricity businesses and encourage entrepreneurship. OVERVIEW 3 BOX 1.1 What is Doing Business in South Africa 2018 and what does it measure? Doing Business measures the regulatory business environment for small and medium-size enterprises. It assesses whether an economy has good rules and processes to yield positive outcomes for entrepreneurs and increased economic activity. Recognizing that governments play a vital role in bolstering private sector development, it promotes smart regulation. The key premise is simple: clear laws and regulations afford entrepreneurs the confidence and the opportunities to invest. Rules should be efficient, transparent, accessible and enforceable. In the annual Doing Business assessment measuring 190 economies globally, Johannesburg represents South Africa as its larg- est business city. However, Johannesburg does not tell the full story. South Africa has 257 local governments.a Entrepreneurs thus face different local regulations and practices depending on where they operate their business. Doing Business in South Africa 2018, the second subnational Doing Business study for the country, helps tell the story beyond Johannesburg. It applies the Doing Business measurement to seven other metropolitan municipalities and the Msunduzi local municipality.b This study updates the findings for these locations across four regulatory areas: dealing with construction permits, getting electricity, registering property and enforcing contracts. It also measures trading across borders through four of South Africa’s maritime ports (Cape Town, Durban, Ngqura and Port Elizabeth). These 13 locations are the same ones measured in the first study. The indicators measure the complexity and cost of regulatory processes and the strength of legal institutions. These indica- tors were selected because they relate to regulatory areas that are governed locally or that depend on local implementation of national regulations. In South Africa local governments have almost exclusive competence in some areas—such as dealing with construction permits and getting electricity. Registering property, for its part, falls under a hybrid of national and local authority. Yet even in those areas where national regulation reigns—enforcing contracts and trading across borders—actions taken locally by a court or a port authority can determine the complexity and efficiency of the regulatory process. Doing Business in South Africa 2018 also introduces some methodological changes (see figure). First, the four indicators applied across the nine urban locations now include indices designed to systematically capture aspects of regulatory quality. For ex- ample, in the getting electricity indicator, Doing Business now measures the reliability of electricity supply and the transparency of tariffs through an index. These new components emphasize the importance of having the right kind Changes to what the Doing Business in South Africa series measures of regulation. Second, this report introduces the - Procedures, time and cost to complete all the formalities to build a warehouse new Doing Business approach to What the and connect it to water and sewerage Doing Business measuring trade processes across in South Africa - Procedures, time and cost to obtain a permanent electricity connection the maritime ports assessed.c The series continues - Procedures, time and cost to transfer a property to measure changes to the trading across bor- - Time and cost to resolve a commercial dispute ders indicator increase its policy and strategic relevance for each Additions: economy. For example, the new - Quality of building regulation and its implementation - Reliability of electricity supply, transparency of tariffs and price of electricity case study assumes that econo- What this report adds - Quality of the land administration system mies export their product of com- and changes - Quality of judicial processes parative advantage, instead of one Changes: of six preselected products under - Time and cost to export the product of comparative advantage and import auto parts the former methodology. Because the indicator has been overhauled, this study creates a new baseline Note: See the chapter “About Doing Business and Doing Business in South Africa 2018” for more information for the four South African seaports on the additions and changes to the indicators. All indicator chapters also include a box on the corresponding measured.d methodological additions or changes. a. This figure comes from the South African Local Government Association (https:/ /www.salga.org.za/). b. The seven other metropolitan municipalities are Buffalo City, Cape Town, Ekurhuleni, eThekwini, Mangaung, Nelson Mandela Bay and Tshwane. c. The revised trading across borders methodology had been applied to the port of Durban since Doing Business 2016, as that port is measured annually as part of the global Doing Business trading across borders assessment. d. World Bank. 2016. Doing Business 2016: Measuring Regulatory Quality and Efficiency. Washington, DC: World Bank. For more information on new quality indices and the trading across borders methodology, see the chapter “About Doing Business and Doing Business in South Africa 2018” and the indicator chapters. 4 DOING BUSINESS IN SOUTH AFRICA 2018 TABLE 1.1  Doing Business in South Africa 2018—where is it easier? Dealing with construction permits Getting electricity Registering property Enforcing contracts Distance to Distance to Distance to Distance to frontier score Ranking frontier score Ranking frontier score Ranking frontier score Ranking Location (0–100) (1–9) (0–100) (1–9) (0–100) (1–9) (0–100) (1–9) Buffalo City (East London) 71.66 6 59.40 5 57.81 6 ñ 51.48 9 Cape Town (Cape Town) 75.48 1 ñ 79.81 1 54.69 7 54.71 7 Ekurhuleni (Germiston) 71.81 4 52.09 6 58.48 4 55.58 5 eThekwini (Durban) 73.65 2 ñ 69.40 2 54.58 8 55.74 4 Johannesburg (Johannesburg) ñ 68.16 8 ñ 68.77 3 59.68 2 54.10 8 Mangaung (Bloemfontein) ñ 71.25 7 59.82 4 ñ 59.73 1 59.01 1 Msunduzi (Pietermaritzburg) ñ 73.17 3 ñ 47.59 8 52.78 9 58.78 2 Nelson Mandela Bay (Port Elizabeth) ñ 71.70 5 ñ 42.19 9 57.93 5 54.85 6 Tshwane (Pretoria) ñ 66.25 9 51.24 7 59.39 3 56.14 3 Source: Doing Business database. Note: Rankings are based on the distance to frontier score (DTF), which shows how far a location is from the best performance achieved by any economy on each Doing Business indicator. The score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). Arrows indicate an improvement in the DTF score between 2015 and 2018. For more information, see the chapter "About Doing Business and Doing Business in South Africa 2018" and the data notes. Mandela Bay are in the middle of the rank- Every location has something to share with its peers, and ing for three indicators and lag on the last. good practices can be found even in lower-performing Meanwhile, Ekurhuleni is in the middle of the ranking across all indicators. Uneven locations. This means that top performers also have room performance across indicators points to to improve and learn. opportunities for peer learning. Nelson Mandela Bay, Buffalo City and backdrop, South African locations’ per- However, some top performers do stand Johannesburg. And Mangaung keeps formance varies widely within each area out. Cape Town leads on two indica- its first-place standing in enforcing con- measured. This is especially true for the tors—dealing with construction permits tracts. It is where attorney fees are lowest two areas where municipalities have the and getting electricity—and Mangaung for commercial litigation. Like Msunduzi, most authority—dealing with construc- on the other two, registering property and it also remains one of the places where tion permits and getting electricity. With enforcing contracts. contract enforcement takes just under 16 some South African locations perform- months—the fastest countrywide. ing on par with OECD high-income In terms of the construction permitting economies and others lagging among the process, Cape Town continues to lead Every location has something to share bottom 20% globally, there is a need to because it is the fastest place to obtain with its peers, and good practices can share and replicate local good practices construction approvals and is among the be found even in lower-performing loca- (figure 1.2). This will not only improve four most procedurally efficient loca- tions. This means that top performers individual locations’ performance but tions.8 It is also at the top of the getting also have room to improve and learn. will make the whole of South Africa more electricity ranking, followed by eThek- For example, Tshwane brings up the rear globally competitive. wini in second place and Johannesburg on construction permitting. However, in third. These are the only locations to obtaining a construction approval there The uneven performance among loca- score any points on the new quality mea- is less expensive than in Cape Town. tions is best illustrated by the distance sure for this indicator—the reliability of Similarly, Buffalo City is in the middle of to frontier measure, which shows how supply and transparency of tariffs index.9 the ranking on getting electricity, yet it is far a location is from recorded global the fastest place to obtain a connection. best practices—the “frontier.” For Mangaung leads on registering property, Requiring only 76 days to connect to the example, in construction permitting, narrowly outperforming Johannesburg power grid, it is two weeks faster than the Cape Town and eThekwini’s distance and Tshwane. In these three locations, next fastest location, Cape Town. to frontier scores (75.48 and 73.65, as in Ekurhuleni, it takes only seven steps respectively) place them among the to transfer property. Mangaung is also A few additional observations comple- top 25% of economies globally. Cape among the fastest locations, along with ment the rankings. First, against a global Town performs as well as Belgium and OVERVIEW 5 FIGURE 1.2  Globally, South African locations’ performance is most widely dispersed on dealing with construction permits and getting electricity—highlighting the need to replicate local good practices Doing Business rank (1–190 economies) 1 Cape Town 25% top 75.48 performers 48 Cape Town 71.46 79.81 Mangaung Port of Port Elizabeth 59.01 69.25 95 Tshwane Mangaung 55.60 66.25 59.73 57.23 65.07 58.92 Msunduzi Buffalo City 52.78 51.48 143 Port of Durban 59.64 Nelson Mandela Bay 25% bottom 42.19 performers 190 Dealing with Getting Registering Enforcing Trading construction permits electricity property contracts across borders Highest DTF score, South Africa Lowest DTF score, South Africa Average DTF score, South Africa Average DTF score, BRIC Average DTF score, OECD high income Source: Doing Business database. Note: The distance to frontier score (DTF) for each indicator shows how far a location is from the best performance achieved by any economy on each Doing Business indicator. The score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more details, see the chapter “About Doing Business and Doing Business in South Africa 2018.” The OECD averages are based on economy-level data for the 33 OECD high-income economies. The BRIC averages are based on economy-level data for Brazil, the Russian Federation, India and China. outperforms the average for OECD grid in Buffalo City, it takes nearly four practices is also key to increasing South high-income economies. Conversely, months longer in Nelson Mandela Bay. Africa’s overall competitiveness. Tshwane’s score places it in the bot- The South African average performance tom half of global economies, behind (58.92 points) is equally telling. It places A second observation on the rankings: Eswatini and just ahead of Namibia. the country among the 40% of low- the quality of regulation has a strong This gap is mostly because of differ- est performers globally. This is largely national component and is an area of ences in procedural complexity and the because over half of the country’s nine potential improvement for South Africa. time to obtain approval of a building urban locations do not monitor electrical Locations perform uniformly on the plan. Municipalities with fewer precon- outages using internationally recognized quality indices for registering property struction approvals and better internal methodologies. and enforcing contracts, which are man- coordination among the relevant aged by national departments. Even in departments perform better. Differences in performance are not as those areas where municipalities tend to large in the indicators on registering have greater authority, national regula- The gap is even wider for getting electric- property, enforcing contracts and trading tion plays a large role. For example, the ity. Nearly 40 percentage points separate across borders. However, there are still national building code has significant the top and lowest performers’ distance good practices to be found in these areas influence over local regulatory quality for to frontier scores. This puts them worlds across South African locations. These are dealing with construction permits. South apart. In the global distribution of 190 also the indicators for which locations Africa’s average performance lags behind Doing Business economies, Cape Town are collectively furthest from global best that of the BRIC economies (Brazil, the would rank 60th and Nelson Mandela Bay practices—mostly because of relatively Russian Federation, India and China) would be 107 places below it. Performance high costs and lower scores on the qual- and OECD high-income economies for is widely varied across all components of ity indices for registering property and all the quality indices, save for dealing this indicator. For instance, while it takes enforcing contracts. In these regulatory with construction permits (figure 1.3). two and a half months to connect to the areas in particular, adopting global good Because the instruments that determine 6 DOING BUSINESS IN SOUTH AFRICA 2018 FIGURE 1.3  Quality of regulation: South African locations trail in all areas except dealing with construction permits Dealing with Getting Registering Enforcing construction permits electricity property contracts 3 economies Malaysia, United Kingdom Singapore Australia (global best performers and 26 economies (global best performer (global best performer 1 on quality index)* 1 (global best performers 1 on quality index) 1 on quality index) Australia, Rwanda on quality index)** Rwanda United Kingdom Chile, Malaysia Malaysia Rwanda United Kingdom Malaysia OECD high income BRIC Australia OECD high income Mexico OECD high income 50 50 50 Australia 50 Mexico South Africa average BRIC, Chile, Namibia Namibia Mexico Chile OECD high income BRIC Mexico Kenya Kenya BRIC South Africa Chile East Asia & Pacific 100 100 100 100 Kenya East Asia & Pacific Kenya, United Kingdom South Africa East Asia & Pacific South Africa East Asia & Pacific Namibia 150 Namibia 150 150 150 190 190 Rwanda 190 190 Source: Doing Business database. Note: The figure illustrates sample rankings among 190 Doing Business economies. Rankings are based on the distance to frontier score (DTF), which shows how far a location is from the best performance achieved by any economy on each Doing Business indicator. The score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more information, see the chapter “About Doing Business and Doing Business in South Africa 2018” and the data notes. In this figure, the ranking is determined by sorting the DTF scores for the corresponding indicator’s quality index. The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, Russia, India and China. *These are Luxembourg, New Zealand and the United Arab Emirates. **These are Belarus; Belgium; Costa Rica; Cyprus; Czech Republic; Estonia; Finland; France; Germany; Hong Kong SAR, China; Ireland; Japan; Kazakhstan; Republic of Korea; Lithuania; the Netherlands; Panama; Portugal; Russia; the Slovak Republic; Slovenia; Spain; Sweden; Taiwan, China; the United Arab Emirates; and Uzbekistan. regulatory quality are largely national, economies on this indicator. However, vehicle for South Africa. It represents the this also points to the key role national the time to get an electricity connec- vast majority of the country’s exports, and departments can play in improving the tion remains a constraint, linked to the South Africa’s ports form a major corridor local business environment and helping number of time-consuming inspections for regional trade.10 Yet compared globally, South African locations converge with required. On average, South African busi- the time needed to comply with port and international best practices. nesses wait one month longer for a per- documentary requirements remains a manent electricity connection than their key barrier for traders across all four ports Third, a close look at the efficiency met- counterparts in the BRIC economies. assessed. South Africa’s border compliance rics reveals that South Africa is relatively costs for exports are also comparatively competitive in terms of time across three Procedural complexity and the cost to high across the ports and more expensive indicators, and the main challenges are complete regulatory processes are gener- than the average for OECD high-income in streamlining processes and reduc- ally still obstacles for South African entre- economies that export by sea (figure ing costs. More specifically, the South preneurs, across indicators. For example, 1.5). This is because customs clearance African average either outperforms or South Africa’s average performance on fees and port handling costs are high on performs close to the average for OECD transferring property—eight steps cost- a global scale. Durban, the country’s larg- high-income economies on the time it ing 7.6% of the property value—puts it est port in terms of volume handled, is its takes to obtain construction approvals, among the 40 most procedurally com- slowest and most expensive. South Africa’s transfer property and enforce contracts plex and 44 most expensive economies efforts continue to focus on upgrading port (figure 1.4). In some cases, the best per- globally. infrastructure and moving toward elec- formance in South Africa is among the tronic transaction systems across agencies best globally. For instance, the 88 days Beyond the four regulatory areas measured involved in the trade value chain. to obtain building plan approvals places across the nine urban locations, maritime Cape Town among the 30 fastest global trade is an equally important development OVERVIEW 7 A close look at the efficiency metrics reveals that WHAT HAS CHANGED? South Africa is relatively competitive in terms of time across three indicators, and the main challenges are in Following the first Doing Business in South streamlining processes and reducing costs. Africa study in 2015, the South African locations assessed set out on a journey to implement reforms aimed at improving FIGURE 1.4  In three areas measured, average times in South Africa are better than or service delivery and the quality of regula- close to the OECD high-income average tion. South Africa created a dedicated Time (days) 661 program to support local governments’ reform efforts, emulating the practices 577.8 of economies like Mexico and Colombia 546.7 (box 1.2).11 469 Over the last three years, five of the nine urban locations measured each intro- duced one reform. The pace of reforms is undoubtedly slow, but the improvements recorded are noteworthy for their impact. Cape Town, eThekwini, Johannesburg 190 and Nelson Mandela Bay have imple- 179 mented reforms in getting electricity, 154.6 124.7 114.2 while Mangaung made improvements in 88 76 registering property (table 1.2). 79.1 63 20 31.7 22.3 Most reforms focused on getting electric- Dealing with Getting Registering Enforcing ity. In 2018 Cape Town, eThekwini and construction permits electricity property contracts Johannesburg became South African Fastest time Average time Longest time OECD high income pioneers in calculating the number and in South Africa in South Africa in South Africa frequency of electrical outages using two methodologies: the system average inter- Source: Doing Business database. ruption duration index (SAIDI) and the Note: The OECD averages are based on economy-level data for the 33 OECD high-income economies. system average interruption frequency index (SAIFI). Replicating this international good practice, they joined more than 120 FIGURE 1.5  On average, exporting through South African ports is nearly twice as Doing Business economies that calculate expensive as through OECD high-income economies that export by sea these critical inputs for monitoring and improving the quality of electricity supply. OECD high income 325 65 390 This improvement has enabled the three Ngqura 451 55 506 locations to score points on the reliability of supply and transparency of tariffs index Port Elizabeth 451 55 506 and improve their overall performance on Cape Town 503 73 576 the getting electricity indicator. They are South Africa average 666 60 726 now collectively at the top of the ranking for this indicator. BRIC 623 124 747 Durban 1,257 55 1,312 Beyond the quality of regulation, Cape Town also improved process efficiency Cost to export: Border compliance (US$) Cost to export: Documentary compliance (US$) and reduced costs to obtain an electricity connection. It streamlined internal pro- cesses for issuance of budget quotes for Source: Doing Business database. Note: The OECD averages are based on economy-level data for the 13 OECD high-income economies that export by connection works, slashing the time by sea. The BRIC averages are based on economy-level data for Brazil, Russia, India and China, all which export by sea. nearly a week. It also exempted first-time 8 DOING BUSINESS IN SOUTH AFRICA 2018 BOX 1.2 The Cities Support Programme—advancing reforms at the subnational level Housed in the South African National Treasury, the Cities Support Programme (CSP) has been one of the main champions of local-level regulatory reform in South Africa. It is founded on the premise that good governance, coupled with sound policy ac- tion, can yield economic growth and reduce poverty and inequality.a The CSP provides support to cities along five main themes essential to the overarching goal of achieving inclusive growth.b Within the theme of economic development support, the CSP aims to promote local decision-making aimed at bolstering private sector development, increasing formal business activity and harnessing job creation. To carry forward this agenda, the CSP works closely with the municipalities. Beyond the CSP’s central coordination team, each municipality also has a “CSP city lead” who works directly with municipal coordinators and focal points—located in the corre- sponding municipality’s planning or economic development department. This organizational structure allows the CSP to draw both municipal executives and technical staff into the reform process. The CSP’s support takes four main forms: monitoring progress, fostering accountability, providing technical assistance and fa- cilitating peer learning. South Africa’s subnational Doing Business studies have been requested and conducted in the context of the CSP’s monitoring role. The CSP used the Doing Business in South Africa 2015 report to advance the conversation around regulatory reform at the local level. Following the first assessment, the report served as input to help relevant municipalities de- sign action plans for reform.c The CSP continues to monitor implementation of these action plans on a quarterly basis. Progress is reported at City Budget Forum meetings, to promote accountability. In 2016 the CSP also organized three peer-learning events so that locations could share good practices related to specific regu- latory areas.d This opened the door for municipalities to start engaging each other directly in the context of peer learning. For example, Buffalo City, Nelson Mandela Bay and eThekwini engaged with Cape Town about its electronic building plan approval system. Nelson Mandela Bay also sought information from Johannesburg and Tshwane about their building plan approval pro- cesses. Representatives of eThekwini and Msunduzi met to discuss implementing management software for building plan ap- provals and georeferencing drone-captured imagery. The CSP also facilitates technical assistance to the municipalities. For example, in collaboration with the World Bank’s Urban Technical Assistance Program, it helped Cape Town, eThekwini and Johannesburg develop capacity to monitor the reliability of electricity supply using internationally recognized methodologies—leading to some of the major improvements recognized in this report. South Africa is not alone in adopting this approach. In Colombia and Mexico—which respectively have conducted four and six rounds of subnational Doing Business benchmarking exercises—a national government body supports local reform activity. In Colombia the National Planning Department (DNP)e has taken this charge since 2008. It has helped states map regulatory pro- cesses, identify bottlenecks and exchange good practices. Mexico has a dedicated National Commission for Regulatory Reform (CONAMER) which does the same.f The Colombian and Mexican examples show that having a reform champion adds value. The facilitating agencies have an over- view of each location’s needs and can respond with the appropriate technical assistance and create meaningful avenues for locations to exchange good practices. For example, in Mexico Doing Business has recorded 257 reforms across 32 states in just over a decade. Moreover, it found that states that engaged most in peer learning improved the most. Similarly, Colombia has recorded 158 regulatory reforms over four rounds of benchmarking, with peer learning increasing over time. After just the first study, South Africa has documented regulatory reforms across five locations. Colombia and Mexico’s experi- ence using a similar model indicates that even broader success may be possible over time. However, as seen in both Colombia and Mexico, the linchpin of long-term success is coordination among all levels of government and the political will to drive the regulatory reform agenda. a. See the Cities Support Programme website at https:/ /csp.treasury.gov.za/Programmes/Pages/default.aspx. b. The thematic areas are core city governance, human settlement, public transport, economic development and climate resilience. c. In the context of the subnational Doing Business study, the CSP’s work has focused primarily on those areas where the municipalities have direct authority: dealing with construction permits, getting electricity and registering property. d. For more information about the peer learning events, see the Cities Support Programme 2016/17 Annual Report. Available at https://csp.treasury.gov.za /Pages/default.aspx. e. Departamento Nacional de Planeación. Available at https:/ /www.dnp.gov.co/DNPN/Paginas/default.aspx. f. Comisión Nacional de Mejora Regulatoria (CONAMER, formerly COFEMER). Available at https://www.gob.mx/conamer. OVERVIEW 9 TABLE 1.2  Who has made it easier to do business since 2015? cut by a month (figure 1.6). This brings Mangaung—formerly the sole location Location Getting electricity Registering property to require a separate interaction with Cape Town (Cape Town) ü the electricity utility—in line with other eThekwini (Durban) ü municipalities. Increased transparency Johannesburg (Johannesburg) ü across South Africa’s local deeds offices also contributed to better conditions Mangaung (Bloemfontein) ü for registering property in Mangaung. Nelson Mandela Bay (Port Elizabeth) ü Deeds offices now display their service Source: Doing Business database. commitment charter, stating time limits Note: Any data update that leads to a change of 2% or more on the relative distance to frontier gap or a change in the quality index score beyond certain defined thresholds is classified as a reform. If a location implemented both for registering deeds, on a public board improvements and changes making it more difficult to do business, only reforms with a net positive impact are at the agency. Taken together, these local displayed in this table. The relevant indicator chapters include tables showing all changes, positive and negative. For more information on how reforms are documented for each indicator, see the data notes. and national factors have reformed the process of registering property, propelling The pace of reforms is undoubtedly slow, but the Mangaung from last to first place on this improvements recorded are noteworthy for their impact. indicator. applicants from the application fee for for rates clearance certificates. In so doing, No major improvements were document- an electricity connection. Yet the most it improved its internal coordination with ed for dealing with construction permits notable reform improving process effi- Centlec by integrating the utility into its and enforcing contracts. This signals the ciency in getting electricity was in Nelson new electronic platform. This eliminated need to continue improving the efficiency Mandela Bay. It cut the time to obtain a the need for conveyancers to have a sepa- of municipal procedures and local courts, connection by over five months. Emerging rate interaction with Centlec, removing as well as the quality of building regula- from labor strikes in 2015, the municipal- one step in the process of obtaining a rates tions and judicial processes. ity improved staff retention, enabling it to clearance certificate. Moreover, the auto- better manage its workload. Moreover, it mation of back- and front-office functions Some changes also made it more difficult created a strategic planning team—the improved overall efficiency. Conveyancers for entrepreneurs to do business. In two Getting Electricity Improvement Team— now apply online and receive rates clear- areas—dealing with construction permits with the specific mission of monitoring ance certificates from the comfort of and registering property—fee increases and improving service delivery. It also their office. Consequently, the time to hampered reform efforts. For dealing with delegated connection works to external obtain a rates clearance certificate was construction permits, all municipalities service providers and procured construc- tion materials for these projects. Despite still ranking last among South African FIGURE 1.6  Automation and internal coordination helped Mangaung speed up the locations, Nelson Mandela Bay has made issuance of rates clearance certificates strides forward on the getting electric- Time to register a property (days) ity indicator. Its distance to frontier score 60 improved by 6.50 percentage points— Mangaung eliminated one step and reduced the time to obtain a rates clearance certificate by nearly a month from 35.69 to 42.19 points. 50 Like Nelson Mandela Bay, Mangaung 40 ranked lowest on an indicator in 2015 but has achieved remarkable improvements 30 in regulatory efficiency and converged with domestic best practices. Mangaung 20 simplified the process to obtain a munici- pal rates clearance certificate needed to 10 register property. Previously, obtaining the certificate required separate interactions 0 with the electricity utility (Centlec) and 1 2 3 4 5 6 7 8 the municipality. In 2015 the municipality Procedures (number) launched an electronic financial manage- ment system and e-application process Source: Doing Business database. 10 DOING BUSINESS IN SOUTH AFRICA 2018 raised construction approval fees. In The obstacles firms face extend beyond mere process Buffalo City, Cape Town and eThekwini the magnitude of local tariff increases efficiency. Businesses also depend on good quality made business conditions worse. For regulations to protect their interests. example, in Cape Town and Buffalo City building plan approval fees went up by ensuring better resilience and continued and how it can be achieved. Mangaung’s nearly two-thirds over the past three growth.12 More specifically, the report property registration reform is a prime years, far exceeding the rate of infla- provides insight into which regulations example: the municipality facilitated tion for the same period. For registering and practices are conducive to busi- coordination with the electricity utility property, fee increases at the national ness creation within the South African through automation, creating a one-stop level—most notably the transfer duty, context. As a follow-on to the first study, shop experience for clients. but also conveyancing and registration this report informs policy makers about fees—made property transfers cost- which reforms have been successful and Second, while municipalities still have lier. Consequently, global Doing Business, where constraints persist. significant room for improving on their which measures Johannesburg annually, own, collaboration with the national recorded an increase in the transfer duty Although some locations have advanced government would increase the range of as a change making it more difficult to toward best practices, there is still sig- areas improved. The obstacles firms face transfer property in South Africa in Doing nificant room for improvement across extend beyond mere process efficiency. Business 2017. the country (table 1.3). Overall, while Businesses also depend on good qual- locations should continue streamlining ity regulations to protect their interests. Besides fee increases, other factors made regulatory processes, they must also Because the quality of business regulation it more difficult to obtain construction start improving the quality of regula- affects local entrepreneurs but is mostly approvals, register property and connect tion. Moreover, advancement hinges on beyond the purview of local government to electricity. As of 2016 Cape Town national and local policy makers’ ability action, there is a need for better collabo- requires the approval of integrated waste to address some cross-cutting issues. ration between the levels of government. plans to obtain construction approvals. Drawing national departments into the This adds a preconstruction procedure to As a first order of business, local authori- conversation on local improvements the process. In eThekwini and Msunduzi ties should increase coordination to would allow national decision makers challenges in implementing the new streamline service delivery for business- to better understand local needs and electronic revenue management systems es. Across nearly all indicators, there is implement changes improving conditions and lack of staff capacity in both loca- evidence that authorities’ lack of internal across the country. For example, adopting tions have caused delays to obtain a rates coordination makes processes more bur- legislation to address who bears respon- clearance certificate needed for property densome for entrepreneurs. For example, sibility for postconstruction latent defects transfers. This led to an increase in the in four urban locations—Johannesburg, and mandating liability insurance to cover time to transfer property by nearly three Mangaung, Nelson Mandela Bay and losses would be a step toward greater weeks in both locations. Similarly, in Tshwane—people applying for con- protections for local entrepreneurs. Mangaung getting electricity has become struction approvals are responsible for However, this improvement depends on more difficult because of limited staff circulating their application to the various national legislative action. capacity. As a result, the time it takes for departments involved in the preconstruc- the utility to issue a connection fee esti- tion approval process. In other locations, Similarly, local entrepreneurs require mate has doubled—increasing total time however, the application is circulated reliable electricity supply for their daily to obtain a connection to the grid from internally, streamlining the process. operations. Systematic monitoring of two and a half to three and a half months. Similarly, at local ports a lack of coordina- outages would provide utilities the infor- tion between government agencies can mation they need to undertake remedial result in redundant processes. For exam- actions to improve the quality of supply. THE WAY FORWARD ple, the South African Revenue Service Cape Town, eThekwini and Johannesburg and Border Police sometimes investigate have led by example, as they recently In the context of budding growth in the same consignment several times, at started monitoring outages using the South Africa, the second Doing Business various stages of the logistics chain. This internationally recognized SAIDI and in South Africa study is timely. It can con- adds three days on average to maritime SAIFI methodologies, which focus on the tribute to the discourse on how South import and export processes. Locations impacts of outages on individual users. Africa might tackle one of its biggest need not look far to see the potential Yet the authority to require all local utili- challenges—job creation—as a means of benefits of better internal coordination ties to use this monitoring method rests OVERVIEW 11 TABLE 1.3  Summary recommendations to improve the ease of doing business across South Africa Suggested reforms Relevant departments, agencies and other stakeholders Dealing with construction permits • Consider differentiating projects by risk and introducing risk-based inspections Local • Increase efficiency by improving coordination, consolidating procedures and • Land use management/town • Utility providers implementing electronic platforms planning department • Fire department • Building control department • Health department • Introduce stringent liability and insurance regimes for latent defects* • Building inspections department • Solid waste department • Involve private-sector professionals in the construction permitting process • Roads and stormwater department National • Department of Labour • Department of Rural Development and Land Reform • South African Bureau of Standards (SABS) • National Regulator for Compulsory Specifications (NRCS) Private sector • Construction practitioners and associations (architects, engineers, contractors, building inspectors) • Private land surveyors • Insurance companies Getting electricity • Monitor and improve the reliability of supply* Local • Streamline the wayleave and excavation permit systems • Municipal distribution utilities • Identify bottlenecks in the internal process to reduce time* National • National Energy Regulator of South Africa (NERSA) • Make the cost and process of getting electricity more transparent to the customer • Eskom • Upgrade geographic information system to eliminate external site inspection • Department of Energy • Reduce the burden of the security deposit Registering property • Streamline issuance of rates clearance certificates Local • Improve coordination among stakeholders and consider implementing a one- • Municipalities stop shop for property registration • Local deeds offices • Local surveyor-general's offices • Reinforce transparency in the land administration system* National • Strengthen protections and resolution mechanisms for land-related issues and • Office of the Chief Registrar of Deeds disputes* • Office of the Chief Surveyor-General • Expand geographic coverage* • Department of Rural Development and Land Reform • Department of Justice** Private sector • Conveyancers Enforcing contracts • Study magistrates’ court caseloads to identify and eliminate causes of trial delay Local and consider limiting the frequency and causes of adjournments • Magistrates’ courts • Assess judicial capacity and resources needed to enhance case management and National make it effective, especially in lower courts* • Office of the Chief Justice • Consider introducing specialized commercial courts or commercial sections in • Department of Justice** locations where needed Trading across borders • Further reduce and streamline documentary requirements and increase the use Local of electronic transaction systems • Chamber of commerce and industry • Increase coordination of different agencies with a view to streamlining National procedures* • Department of Trade and Industry • Introduce an electronic single window for trade • South African Revenue Service (SARS) • Transnet National Ports Authority (TNPA) • Promote regional integration through the effective implementation of border • Transnet Port Terminals (TPT) cooperation agreements • International Trade Administration Commission of South Africa (ITAC) • Upgrade trade logistics infrastructure* • Ports Regulator of South Africa (PRSA) • Perishable Products Export Control Board (PPECB) • Department of Agriculture, Forestry and Fisheries (DAFF) • South African Police Service (SAPS) • National Regulator for Compulsory Specifications (NRCS) Private sector • Clearing and freight forwarding agencies • Carriers (shipping/rail lines, trucking companies) Note: All recommendations are detailed in the “What can be improved?” section of the corresponding indicator chapter. * These are new policy recommendations not included in the 2015 study. Other recommendations were included in the prior study. They have thus been updated to reflect the most recent good practices, and locations should focus on continuing to implement these recommendations. ** For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. 12 DOING BUSINESS IN SOUTH AFRICA 2018 Municipalities and national departments can work not issue rates clearance certificates during the data migration period, which together to achieve more holistic and comprehensive lasted about a month. This caused the improvements across all locations. backlogs the municipality is still striving to overcome. with the National Energy Regulator of consider making the intended users South Africa. The two levels of govern- part of the implementation process and Addressing these cross-cutting issues ment can work together to achieve more publicizing reforms. Since 2015 many will improve the prospects for attempted holistic and comprehensive improve- locations have worked toward multi- reforms to bear fruit. The good news is ments across all locations. year reforms like process automation. that as locations prepare to tackle more For example, Johannesburg developed reforms, they can find good practices Third, municipalities argue that a lack of an option for conveyancers to apply for to emulate from neighbors that share resources, specifically staff resources, rates clearance certificates electronically. their development context and history. has constrained their ability to improve The e-application is connected to the Combining the subnational practices service delivery. Authorities could con- municipality’s SAP software platform found in the country reveals the poten- duct a study of how to better streamline and aims to streamline processing tial for improvement. If Johannesburg, processes to use existing resources time. The municipality has also made which represents South Africa in the more efficiently. Process mapping could it cheaper to apply electronically than annual Doing Business assessment, subsequently help them determine if manually. However, manual application adopted all the good practices found resources should be redistributed or is still more commonly used, as many in the country, its performance would added. For instance, Tshwane—where conveyancers are unaware of the elec- improve dramatically (figure 1.7). All obtaining construction approvals is most tronic option. This points to the need to indicator areas would benefit, but the cumbersome—does not have sufficient raise awareness among the community potential for improvement is greatest in plan examiners to efficiently process of prospective users for such reforms to getting electricity. If Johannesburg were its volume of construction applications. succeed. Mangaung illustrates how to streamline the process of obtaining Similarly, in Mangaung the limited drawing beneficiaries into the process a connection—to four procedures (as number of technical experts is one of can yield intended outcomes. It was suc- in Cape Town and Mangaung) taking the major factors fueling the twofold cessful in implementing an e-application 76 days (as in Buffalo City)—and score increase in the time to obtain a budget reform like Johannesburg’s, and part of 6 points on the reliability of supply and quotation for electricity connection its strategy involved biannual meetings transparency of tariffs index (as in Cape works. And eThekwini faces a similar with stakeholders—including convey- Town), it would narrow its distance to adversity. As of May 2018 it had nine ancers—to understand their concerns the frontier of best practices by 14.00 staff vacancies in the department that and keep them apprised of upcoming percentage points—equivalent to mov- processes rates clearance certificate improvements. ing up 55 places in the global ranking for applications—it is the second slowest this indicator. Moreover, if Johannesburg place to obtain this type of certificate.13 Staff training is also important for proper adopted South African good practices Msunduzi’s staffing gap is perhaps the implementation, especially where elec- across all five indicators, its overall dis- best example of how a lack of resources tronic platforms are involved. Efforts by tance to frontier score—across all Doing can erode potential success. The eThekwini and Msunduzi to improve ser- Business indicators—would improve by municipality introduced a new platform vice delivery through their new revenue 3.72 percentage points, and it would gain to manage construction approvals, but management system are hampered by a ground on the global ranking of econo- due to staff departures and retirements, lack of staff training and recurring techni- mies by 24 places. the human resources needed to trans- cal glitches. These two factors have pre- late this into an increase in efficiency vented optimal use of the new platforms. South African locations are already are lacking. This also suggests that there To reap the benefits of going electronic, engaging in peer learning, facilitated by is a need for municipalities to identify municipalities must ensure their staff the Cities Support Programme and also reasons for staff attrition and explore are well trained and systems are backed on their own initiative. The way forward avenues to improve retention. with proper technical support. Moreover, is to redouble these efforts and maximize during the rollout of electronic platforms, opportunities to share good practices. Lastly, municipalities should ensure municipalities need a contingency plan Municipalities can also learn from each the implementation process is prop- to avert loss of efficiency. For instance, other’s reform experiences. Most of the erly executed for improvement efforts to when eThekwini introduced its new improvements so far have been driven produce real results. Authorities should revenue management system, staff could by the municipalities, and successful OVERVIEW 13 FIGURE 1.7  If Johannesburg adopted the good practices found in the country, South Africa’s global performance would improve South Africa (Johannesburg) Best South African performance Distance to frontier score in Doing Business 2018 (0–100) Hypothetical distance to frontier score (0–100) 82.77 Getting electricity 4 procedures, 76 days, 165.4% of income per capita, 6 points on the reliability of supply and transparency of tariffs index 76.12 Dealing with construction permits 17 procedures, 88 days, 1.9% of warehouse value, 12 points on the building quality control index Getting electricity 5 procedures, 109 days, 165.4% of income per capita, 4 points on the reliability of 69.25 Trading across borders supply and transparency of tariffs index 68.77 148 hours and US$ 506 to export and 90 hours Dealing with construction permits 68.16 and US$ 749 to import 20 procedures, 155 days, 2% of warehouse value, 12 points on the building quality control index Registering property Registering property 7 procedures, 23 days, 7.6% of property value, 7 procedures, 20 days, 7.6% of property value, 15 points on the quality of land administration index 59.68 60.05 15 points on the quality of land administration index Trading across borders* 59.64 59.12 Enforcing contracts 160 hours and US$ 1,312 export and 123 hours 469 days, 29.4% of claim value, and US$ 749 to import 7 points on the quality of judicial processes index Enforcing contracts 54.10 600 days, 33.2% of claim value, 7 points on the quality of judicial processes index Source: Doing Business database. Note: The distance to frontier score shows how far a location is from the best performance achieved by any economy on each Doing Business indicator. The measure is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more information, see the chapter “About Doing Business and Doing Business in South Africa 2018” and the data notes. *The port of Durban represents South Africa in the global Doing Business assessment, as the entry and exit port for Johannesburg. reforms generally occurred within their nourishes and promotes entrepreneurs” 4. World Bank. 2018. Overcoming Poverty and Inequality in South Africa: An Assessment areas of competence. Additionally, and to “reduce the regulatory barriers for of Drivers, Constraints and Opportunities. reforms were successful where they small businesses.”15 The country must Washington, DC: World Bank. were supported by effective local leader- seize on this momentum to drive the 5. Forecast of the Organisation for Economic Co-operation and Development. See OECD ship, strong coordination among munici- regulatory reform effort, in support of its Data site at https:/ /data.oecd.org/gdp/real pal departments and sufficient capacity national development goal of attaining -gdp-forecast.htm. to ensure proper implementation. Yet full employment by 2030.16 6. OECD. 2017. OECD Economic Surveys: South Africa. Paris: OECD Publishing. as local authorities continue to reform, 7. Global Entrepreneurship Monitor. 2017. South collaboration with national departments Africa Report 2016/2017. will help them achieve broader and 8. The three other locations are Ekurhuleni, eThekwini and Msunduzi. deeper local improvements. 9. Only locations that monitor the frequency and NOTES duration of electricity outages—per the system South Africa finds itself at a crossroads. average interruption duration index (SAIDI) 1. World Bank. 2018. South Africa Economic and system average interruption frequency Amid renewed optimism in its economy, Update: Jobs and Inequality. Washington, DC: index (SAIFI)—are evaluated on this index. For World Bank. Available at https:/ /www the country must find ways to sustain more information, see the chapter on getting .worldbank.org/en/country/southafrica growth and ensure it is inclusive.14 In electricity and the data notes. /publication/south-africa-economic-update 10. The Department of Transport’s Maritime the latest State of the Nation Address, -policy-interventions-skilled-jobs-can-reduce Branch states that in terms of volume, more -inequality-in-south-africa. the South African president noted that than 96% of South Africa’s imports and 2. International Monetary Fund. 2018. “South small businesses are the key to sustained exports are shipped by sea. See the Maritime Africa: Staff Concluding Statement of the Branch’s website at http:/ /www.transport.gov economic growth. He vowed to work 2018 Article IV Mission.” .za/web/department-of-transport/maritime. 3. For more data on South Africa, see the World with social partners “to build a small 11. World Bank. 2015. “World Bank and Bank Open Data site at business support ecosystem that assists, Switzerland to Support South African Cities.” https://data.worldbank.org. 14 DOING BUSINESS IN SOUTH AFRICA 2018 Press Release, September 19, 2015. Available at http://www.worldbank.org/en/news/press -release/2015/09/18/world-bank-and -switzerland-to-support-south-african-cities. 12. “Most jobs in South Africa are located in firms of less than 50 workers. However, the share of employment in SMEs declined from 72 percent in 2005 to 67 percent in 2015, mirroring weak net job creation in this segment in the last decade. Small businesses are nonetheless critical to reducing inequalities, providing an entry point for young people to enter the labor market.” World Bank. 2018. South Africa Economic Update. 13. Interview with eThekwini municipal authorities. May 10, 2018. 14. World Bank. 2018. South Africa - Systematic country diagnostic: an incomplete Transition: Overcoming the Legacy of Exclusion in South Africa. Washington, DC: World Bank. 15. President Cyril Ramaphosa: 2018 State of the Nation Address, available at https:/ /www.gov. za/speeches/president-cyril-ramaphosa -2018-state-nation-address-16-feb-2018-0000. 16. National Planning Commission. 2012. “National Development Plan 2030: Our future –make it work.” Available at https:/ /www.gov .za/issues/national-development-plan-2030. About Doing Business and Doing Business in South Africa 2018 ƒƒ Based on standardized case scenarios, Doing Business measures aspects of business regulation that affect domestic small and medium-size firms located in the largest business city of each economy. For 11 economies with a population of over 100 million, it covers a second city. ƒƒ Doing Business benchmarks 11 areas of business regulation across 190 economies. Ten of these areas—starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency—are included in the distance to frontier score and ease of doing business ranking. Doing Business also looks at features of labor market regulation, which is not included in these two measures. ƒƒ Doing Business in South Africa 2018 covers five of these areas: dealing with construction permits, getting electricity, registering property, enforcing contracts and trading across borders. ƒƒ Doing Business and Doing Business in South Africa 2018 rely on four main sources of information: relevant laws and regulations, expert respondents, government authorities (national and local) and World Bank Group specialists. ƒƒ Governments use Doing Business as a source of objective data providing unique insights into good practices worldwide. Many Doing Business indicators are “actionable”—though depending on the context, they may not always be “action-worthy.” 16 DOING BUSINESS IN SOUTH AFRICA 2018 T he foundation of Doing Business is quantitative indicators on the regulations indicators or include the topic in the the notion that economic activity, that apply to firms at different stages aggregate distance to frontier score or particularly private sector devel- of their life cycle. The results for each ranking on the ease of doing business, it opment, benefits from clear and coherent economy can be compared with those for does present the data for these indicators. rules—rules that set out and clarify prop- 189 other economies and over time. Subnational Doing Business studies cover erty rights and facilitate the resolution a subset of the 11 areas of business regu- of disputes and rules that enhance the lation that Doing Business covers across predictability of economic interactions FACTORS MEASURED BY 190 economies (table 2.1). These studies and provide contractual partners with DOING BUSINESS AND focus on indicators that are most likely essential protections against arbitrari- SUBNATIONAL DOING to vary from city to city, such as those ness and abuse. Such rules are much BUSINESS STUDIES on dealing with construction permits or more effective in shaping the incentives registering property. Indicators that use a of economic agents in ways that promote Doing Business captures several impor- legal scoring methodology, such as those growth and development where they are tant dimensions of the regulatory on getting credit or protecting minority reasonably efficient in design, are trans- environment as it applies to local firms. investors, are typically excluded because parent and accessible to those for whom It provides quantitative indicators on they mostly look at national laws with they are intended and can be imple- regulation for starting a business, deal- general applicability. mented at a reasonable cost. The quality ing with construction permits, getting of the rules also has a crucial bearing on electricity, registering property, getting The subnational Doing Business stud- how societies distribute the benefits and credit, protecting minority investors, pay- ies expand the Doing Business analysis finance the costs of development strate- ing taxes, trading across borders, enforc- beyond the largest business city of gies and policies ing contracts and resolving insolvency. an economy. They measure variation Doing Business also measures features of in regulations or in the implementa- Good rules are a key to social inclusion. labor market regulation. Although Doing tion of national laws across locations Enabling growth—and ensuring that all Business does not present rankings of within an economy (as in South Africa) people, regardless of income level, can economies on the labor market regulation or a region (as in the European Union). participate in its benefits—requires an environment where new entrants with drive and good ideas can get started TABLE 2.1 What Doing Business and subnational Doing Business studies measure— in business and where good firms can 11 areas of business regulation invest and expand. The role of govern- Indicator set What is measured ment policy in the daily operations of Included in subnational Doing Business reports domestic small and medium-size firms is Starting a business Procedures, time, cost and paid-in minimum capital to start a a central focus of the Doing Business data. limited liability company The objective is to encourage regulation Dealing with construction permits Procedures, time and cost to complete all formalities to build that is designed to be efficient, acces- a commercial warehouse and the quality control and safety mechanisms in the construction permitting system sible to all and simple to implement. Getting electricity Procedures, time and cost to get connected to the electrical grid, Onerous regulation diverts the energies the reliability of the electricity supply and the transparency of tariffs of entrepreneurs away from developing Registering property Procedures, time and cost to transfer a property and the quality of their businesses. But regulation that is the land administration system efficient, transparent and implemented in Enforcing contracts Time and cost to resolve a commercial dispute and the quality of a simple way facilitates business expan- judicial processes sion and innovation and makes it easier Trading across borders Time and cost to export the product of comparative advantage and for aspiring entrepreneurs to compete on import auto parts an equal footing. Not typically included in subnational Doing Business reports Getting credit Movable collateral laws and credit information systems Doing Business measures aspects of Protecting minority investors Minority shareholders’ rights in related-party transactions and in business regulation for domestic firms corporate governance through an objective lens. The focus of Paying taxes Payments, time and total tax rate for a firm to comply with all tax regulations as well as postfiling processes the project is on small and medium-size companies in the largest business city Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency of an economy. Based on standardized case studies, Doing Business presents Labor market regulation Flexibility in employment regulation and aspects of job quality ABOUT DOING BUSINESS AND DOING BUSINESS IN SOUTH AFRICA 2018 17 Projects are undertaken at the request of that share the same legal and regula- Colombia, the European Union (Bulgaria, governments. tory framework can be revealing: local Hungary and Romania in one report and officials find it hard to explain why Croatia, the Czech Republic, Portugal Data collected by subnational studies doing business is more difficult in their and Slovakia in another) and Kazakhstan. over the past three years show that jurisdiction than in a neighboring one. Ongoing studies include those in the there can be substantial variation within ƒƒ Pointing out good practices that European Union (Greece, Ireland and an economy (figure 2.1). In Mexico in exist in some locations but not oth- Italy), Kazakhstan, Mozambique and the 2016, for example, registering a property ers within an economy helps policy United Arab Emirates. transfer took as few as 9 days in the state makers recognize the potential for of Puebla and as many as 78 in Oaxaca. replicating these good practices. This Doing Business in South Africa 2018 is the Indeed, within the same economy one can prompt discussions of regula- second subnational Doing Business study can find locations that perform as well tory reform across different levels of for South Africa. It focuses on five topics: as economies ranking in the top 20 on government, providing opportunities dealing with construction permits, getting the ease of registering property and for local governments and agencies electricity, registering property, enforcing locations that perform as poorly as to learn from one another and result- contracts and trading across borders. The economies ranking in the bottom 40 on ing in local ownership and capacity first study, conducted in 2015, measured that indicator. building. for the first time the regulatory environ- ment beyond the capital, Johannesburg. The subnational Doing Business studies Since 2005 subnational reports have It benchmarked business regulations produce disaggregated data on business covered 510 locations in 75 economies, and their enforcement in eight additional regulation. But they go beyond a data col- including Colombia, the Arab Republic locations across four regulatory areas. It lection exercise. They have proved to be of Egypt, Italy, the Philippines and Serbia also measured trading across borders at strong motivators for regulatory reform (figure 2.2). Seventeen economies— four maritime ports. This second study at the local level: including Colombia, Indonesia, Kenya, updates the data presented in Doing ƒƒ The data produced are comparable Mexico, Nigeria, the Philippines, the Business in South Africa 2015 in four of the across locations within the economy Russian Federation and South Africa— areas previously covered and includes and internationally, enabling loca- have undertaken two or more rounds of new measures on the quality of regula- tions to benchmark their results both subnational data collection to measure tions for each of them. Doing Business in locally and globally. Comparisons of progress over time. Recently subnational South Africa 2018 also presents baseline locations within the same economy studies were completed in Afghanistan, data for trading across borders, adopting FIGURE 2.1  Different locations, different regulatory processes, same economy Time to register property (days) 80 Oaxaca (78) Isiolo (73) Msunduzi (63) 60 58 Wroclaw (51) Mombasa (41) 40 33 32 26 Melilla (26) Nelson Mandela Bay Bialystok (20) (18) 20 Madrid 17 Puebla (12.5) (9) 0 Kenya Mexico Poland South Africa Spain Shortest time Longest time Average time Source: Subnational Doing Business database. Note: The average time shown for each economy is based on all locations covered by the data: 11 counties in Kenya in 2016, 32 states in Mexico in 2016, 18 cities in Poland in 2015, 9 locations in South Africa in 2018 and 19 cities in Spain in 2015. 18 DOING BUSINESS IN SOUTH AFRICA 2018 FIGURE 2.2  Comparing regulation at the local level: subnational Doing Business studies 84 cities 83 cities in OECD in Europe and Central Asia high-income economies 30 cities in the Middle East and North Africa 46 cities 76 cities in South Asia in East Asia and the Paci c 82 cities 109 cities in Sub-Saharan Africa in Latin America and the Caribbean IBRD 43044 | AUGUST 2018 This map was produced by the Cartography Unit of the World Bank Group. The boundaries, colors, ECONOMIES WITH ONE SUBNATIONAL OR REGIONAL STUDY denominations and any other information shown on this map do not imply, on the part of the World Bank ECONOMIES WITH MORE THAN ONE SUBNATIONAL OR REGIONAL STUDY Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. Source: Subnational Doing Business database. Doing Business’ new approach to measur- companies in 139 economies. Access population and a lesser one on lower-risk ing trade processes.1 to finance and access to electricity, for activities. Thus the economies that rank example, are among the factors identified highest on the ease of doing business How the indicators are selected by the surveys as important to busi- are not those where there is no regula- The design of the Doing Business indica- nesses—inspiring the design of the Doing tion—but those where governments have tors has been informed by theoretical Business indicators on getting credit and managed to create rules that facilitate insights gleaned from extensive research getting electricity. interactions in the marketplace without and the literature on the role of institu- needlessly hindering the development of tions in enabling economic development. Some Doing Business indicators give a the private sector. In addition, the background papers devel- higher score for more regulation and oping the methodology for each of the better-functioning institutions (such The five Doing Business indicator sets Doing Business indicator sets have estab- as courts). For example, in the area of included in this study—dealing with con- lished the importance of the rules and protecting minority investors higher struction permits, getting electricity, reg- regulations that Doing Business focuses scores are given for stricter disclosure istering property, enforcing contracts and on for such economic outcomes as trade requirements for related-party transac- trading across borders—were selected in volumes, foreign direct investment, mar- tions. Higher scores are also given for a collaboration with the National Treasury ket capitalization in stock exchanges and simplified way of applying regulation that of South Africa. They are based on their private credit as a percentage of GDP.2 keeps compliance costs for firms low— relevance for the country’s development such as by easing the burden of business and their ability to show variation across The choice of the 11 sets of Doing start-up formalities with a one-stop shop the locations covered. Business indicators has also been guided or through a single online portal. Finally, by economic research and firm-level Doing Business scores reward economies The distance to frontier and data, specifically data from the World that apply a risk-based approach to ease of doing business ranking Bank Enterprise Surveys.3 These surveys regulation as a way to address social To provide different perspectives on provide data highlighting the main and environmental concerns—such as the data, Doing Business presents data obstacles to business activity as reported by imposing a greater regulatory burden both for individual indicators and for by entrepreneurs in more than 131,000 on activities that pose a high risk to the two aggregate measures: the distance ABOUT DOING BUSINESS AND DOING BUSINESS IN SOUTH AFRICA 2018 19 to frontier score and the ease of doing environment over time as measured by Doing Business uses a simple averaging business ranking. This report presents the Doing Business. The distance to frontier approach for weighting component distance to frontier score and the ranking score is computed for each topic and can indicators, calculating rankings and for individual sets of indicators. be averaged across all topics to compute determining the distance to frontier the aggregate distance to frontier score. score.4 Each topic covered by Doing The distance to frontier score aids in The ranking on the ease of doing business Business relates to a different aspect of assessing the absolute level of regula- complements the distance to frontier the business regulatory environment. tory performance and how it improves score by providing information about The distance to frontier scores and rank- over time. This measure shows the dis- an economy’s performance in business ings of each economy vary, often con- tance of each economy to the “frontier,” regulation relative to the performance of siderably, across topics, indicating that which represents the best performance other economies as measured by Doing a strong performance by an economy in observed on each of the indicators across Business. one area of regulation can coexist with all economies in the Doing Business weak performance in another. One way sample since 2005 or the third year in The distance to frontier score for each to assess the variability of an economy’s which data were collected for the indi- indicator captures the gap between an regulatory performance is to look at its cator. The frontier is set at the highest economy’s performance and the best distance to frontier scores across topics. possible value for indicators calculated as practices globally. For starting a business, Morocco, for example, has an overall scores, such as the strength of legal rights for example, New Zealand has the small- distance to frontier score of 67.91, mean- index or the quality of land administration est number of procedures required (one) ing that it is about two-thirds of the way index. This underscores the gap between and the shortest time to fulfill them (0.5 from the worst to the best performance. a particular economy’s performance and days). Slovenia has the lowest cost (0.0), Its distance to frontier score is 92.43 the best performance at any point in and Australia, Colombia and 112 other for starting a business, 81.12 for trading time and helps in assessing the absolute economies have no paid-in minimum across borders and 79.73 for dealing change in the economy’s regulatory capital requirement (table 2.2). with construction permits. At the same TABLE 2.2  What is the frontier in regulatory practice? Topic and indicator Who set the frontier Frontier Worst performance Starting a business Procedures (number) New Zealand 1 18a Time (days) New Zealand 0.5 100b Cost (% of income per capita) Slovenia 0.0 200.0b Minimum capital (% of income per capita) Australia; Colombia c 0.0 400.0b Dealing with construction permits Procedures (number) No economy was at the frontier as of June 1, 2017. 5 30a Time (days) No economy was at the frontier as of June 1, 2017. 26 373b Cost (% of warehouse value) No economy was at the frontier as of June 1, 2017. 0.0 20.0b Building quality control index (0–15) Luxembourg; New Zealand; United Arab Emirates 15 0d Registering property Procedures (number) Georgia; Norway; Portugal; Sweden 1 13a Time (days) Georgia; New Zealand; Portugal 1 210b Cost (% of property value) Saudi Arabia 0.0 15.0b Quality of land administration index (0–30) No economy has attained the frontier yet. 30 0d Enforcing contracts Time (days) Singapore 120 1,340b Cost (% of claim) Bhutan 0.1 89.0b Quality of judicial processes index (0–18) No economy has attained the frontier yet. 18 0d Source: Doing Business database. a. Worst performance is defined as the 99th percentile among all economies in the Doing Business sample. b. Worst performance is defined as the 95th percentile among all economies in the Doing Business sample. c. Another 112 economies also have a paid-in minimum capital requirement of 0. d. Worst performance is the worst value recorded. 20 DOING BUSINESS IN SOUTH AFRICA 2018 time, it has a distance to frontier score of In the same formulation, to mitigate the giving equal weight to each of the topic 34.03 for resolving insolvency, 45.00 for effects of extreme outliers in the distri- components. getting credit and 58.33 for protecting butions of the rescaled data for most minority investors. component indicators (very few econo- A location’s distance to frontier score, mies need 700 days to complete the per topic and overall, is indicated on a Calculation of the distance to procedures to start a business, but many scale from 0 to 100, where 0 represents frontier score need 9 days), the worst performance is the worst performance and 100 the Calculating the distance to frontier calculated after the removal of outliers. frontier. All distance to frontier calcula- score for each economy involves two The definition of outliers is based on the tions are based on a maximum of five main steps. In the first step, individual distribution for each component indica- decimals. However, indicator ranking component indicators are normalized tor. To simplify the process two rules calculations and the ease of doing busi- to a common unit where each of the 36 were defined: the 95th percentile is used ness ranking calculations are based on component indicators (except for the for the indicators with the most dispersed two decimals. total tax rate) is rescaled using the linear distributions (including minimum capital transformation (worst − y)/(worst − and the time and cost indicators), and The differences between the distance to frontier). In this formulation the frontier the 99th percentile is used for number of frontier scores in 2015 and 2018 illustrate represents the best performance on the procedures (figure 2.3). the extent to which each South African indicator across all economies since location has closed the gap to the regula- 2005 or the third year in which data In the second step, for each economy the tory frontier over time. The scores also for the indicator were collected. Both scores obtained for individual indicators show how far a location is from the best the best performance and the worst are aggregated through simple averaging performance for both years. performance are established every five for each topic for which performance years based on the Doing Business data is measured and ranked. More com- for the year in which they are estab- plex aggregation methods—such as FACTORS NOT MEASURED lished, and remain at that level for the principal components and unobserved BY DOING BUSINESS AND five years regardless of any changes in components—yield a ranking nearly SUBNATIONAL DOING data in interim years. Thus an economy identical to the simple average used BUSINESS STUDIES may set the frontier for an indicator even by Doing Business.5 Thus Doing Business though it is no longer at the frontier in a uses the simplest method: weighting all Many important policy areas are not subsequent year. topics equally and, within each topic, covered by Doing Business; even within the areas it covers, its scope is narrow (table 2.3). Doing Business does not FIGURE 2.3 How are distance to frontier scores calculated for indicators? An example measure the full range of factors, policies A time-and-motion topic: dealing with construction permits and institutions that affect the quality Distance to frontier score for procedures of an economy’s business environment 100 Regulatory frontier or its national competitiveness. It does not, for example, capture the aspects of Best performance market size, macroeconomic stability, (frontier): 80 5 procedures development of the financial system, the quality of the labor force or the incidence of bribery and corruption. 60 The focus is deliberately narrow even within the relatively small set of indica- 40 tors included in Doing Business. The time and cost required for the logistical pro- Worst performance cess of exporting and importing goods 20 (99th percentile): 30 procedures is captured in the trading across borders indicators, for example, but they do not 0 measure the cost of tariffs or of interna- 5 10 15 20 25 30 35 tional transport. Doing Business provides a Procedures (number) narrow perspective on the infrastructure Source: Doing Business database. challenges that firms face, particularly A legal topic: protecting minority investors Distance to frontier score for extent of disclosure index 100 Regulatory frontier ABOUT DOING BUSINESS AND DOING BUSINESS IN SOUTH AFRICA 2018 21 TABLE 2.3 What Doing Business does not cover subject of the Doing Business case study—in the largest business city of the Examples of areas not covered economy. The reality is that business reg- Macroeconomic stability ulations and their enforcement may differ Development of the financial system within a country, particularly in federal states and large economies. But gather- Quality of the labor force ing data for every relevant jurisdiction in Incidence of bribery and corruption each of the 190 economies covered by Market size Doing Business is not feasible. Beginning in 2014, Doing Business extended its Lack of security global coverage to include the second largest business city in economies with a in the developing world, through these population of more than 100 million as of indicators. It does not address the extent ADVANTAGES AND 2013. To complement the global assess- to which inadequate roads, rail, ports and LIMITATIONS OF THE ment, subnational Doing Business studies communications may add to firms’ costs METHODOLOGY generate data at the local level, beyond and undermine competitiveness (except the largest business city—a potentially to the extent that the trading across The Doing Business methodology is useful tool for policy makers. borders indicators indirectly measure designed to be an easily replicable way to the quality of ports and border connec- benchmark specific aspects of business Doing Business recognizes the limitations tions). Similar to the indicators on trading regulation. Its advantages and limitations of the standardized case scenarios and across borders, all aspects of commercial should be understood when using the assumptions. But while such assump- legislation are not covered by those on data (table 2.4). tions come at the expense of generality, starting a business or protecting minor- they also help to ensure the comparabil- ity investors. And while Doing Business Ensuring comparability of the data across ity of data. Some Doing Business topics measures only a few aspects within each a global set of economies is a central are complex, and so it is important that area that it covers, business regulation consideration for the Doing Business the standardized cases are defined care- reforms should not focus only on these indicators, which are developed around fully. For example, the standardized case aspects, because those that are not mea- standardized case scenarios with specific scenario usually involves a limited liabil- sured are also important. assumptions. One such assumption is the ity company or its legal equivalent. There location of a standardized business—the are two reasons for this assumption. Doing Business does not attempt to quan- tify all costs and benefits of a particular TABLE 2.4 Advantages and limitations of the Doing Business methodology law or regulation to society as a whole. The paying taxes indicators measure the Feature Advantages Limitations total tax and contribution rate, which, in Use of standardized Makes data comparable across Reduces scope of data; only regulatory case scenarios economies and methodology reforms in areas measured can be isolation, is a cost to businesses. However, transparent, using case scenarios that systematically tracked; the case the indicators do not measure—nor are are common globally scenarios may not be the most common in a particular economy they intended to measure—the benefits of the social and economic programs Focus on largest Makes data collection manageable Reduces representativeness of data business city a (cost-effective) and data comparable for an economy if there are significant funded with tax revenues. Measuring the differences across locations quality and efficiency of business regula- Focus on domestic and Keeps attention on formal sector— Unable to reflect reality for informal tion provides only one input into the formal sector where regulations are relevant and sector—important where that is debate on the regulatory burden associ- firms are most productive large—or for foreign firms facing a different set of constraints ated with achieving regulatory objectives, which can differ across economies. Doing Reliance on expert Ensures that data reflect knowledge Indicators less able to capture variation respondents of those with most experience in in experiences among entrepreneurs Business provides a starting point for this conducting types of transactions discussion and should be used in con- measured junction with other data sources. Focus on the law Makes indicators “actionable”— Where systematic compliance with the because the law is what policy makers law is lacking, regulatory changes will can change not achieve full results desired a. In economies with a population of more than 100 million as of 2013, Doing Business covers business regulation in both the largest and second largest business city. Subnational Doing Business studies go beyond the largest business cities within countries or regions. 22 DOING BUSINESS IN SOUTH AFRICA 2018 First, private, limited liability companies requirements. The Doing Business 2018 Relevant laws and regulations are the most prevalent business form report covers 190 economies—includ- Indicators presented in Doing Business in (for firms with more than one owner) ing some of the smallest and poorest South Africa 2018 are based mostly on in many economies around the world. economies, for which little or no data are laws and regulations. Besides participat- Second, this choice reflects the focus of available from other sources. The data ing in interviews or filling out written Doing Business on expanding opportuni- are collected through several rounds of questionnaires, expert respondents ties for entrepreneurship: investors are communication with expert respondents provided references to the relevant laws, encouraged to venture into business (both private sector practitioners and regulations and fee schedules, which when potential losses are limited to their government officials), through responses were collected and analyzed by the capital participation. to questionnaires, conference calls, writ- Subnational Doing Business team. ten correspondence and visits by the Another assumption underlying the team. Doing Business relies on four main The team collects the texts of the rel- Doing Business indicators is that entre- sources of information: the relevant laws evant laws and regulations and checks preneurs have knowledge of and comply and regulations, Doing Business respon- the questionnaire responses for accuracy. with applicable regulations. In practice, dents, the governments of the economies The team examines the civil procedure entrepreneurs may not be aware of what covered and World Bank Group staff. code, for example, to check the maximum needs to be done or how to comply with More than 43,000 professionals in 190 number of adjournments in a commercial regulations and may lose considerable economies have assisted in providing court dispute, and reads the insolvency time trying to find out. Alternatively, the data that inform the Doing Business code to see whether the debtor can they may intentionally avoid compli- indicators over the past 16 years. For a initiate liquidation or reorganization ance—by not registering for social detailed explanation of the Doing Business proceedings. These and other types of security, for example. Firms may opt for methodology, see the report’s data notes. laws are available on the Doing Business bribery and other informal arrangements law library website.8 Since the data col- intended to bypass the rules where Subnational Doing Business follows similar lection process involves an annual update regulation is particularly onerous—an data collection methods. However, sub- of an established database, having a very aspect that helps explain differences national Doing Business studies are driven large sample of respondents is not strictly between the de jure data provided by by client demand and do not follow the necessary. In principle, the role of the Doing Business and the de facto insights same timeline as global Doing Business contributors is largely advisory—helping offered by the World Bank Enterprise publications. They incorporate a “right of the Doing Business team to locate and Surveys.6 Levels of informality tend to reply” period, which consists of a series understand the laws and regulations. be higher in economies with particularly of consultative working meetings with There are quickly diminishing returns to burdensome regulation. Compared with local authorities in each of the locations an expanded pool of contributors. That their formal sector counterparts, firms in measured to discuss the preliminary data said, the number of contributors rose by the informal sector typically grow more and gather their feedback (figure 2.4). 40%, globally, between 2010 and 2017. slowly, have poorer access to credit and employ fewer workers—and these workers remain outside the protections FIGURE 2.4  Typical stages of a subnational Doing Business project of labor law and, more generally, other legal protections embedded in the law.7 Firms in the informal sector are also less Stage 1 Stage 2 Stage 4 likely to pay taxes. Doing Business mea- Client inquiry Project setup and Stage 3 Data collection sures one set of factors that help explain and request engagement with Project kickoff and preparation of local partners preliminary results the occurrence of informality and give policy makers insights into potential areas of regulatory reform. Stage 6 Stage 5 DATA COLLECTION IN Stage 7 Data verification, Presentation of PRACTICE Launch of construction of preliminary results final results final indicators and to public officials report drafting (”right of reply”) The Doing Business data are based on a detailed reading of domestic laws and regulations as well as administrative ABOUT DOING BUSINESS AND DOING BUSINESS IN SOUTH AFRICA 2018 23 Extensive consultations with multiple in South Africa 2018 breaks down each reform experiences and stories. Over contributors are conducted by the team process or transaction, such as start- time, these right of reply meetings have to minimize measurement error for ing a business or registering a building, become an essential milestone of subna- the rest of the data. For some indica- into separate steps to ensure a better tional Doing Business projects to enhance tors—for example, those on dealing estimate of time. The time estimate for the quality of the studies and motivate with construction permits, and enforc- each step was given by practitioners with local governments to have greater own- ing contracts—the time component significant and routine experience in the ership of the reform process. The final and part of the cost component (where transaction. data are analyzed and incorporated into fee schedules are lacking) are based on a comprehensive written report, which is actual practice rather than the law on There are two main reasons that Doing shared and peer-reviewed by World Bank the books. This introduces a degree of Business does not survey firms. The first Group specialists. judgment by respondents on what actual relates to the frequency with which firms practice looks like. When respondents engage in the transactions captured by disagree, the time indicators reported by the indicators, which is generally low. For USES OF THE DOING Doing Business represent the median val- example, a firm goes through the start- BUSINESS DATA ues of several responses given under the up process once in its existence, while assumptions of the standardized case. an incorporation lawyer may carry out Doing Business was designed with two 10 such transactions each month. The main types of users in mind: policy makers Expert respondents incorporation lawyers and other experts and researchers.9 It is a tool that govern- For Doing Business in South Africa 2018 providing information to Doing Business ments can use in designing sound busi- more than 300 professionals across 13 are therefore better able to assess the ness regulatory policies. Nevertheless, locations assisted in providing the data process of starting a business than are the Doing Business data are limited in that inform the five areas covered. The individual firms. They also have access to scope and should be complemented Subnational Doing Business website and current regulations and practices, while with other sources of information. Doing the acknowledgments section of this a firm may have faced a different set of Business focuses on a few specific rules report list the names and credentials of rules when incorporating years before. relevant to the specific case studies ana- those respondents who wished to be The second reason is that the Doing lyzed. These rules and case studies are acknowledged. Selected on the basis of Business questionnaires mostly gather chosen to be illustrative of the business their expertise, respondents are profes- legal information, which firms are unlikely regulatory environment, but they are sionals who routinely administer or advise to be fully familiar with. For example, not a comprehensive description of that on the legal and regulatory requirements few firms will know about all the main environment. By providing a unique data in the specific areas covered by Doing legal procedures involved in resolving a set that enables analysis aimed at better Business in South Africa 2018. Because commercial dispute through the courts, understanding the role of business regu- of the focus on legal and regulatory even if they have gone through the pro- lation in economic development, Doing arrangements, most of the respondents cess themselves. But a litigation lawyer Business also serves as an important are legal professionals such as lawyers should have little difficulty in providing source of information for researchers. or conveyancers. Architects, engineers, the requested information on all the electrical engineers and other profession- procedures. Governments and policy makers als answered the questionnaires related Doing Business offers policy makers a to dealing with construction permits Governments and World Bank benchmarking tool useful in stimulating and getting electricity. For trading across Group staff policy debate, both by exposing potential borders, information was provided by After analyzing laws and regulations challenges and by identifying good prac- clearing and freight forwarding agencies. and conducting follow-up interviews tices and lessons learned. Despite the Information incorporated in the indica- with respondents for Doing Business in narrow focus of the indicators, the initial tors was also provided by public officials South Africa 2018, the Subnational Doing debate in an economy on the results they and judicial and municipal authorities. Business team shared the preliminary highlight typically turns into a deeper findings with the relevant government discussion on areas where business The Doing Business approach is to work and public authorities in each location. regulatory reform is needed, including with legal practitioners or other profes- Through this process, government offi- areas well beyond those measured by sionals who regularly undertake the cials have the opportunity to provide their Doing Business. transactions involved. Following the feedback on the preliminary data, give standard methodological approach for updates on their new and ongoing regu- Many Doing Business indicators can be time-and-motion studies, Doing Business latory reform initiatives, and share their considered “actionable.” For example, 24 DOING BUSINESS IN SOUTH AFRICA 2018 governments can set the minimum providing unique insights into good prac- to discuss the challenges of regulatory capital requirement for new firms, invest tices worldwide as they have come to reform and to share their experiences. in company and property registries to understand the importance of business increase their efficiency, or improve the regulation as a driving force of competi- Think tanks and other research efficiency of tax administration by adopt- tiveness. To ensure the coordination of organizations ing the latest technology to facilitate the efforts across agencies, economies such Doing Business data are widely used by preparation, filing and payment of taxes as Colombia, Malaysia and the Russian think tanks and other research organiza- by the business community. And they Federation have formed regulatory tions, both to produce research papers can undertake court reforms to shorten reform committees. These committees and to develop new indices. delays in the enforcement of contracts. use the Doing Business indicators as But some Doing Business indicators one input to inform their programs for Many research papers have shown capture procedures, time and costs that improving the business environment. the importance of business regulation, involve private sector participants, such More than 60 other economies have demonstrating how it relates to differ- as lawyers, notaries, architects, electri- also formed such committees. In East ent economic outcomes.11 One of the cians or freight forwarders. Governments Asia and the Pacific, they include Brunei most cited theories on how excessive may have little influence in the short Darussalam; Indonesia; the Republic of business regulation affects economic run over the fees these professions Korea; the Philippines; Taiwan, China; performance and development is that it charge, though much can be achieved and Thailand. In the Middle East and makes it too costly for firms to engage in by strengthening professional licensing North Africa: the Arab Republic of the formal economy, causing them not to regimes and preventing anticompetitive Egypt, Kuwait, Morocco, Saudi Arabia invest or prompting them to move to the behavior. And governments have no con- and the United Arab Emirates. In South informal economy. Recent studies have trol over the geographic location of their Asia: Bangladesh, India and Pakistan. conducted extensive empirical testing of economy, a factor that can adversely In Europe and Central Asia: Albania, this proposition using Doing Business and affect businesses. Croatia, Georgia, Kazakhstan, Kosovo, other related indicators. According to one the Kyrgyz Republic, the former Yugoslav study, for example, a reform that simpli- While many Doing Business indicators Republic of Macedonia, Moldova, fied business registration in Mexican are actionable, this does not necessarily Montenegro, Poland, Tajikistan, Turkey, municipalities increased registration by mean that they are all “action-worthy” Ukraine and Uzbekistan. In Sub-Saharan 5% and wage employment by 2.2%— in a particular context. Business regula- Africa: Benin, Burundi, the Comoros, and, as a result of increased competition, tory reforms are only one element of a the Democratic Republic of Congo, reduced the income of incumbent busi- strategy aimed at improving competitive- the Republic of Congo, Côte d’Ivoire, nesses by 3%.12 Business registration ness and establishing a solid foundation Guinea, Guinea-Bissau, Kenya, Liberia, reforms in Mexico also resulted in 14.9% for sustainable economic growth. There Malawi, Mali, Mauritius, Niger, Nigeria, of informal business owners shifting to are many other important goals to pur- Rwanda, Senegal, Sierra Leone, Sudan, the formal economy.13 sue—such as effective management of Tanzania, Togo, Zambia and Zimbabwe. public finances, adequate attention to And in Latin America and the Caribbean: Efficient and non-distortionary business education and training, adoption of the Argentina, Brazil, Chile, Costa Rica, regulations are important drivers of pro- latest technologies to boost economic the Dominican Republic, Guatemala, ductivity. A study on India, for example, productivity and the quality of public ser- Jamaica, Mexico, Nicaragua, Panama, shows that inefficient licensing and size vices, and appropriate regard for air and Peru and St. Lucia. Since 2003, govern- restrictions cause a misallocation of water quality to safeguard public health. ments have reported more than 3,180 resources, reducing total factor produc- Governments must decide what set of regulatory reforms, about 920 of which tivity by preventing efficient firms from priorities best suits their needs. To say have been informed by Doing Business achieving their optimal scale and allowing that governments should work toward since 2003.10 inefficient firms to remain in the market.14 a sensible set of rules for private sector The study shows that removing these activity (as embodied, for example, in Many economies share knowledge on restrictions would boost total factor pro- the Doing Business indicators) does not the regulatory reform process related to ductivity by an estimated 40-60%. In the suggest that doing so should come at the the areas measured by Doing Business. European Union and Japan, implicit taxes expense of other worthy policy goals. Among the most common venues for on capital use were shown to reduce the this knowledge sharing are peer-to-peer average size of firms by 20%, output by Over the past decade governments have learning events—workshops where offi- 8.1% and output per firm by 25.6%.15 A increasingly turned to Doing Business as cials from different governments across recent study on Côte d’Ivoire, Ethiopia, a repository of actionable, objective data a region or even across the globe meet Ghana and Kenya demonstrates large ABOUT DOING BUSINESS AND DOING BUSINESS IN SOUTH AFRICA 2018 25 productivity gains following the removal logistics found that a one-day increase systems for debt recovery. For example, of firm-level distortions caused by in transit time reduces exports by an a reform making bankruptcy laws more uneven regulations and a poor business average of 7% in Sub-Saharan Africa.20 efficient significantly improved the recov- environment.16 Research also shows that Another study found that a one-day ery rate for viable firms in Colombia.28 In raising the efficiency level of bankruptcy delay in transport time for landlocked a multi-economy study the introduction laws in select OECD high-income econo- economies and for time-sensitive agricul- of collateral registries for movable assets mies to that of the United States would tural and manufacturing products has a was shown to increase firms’ access to increase the total factor productivity of particularly large negative impact, reduc- finance by approximately 8%.29 In India the former by about 30% through a rise ing trade by more than 1% for each day the establishment of debt recovery tri- in bank loans to large firms.17 of delay.21 Delays while clearing customs bunals reduced nonperforming loans by also affect a firm’s ability to export, par- 28% and lowered interest rates on larger Considerable effort has been devoted to ticularly when goods are destined for new loans, suggesting that faster processing studying the link between employment clients.22 And in economies with flexible of debt recovery cases led to a lower growth and government regulation of entry regulations, a 1% increase in trade cost of credit.30 An in-depth review of firm entry. In Portugal business reforms is associated with an increase of more global bank flows revealed that firms in resulted in a reduction of the time and than 0.5% in income per capita but has economies with better credit information cost needed for company formalization, no positive income effects in economies sharing systems and higher branch pen- increasing the number of business start- with more rigid regulation.23 Research etration evade taxes to a lesser degree.31 ups by 17% and creating 7 new jobs per has also found that—although domestic Strong shareholder rights have been 100,000 inhabitants per month. New buyers benefit from having goods of found to reduce financial frictions, espe- start-ups were more likely to be female- varying quality and price to choose cially for firms with large external finance owned, were smaller and were headed from—import competition results in only relative to their capital stock (such as by less experienced, less-educated minimal quality upgrading in OECD high- small firms or firms in distress).32 entrepreneurs than before the reform, income economies with cumbersome suggesting that the reform created a regulation while it has no effect on quality There is also a large body of theoretical more inclusive environment for aspiring upgrading in non-OECD economies with and empirical work investigating the entrepreneurs.18 cumbersome regulation.24 Therefore, distortionary effects of high tax rates and the potential gains for consumers from cumbersome tax codes and procedures. In many economies companies engag- import competition are reduced where According to one study, business licens- ing in international trade struggle with regulation is cumbersome. ing among retail firms rose 13% after high trade costs arising from transport, a tax reform in Brazil.33 Another found logistics and regulations, impeding Doing Business measures aspects of busi- that a 10% reduction in tax complexity is their competitiveness and preventing ness regulation affecting domestic firms. comparable to a 1% reduction in effective them from taking full advantage of their However, research shows that better corporate tax rates.34 productive capacity. With the availability business regulation—as measured by of Doing Business indicators on trading Doing Business—is associated with higher Labor market regulation—as measured across borders—which measure the time, levels of foreign direct investment.25 by Doing Business—has been shown to procedural and monetary costs of export- Furthermore, foreign direct investment have important implications for the labor ing and importing—several empirical can either impede or promote domestic market. According to one study, graduat- studies have assessed how trade costs investment depending on how business- ing from school during a time of adverse affect the export and import performance friendly entry regulations are in the host economic conditions has a persistent, of economies. A rich body of empirical economy. In fact, foreign direct invest- harmful effect on workers’ subsequent research shows that efficient infrastruc- ment has been shown to crowd out employment opportunities. The persis- ture and a healthy business environment domestic investment in economies with tence of this negative effect is stronger are positively associated with export costly processes for starting a business.26 in countries with stricter employment performance.19 Another study shows that economies protection legislation.35 Rigid employ- with higher international market integra- ment protection legislation can also have Improving infrastructure efficiency and tion have, on average, easier and simpler negative distributional consequences. trade logistics bring documented ben- processes for starting a business.27 A study on Chile, for example, found efits to an economy’s balance of trade that the tightening of job security rules and individual traders. However, delays Recent empirical work shows the impor- was associated with lower employment in transit time can reduce exports: a tance of well-designed credit market rates for youth, unskilled workers and study analyzing the importance of trade regulations and well-functioning court women.36 26 DOING BUSINESS IN SOUTH AFRICA 2018 By expanding the time series dimension Doing Business was not initially designed to NOTES inform decisions by foreign investors, though and the scope of the data, Doing Business investors may in practice find the data useful hopes to continue being a key reference 1. For more information on additions and as a proxy for the quality of the national for the debate on the importance of busi- investment climate. Analysis done in the changes to the methodology since 2015, World Bank Group’s Global Indicators Group ness regulation for economic develop- please refer to the methodology box in each has shown that countries that have sensible indicator chapter and the data notes. ment both within and outside the World 2. These papers are available on the Doing rules for domestic economic activity also tend Bank Group. to have good rules for the activities of foreign Business website at http:/ /www.doingbusiness investors engaged in the local economy. org/methodology. 10. These are reforms for which Doing Business 3. The World Bank Enterprise Surveys and Doing Indices Business complement each other as two sides is aware that information provided by Doing Beyond this body of research, Doing Business was used in shaping the reform of the same coin. They both provide useful agenda. Business has identified 17 different data information on the business environment of an 11. The papers cited here are just a few examples economy, but in different ways. Doing Business projects or indices that use Doing Business has a narrower scope than the Enterprise of research done in the areas measured by as one source of data.37 Most of these use Doing Business. Since 2003, when the Doing Surveys. But by focusing on actionable Business report was first published, 2,182 indicator-level data and not the aggregate indicators related to business regulation, research articles published in peer-reviewed Doing Business provides a clear roadmap ease of doing business ranking. Starting a for governments seeking to improve such academic journals have discussed how business is the indicator set most widely regulation in the areas measured by Doing regulation. Doing Business uses standardized Business influences economic outcomes. used, followed by labor market regulation case scenarios while the Enterprise Surveys Another 6,296 working papers have been use representative samples. For more on the and paying taxes. These efforts typically Enterprise Surveys and how they differ from posted online. combine Doing Business data with data 12. Bruhn, Miriam. 2011.“License to Sell: The Doing Business, see the website at Effect of Business Registration Reform on from other sources to assess economies http://www.enterprisesurveys.org. Entrepreneurial Activity in Mexico.” Review of 4. For getting credit, indicators are weighted along a particular aggregate dimension proportionally, according to their contribution Economics and Statistics 93, no. 1: 382–86. such as competitiveness or innovation. 13. Bruhn, Miriam. 2013. “A Tale of Two Species: to the total score, with a weight of 60% Revisiting the Effect of Registration Reform on The Heritage Foundation’s Index of assigned to the strength of legal rights index Informal Business Owners in Mexico.” Journal and 40% to the depth of credit information Economic Freedom, for example, has index. In this way each point included in these of Development Economics 103: 275–83. used six Doing Business indicators in mea- 14. Hsieh, Chang-Tai, and Peter J. Klenow. 2009. indices has the same value independent of “Misallocation and Manufacturing TFP in suring the degree of economic freedom in the component it belongs to. Indicators for all China and India.” Quarterly Journal of Economics other topics are assigned equal weights. the world.38 Economies that score better 5. Djankov, Simeon, Darshini Manraj, Caralee 124 (4): 1403–48. in these six areas also tend to have a 15. Guner, Nezih, Gustavo Ventura and Yi Xu. McLiesh and Rita Ramalho. 2005. “Doing 2008. “Macroeconomic Implications of higher degree of economic freedom. Business Indicators: Why Aggregate, and Size-Dependent Policies.” Review of Economic How to Do It.” Washington, DC: World Dynamics 11: 721–44. Bank. Principal components and unobserved Similarly, the World Economic Forum 16. Cirera, Xavier, Roberto N. Fattal Jaef and components methods yield a ranking nearly Hibret B. Maemir. 2017. “Taxing the Good? uses Doing Business data in its Global identical to that from the simple average Distortions, Misallocation, and Productivity in method because both these methods assign Competitiveness Index, designed to roughly equal weights to the topics, since the Sub-Saharan Africa.” Policy Research Working demonstrate how competitiveness is a Paper 7949, World Bank, Washington, DC. pairwise correlations among indicators do 17. Neira, Julian. 2017. “Bankruptcy and Cross- global driver of economic growth. The not differ much. An alternative to the simple Country Differences in Productivity.” Journal average method is to give different weights to organization also uses Doing Business the topics, depending on which are considered of Economic Behavior and Organization (2017). indicators in four other indices, which Available from http:/ /dx.doi.org/10.1016/j.jebo of more or less importance in the context of a .2017.07.011. measure trade facilitation, technological specific economy. 18. Branstetter, Lee G., Francisco Lima, Lowell J. 6. Hallward-Driemeier, Mary, and Lant readiness, human capital development, Pritchett. 2015. “How Business Is Done in the Taylor and Ana Venâncio. 2013. “Do Entry and travel and tourism sector competi- Regulations Deter Entrepreneurship and Job Developing World: Deals versus Rules.” Journal Creation? Evidence from Recent Reforms tiveness. These publicly available sources of Economic Perspectives 29, no. 3: 121–40. in Portugal.” Economic Journal, published 7. Schneider, Friedrich. 2005. “The Informal expand on the general business environ- Sector in 145 Countries.” Department of electronically July 16, 2013. https://doi.org ment data generated by Doing Business by /10.1111//ecoj.12044. Economics, University Linz, Linz, Austria; 19. Portugal-Perez, Alberto, and John S. incorporating these data into the study La Porta, Rafael, and Andrei Shleifer. 2008. Wilson. 2011. “Export Performance and “The Unofficial Economy and Economic of other important social and economic Development.” Tuck School of Business Trade Facilitation Reform: Hard and Soft issues across economies and regions. Infrastructure.” World Development 40, no. 7: Working Paper 2009-57, Dartmouth College, 1295–1307. They prove that, taken individually, Doing Hanover, NH, available at Social Science 20. Freund, Caroline, and Nadia Rocha. 2011. Research Network (SSRN) at http:/ /ssrn.com Business indicators remain a useful start- /abstract=1304760. “What Constrains Africa’s Exports?” World ing point for a rich body of analysis across Bank Economic Review 25, no. 3: 361–86. 8. For the law library, see the website at 21. Djankov, Simeon, Caroline Freund and Cong different areas and dimensions. http://www.doingbusiness.org/law-library. S. Pham. 2010. “Trading on Time.” Review of 9. The focus of the Doing Business indicators Economics and Statistics 92, no. 1: 166–73. remains the regulatory regime faced by . 22. Volpe Martincus, Christian, Jeronimo Carballo domestic firms engaging in economic activity and Alejandro Graziano. 2015. “Customs.” in the largest business city of an economy. Journal of International Economics 96: 119–37. ABOUT DOING BUSINESS AND DOING BUSINESS IN SOUTH AFRICA 2018 27 23. Freund, Caroline, and Bineswaree Bolaky. Index (jointly with Cornell University and the 2008. “Trade, Regulations, and Income.” World Intellectual Property Organization); Journal of Development Economics 87: 309–21. the Fraser Institute’s Economic Freedom of 24. Amiti, Mary, and Amit K. Khandelwal. 2011. the World; KPMG’s Change Readiness Index; “Import Competition and Quality Upgrading.” Citi and Imperial College London’s Digital Review of Statistics and Economics 95 (2): Money Index; the International Institute 476–90. for Management Development’s World 25. Corcoran, Adrian, and Robert Gillanders. 2015. Competitiveness Yearbook; DHL’s Global “Foreign Direct Investment and the Ease of Connectedness Index; PwC’s Paying Taxes Doing Business.” Review of World Economics 2016: The Global Picture; and the Legatum 151, no. 1: 103–26. Institute’s Legatum Prosperity Index. 26. Munemo, Jonathan. 2014. “Business Start- 38. For more on the Heritage Foundation’s Index Up Regulations and the Complementarity of Economic Freedom, see the website at between Foreign and Domestic Investment.” https://www.heritage.org/index. Review of World Economics 150, no. 4: 745–61. 27. Norbäck, Pehr-Johan, Lars Persson and Robin Douhan. 2014. “Entrepreneurship Policy and Globalization.” Journal of Development Economics 110: 22–38. 28. Giné, Xavier, and Inessa Love. 2010. “Do Reorganization Costs Matter for Efficiency? Evidence from a Bankruptcy Reform in Colombia.” Journal of Law and Economics 53, no. 4: 833–64. 29. Love, Inessa, María Soledad Martínez Pería and Sandeep Singh. 2013. “Collateral Registries for Movable Assets: Does Their Introduction Spur Firms’ Access to Bank Finance?” Policy Research Working Paper 6477, World Bank, Washington, DC. 30. Visaria, Sujata. 2009. “Legal Reform and Loan Repayment: The Microeconomic Impact of Debt Recovery Tribunals in India.” American Economic Journal: Applied Economics 1, no. 3: 59–81. 31. Beck, Thorsten, Chen Lin and Yue Ma. 2014. “Why Do Firms Evade Taxes? The Role of Information Sharing and Financial Sector Outreach.” Journal of Finance 69: 763–817. 32. Claessens, Stijn, Kenichi Ueda and Yishay Yafeh. 2014. “Institutions and Financial Frictions: Estimating with Structural Restrictions on Firm Value and Investment.” Journal of Development Economics 110: 107–22. 33. Monteiro, Joana, and Juliano J. Assunção. 2012. “Coming Out of the Shadows? Estimating the Impact of Bureaucracy Simplification and Tax Cut on Formality in Brazilian Microenterprises.” Journal of Development Economics 99: 105–15. 34. Lawless, Martina. 2013. “Do Complicated Tax Systems Prevent Foreign Direct Investment?” Economica 80, no. 317: 1–22. 35. Kawaguchi, Daiji, and Tetsushi Murao. 2014. “Labor-Market Institutions and Long-Term Effects of Youth Unemployment.” Journal of Money, Credit and Banking 46, S2: 95–116. 36. Montenegro, Claudio, and Carmen Pagés. 2003. “Who Benefits from Labor Market Regulations?” Policy Research Working Paper 3143, World Bank, Washington, DC. 37. The 17 data projects or indices are the Millennium Challenge Corporation’s Open Data Catalog; the Heritage Foundation’s Index of Economic Freedom; the World Economic Forum’s Global Competitiveness Index, Enabling Trade Index, Networked Readiness Index (jointly with INSEAD), Human Capital Index and Travel and Tourism Competitiveness Index; INSEAD’s Global Talent Competitiveness Index and Global Innovation Dealing with Construction Permits MAIN FINDINGS ƒƒ Across the nine South African locations measured, the construction permitting process requires 18 procedures on average, takes 125 days and costs 2.2% of the warehouse value. This performance is faster than the average for OECD high-income economies but requires nearly six more procedures and is 40% more expensive. ƒƒ Cape Town is the place where it is easiest to build a warehouse and connect it to water and sewerage, while Tshwane is the most difficult. ƒƒ Nelson Mandela Bay improved the most since 2015— moving up one place in the ranking to take the fifth spot. Peer-learning engagements with the municipalities of Tshwane and Johannesburg allowed Nelson Mandela Bay to optimize its own workflow and better monitor incoming applications. As a result, the time to obtain approvals of building plans dropped by more than 12%—from 40 days in 2015 to 35 days today. ƒƒ South Africa’s average score on the building quality control index—12 of 15 possible points—is among the highest globally and ahead of the averages for OECD high-income and BRIC economies. However, the country receives no points on the liability and insurance regimes index. ƒƒ Five municipalities introduced minor improvements making the construction approval process easier, but there is still room for improvement. Among the main constraints to greater efficiency are the lack of a streamlined process for preapprovals and the use of inefficient paper-based systems. DEALING WITH CONSTRUCTION PERMITS 29 T he construction sector is the relatively steady growth in total construc- can be relatively simple, efficient and safe. second largest employer in South tion output for 20 years (1990 to 2010). In these economies regulatory reforms Africa after the government.1 Since However, with the 2008 financial crisis have revolved around three key features: building and construction are labor-inten- and completion of infrastructure projects delegating parts of the process to the sive, when this industry is operating at full in preparation for the 2010 World Cup, private sector, applying risk classification capacity, large sections of an economy’s growth slowed. This led to labor unrest for buildings and using new technologies workforce are active. Worldwide, the and strikes, which negatively affected the (such as electronic platforms or one-stop construction industry is recognized as a construction sector and caused delays shops). significant contributor to employment and in major building projects to this day. economic growth. The South African con- Studies have shown that extensive delays struction industry thus has the potential to in the construction permitting process HOW DOES CONSTRUCTION bolster the National Development Plan’s can lead to higher transaction costs and PERMITTING WORK IN overarching goals of increasing economic fewer construction projects.3 SOUTH AFRICA? growth and creating jobs.2 Economies such as Denmark, New South Africa’s construction permit- Following the end of the apartheid Zealand and Taiwan, China, have proved ting process follows a general scheme era’s economic isolation, there was that the construction permitting process of 11 steps common to most locations WHAT DOES DEALING WITH CONSTRUCTION PERMITS MEASURE? To measure the ease of dealing with construction permits, Doing Business records the procedures, time and cost required for a small or medium-size business to obtain the approvals needed to build a commercial warehouse and connect it to water and sewerage. This includes all inspections and certificates needed before, during and after construction of the warehouse. To make the data comparable across locations, it is assumed that the warehouse is in the periurban area of the analyzed business city, that it is not in a special economic or industrial zone and that it will be used for the general storage of non- hazardous materials such as books. In 2015 a new indicator was introduced to measure the underlying quality of construction regulations and controls. The building quality control index accounts for one-fourth of the distance to frontier score for dealing with construction per- mits (see figure). Dealing with construction permits: measuring the efficiency and quality of building regulation Rankings are based on distance to frontier scores for four indicators Quality of Measures the accessibility of building regulations and the clarity building regulations of requirements for obtaining a building permit Days to comply Cost to comply with formalities with formalities, to build a as % of warehouse Quality control Assesses whether licensed or technical experts are involved in warehouse value before construction approving building plans Quality control Records the types of inspections legally mandated during 25% 25% construction and whether they are carried out in practice Time Cost during construction 25% 25% Procedures Building quality Records final inspections legally mandated after construction and control Quality control index after construction whether they are carried out in practice Steps to comply with formalities; Records which parties are held legally liable for structural defects Liability and and which are required to obtain insurance policies to cover completed when final document is insurance regimes damages caused by defects received Professional Assesses the qualification requirements for the professionals who certifications approve building plans and for those who supervise construction 30 DOING BUSINESS IN SOUTH AFRICA 2018 (figure 3.1). Under the National Building Once building plans have been approved, of compliance and a written request for Regulations and Building Standards Act, the builder must notify the municipality issuance of the occupancy certificate constructing a building requires the prior of its commencement of work at least to the municipality. The local author- approval of the building plans by the local four days before construction begins. At ity usually issues this within 14 days. Per authority (municipality).4 The building this point the builder will apply for con- the National Building Regulations and company (the builder) must first prepare nection to water and sewerage services Building Standards Act, the building may a set of building plans and submit them at the municipal water and sanitation not be occupied prior to issuance of the to the municipal building control depart- department. occupancy certificate. ment. The submission usually includes the application form, a copy of the title deed, a Compulsory building site inspections These 11 steps require an average of 18 zoning certificate and detailed drawings.5 happen at various intervals during the procedures, take 125 days and cost 2.2% construction process. These inspec- of the warehouse value. This performance To prepare the architectural and struc- tions include the excavation inspection is twice as fast as the average of the BRIC tural designs of the plans, the builder (foundation trenches) and an open drain economies (Brazil, Russian Federation, needs a geological and topographical inspection. Once the building work has India and China) and almost a month survey of the land plot. Such surveys been completed and the plot is ready for faster than the OECD high-income econ- are conducted by a private licensed final inspection, the builder must notify omies (figure 3.2). However, the process firm or land surveyor.6 Once all required the municipality of the completion of the requires nearly six more procedures documentation is presented, a fee for work. and is nearly 40% more expensive than submission must be paid immediately, the average of the OECD high-income and a reference number is provided to the Lastly, the builder prepares a set of cer- economies (12.5 procedures and 1.6% builder. The application is then sent to tificates of compliance. These indicate of the warehouse value). Denmark—the the various municipal departments (for that the building has been designed and global best performer—requires seven example, health, water and sanitation, erected in accordance with the applica- procedures and is two months faster than fire, traffic, roads and energy) for their tion for which approval was granted.7 the South African average. In Denmark review and comments on the plans. The builder then sends the certificates preconstruction clearances are not FIGURE 3.1  Ten of the 11 stages in the construction permitting process are governed at the municipal level Number of procedures Stage per stage Agency BEFORE CONSTRUCTION Obtain geotechnical and topographic surveys of land plot Licensed private firm Obtain preconstruction clearances Relevant departments Obtain land use management approval Town planning department Obtain approval of the building plans Building control department Notify about commencement of building work Building control and Department of Labor DURING CONSTRUCTION Receive inspections (foundations trenches, drainage systems) Building control and Department of Labor Apply for water and sewerage connections Water and sanitation department (utilities) Receive inspections and obtain water and sewerage connections Water and sanitation department (utilities) AFTER CONSTRUCTION Notify about completion of building work Building control department Receive final inspections Building control and fire department Obtain occupancy certificate Building control department Government or utility service Private sector service Individual procedure Procedure is not required in all locations Source: Doing Business database. Note: These stages are common to all locations benchmarked. Additional requirements may apply in specific locations. DEALING WITH CONSTRUCTION PERMITS 31 FIGURE 3.2  Building in South Africa is faster but requires more procedures and is more expensive than in OECD high-income economies EFFICIENCY OF CONSTRUCTION PERMITTING BUILDING QUALITY CONTROL Procedures Time Cost Index (number) (days) (% of warehouse value) (0–15) 0 0 5 economies 3 economies Denmark, 7 (global best)* 15 Marshall Islands (global best)** (global best) 25 Australia, Rwanda 9 Korea, Rep. Australia 1 14 United Kingdom (global best) United Kingdom 10 Chile Chile, Malaysia 75 13 Malaysia Malaysia 11 OECD 2 8 South African Australia Mexico high income Msunduzi Mexico United Kingdom 100 Cape Town 12 locations 12 Namibia, Chile Nelson Mandela Bay East Asia 7 South African South Africa Buffalo City & Pacific locations OECD average OECD high income 13 high income Rwanda Mangaung Namibia 3 South Africa 11 Buffalo City Australia 125 eThekwini average 14 BRIC Malaysia Chile South Africa average Nelson Mexico 10 15 East Asia Msunduzi Mandela Bay Rwanda 150 Ekurhuleni 5 & Pacific East Asia & Pacific East Asia & Pacific 16 Cape Town, Kenya 9 Kenya Ekurhuleni, OECD Johannesburg Kenya, eThekwini, high income United Kingdom 17 175 Msunduzi Kenya 8 Tshwane 8 18 Namibia South Africa Buffalo City Namibia range 200 BRIC 7 19 South Africa (9 locations) average 20 Mexico 10 Johannesburg, 250 6 21 Mangaung, Nelson Mandela Bay, Rwanda 1 Tshwane BRIC 22 275 14 BRIC 0 Source: Doing Business database. Note: The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, Russia, India and China. *These are Mongolia, the Slovak Republic, St. Vincent and the Grenadines, Thailand and Trinidad and Tobago. **These are Luxembourg, New Zealand and the United Arab Emirates. management departments for com- The nine locations benchmarked show notable differences ments and stamps of approval on the plans. In Johannesburg, Mangaung, in the efficiency of the construction permitting process. Nelson Mandela Bay and Tshwane the municipality does not circulate building required and the building permit appli- Tshwane and Johannesburg, where the plans internally across departments; cation can be managed and completed process, even though cheaper (2.1% on instead, the applicant is responsible for online. Nevertheless, South Africa’s aver- average), requires three additional pro- getting the plans to each of the depart- age score on the building quality control cedures and takes two and a half months ments involved. Depending on the loca- index—12 of 15 possible points—is longer. tion, this adds three to five procedures to among the highest globally and ahead of the preconstruction phase. the averages for OECD high-income and How the process compares BRIC economies. Obtaining construction approvals Additionally, in six locations builders requires between 17 and 20 procedures need a mandatory preconstruction The nine locations benchmarked show in South Africa. This stems from local approval from the town planning or notable differences in the efficiency of the requirements before construction. land use management departments. construction permitting process and the Buffalo City and Cape Town have no In Ekurhuleni, Johannesburg, Nelson quality of building regulation. Obtaining municipal requirements prior to submis- Mandela Bay and Tshwane the builder construction approvals remains easiest sion of building plans.8 In these locations must obtain a site development plan in Cape Town—17 procedures, 88 days, building plans are circulated inter- from the town planning department. In 2.4% of the warehouse value and 12 nally by the municipality to the town eThekwini and Msunduzi the land use points on the building quality control planning, traffic engineering, health, management department must conduct index (table 3.1). It is more difficult in wastewater, roads and stormwater “pre-scrutiny” of the plans.9 32 DOING BUSINESS IN SOUTH AFRICA 2018 TABLE 3.1  Dealing with construction permits in South Africa—where is it easier? 2018 2015 Distance to Distance to Cost Building quality Rank frontier score frontier score Procedures Time (% of warehouse control index Location (1–9) (0–100) (0–100) (number) (days) value) (0–15) OECD high income average 75.14 75.03 12.5 154.6 1.6 11.4 South Africa average 71.46 71.41 18.4 124.7 2.2 11.9 East Asia & Pacific average 69.60 68.90 15.2 138.0 2.2 8.9 BRIC average 50.29 48.49 21.7 266.1 8.3 10.0 Cape Town (Cape Town) 1 75.48 76.19 17 88 2.4 12 eThekwini (Durban) 2 73.65 73.67 17 117 2.2 12 Msunduzi (Pietermaritzburg) 3 73.17 73.07 17 129 1.9 12 Ekurhuleni (Germiston) 4 71.81 71.82 17 144 2.2 12 Nelson Mandela Bay (Port Elizabeth) 5 71.70 71.10 20 96 2.6 12 Buffalo City (East London) 6 71.66 71.80 18 104 2.4 11 Mangaung (Bloemfontein) 7 71.25 71.06 20 110 2.2 12 Johannesburg (Johannesburg) 8 68.16 67.98 20 155 2.0 12 Tshwane (Pretoria) 9 66.25 66.04 20 179 2.2 12 Source: Doing Business database. Note: Rankings are based on the average distance to frontier score (DTF) for the procedures, time and cost associated with dealing with construction permits as well as for the building quality control index. The DTF score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). The DTF score from the 2015 report includes all data revisions and methodological changes implemented since then. For more details, see the chapter "About Doing Business and Doing Business in South Africa 2018." The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, Russia, India and China. Despite its high number of procedures, Construction regulations can help protect the public from South Africa’s construction permitting process is relatively fast. The South faulty building practices. But to do so they need to be Africa average is not only faster than clear and thorough. the average for OECD high-income and BRIC economies but also faster than The average cost of dealing with construc- the civil or structural engineer to design nearly 60% of the 189 other economies tion permits is 2.2% of the warehouse val- a sound foundation system as well as measured by Doing Business. However, ue—ZAR 84,532 ($6,146)—and ranges the drainage and stormwater circulation significant differences still exist at the from 1.9% of the warehouse value in systems. local level. Compared with the previous Msunduzi to 2.6% in Nelson Mandela benchmarking in 2015, construction Bay. Building plan approval fees are the Going beyond efficiency—the permitting is still fastest in Cape Town main drivers of this variation. These fees, building quality control index (88 days). This is mainly due to contin- set by the local authorities, depend on Construction regulations can help ued improvement of the municipality’s the use of the building and its size. They protect the public from faulty building electronic platform for submitting build- comprise over a third of the total cost practices. But to do so they need to be ing plans. Meanwhile, Tshwane remains on average and vary across locations clear and thorough. Where regulations the location with the longest delays (figure 3.3). lack clarity there is a risk of confusion (179 days). On average in Tshwane, as among both builders and authorities, in Mangaung and Johannesburg, it takes Preconstruction procedure costs, such which can lead to unnecessary delays approximately two months to obtain as fees to obtain geotechnical and topo- and disputes. Overly complicated regu- approval of building plans due to a lack of graphical surveys of the land plot, can lations can also increase opportunities capacity to efficiently process the volume also amount to upwards of ZAR 37,695 for corruption. An analysis of the World of plans and the number of times building ($2,740). However, these procedures— Bank’s Enterprise Survey data shows that control departments circulate the plans performed by a private sector firm or the share of firms expecting to give gifts internally. In Tshwane, for example, files private land surveyor—cost approxi- in exchange for construction approvals are sometimes mislabeled, misfiled or mately the same nationwide, accounting is correlated to the level of complexity sent to other service departments unnec- for 45% of the total cost on average. and cost of dealing with construction essarily, thus delaying the process. These surveys provide information to permits.10 DEALING WITH CONSTRUCTION PERMITS 33 FIGURE 3.3  Private sector services account for 45% of the cost of dealing with construction permits Mangaung Tshwane ZAR 81,338 ZAR 82,258 ($5,914) ($5,980) Cape Town Other 1% ZAR 92,189 Building plans ($6,702) approval Johannesburg 34% ZAR 76,664 ($5,572) Cost of dealing with construction Nelson Mandela Bay Geotechnical & Type of fee, as a share permits, South Africa average ZAR 98,305 topographical surveys of total cost across ZAR 84,532 ($6,146) ($7,147) 45% South Africa (%) Msunduzi ZAR 72,610 Utility-water ($5,279) and sewerage Buffalo City Land use ZAR 91,966 19% management ($6,686) approval 2% Ekurhuleni eThekwini ZAR 81,117 ZAR 84,341 ($5,897) ($6,132) Source: Doing Business database. Note: Costs are based on the assumed Doing Business warehouse, valued at ZAR 3,768,738 ($274,000). This new edition of Doing Business in the builder’s professional team and the control officers head the committees South Africa continues to measure effi- sign-off of the appointed professional approving the plans, the law requires ciency—procedures, time and cost—in to the project. Not having an external them to be licensed engineers (1 point). construction permitting, but it now or independent inspector can affect the adds a measure of quality. The build- accountability and quality of the con- During construction, inspections in South ing quality control index assesses both struction process as well as the enforce- Africa are carried out in practice by build- quality control and safety mechanisms ment of penalties when violations are ing control authorities, as seen in almost in six primary areas (for a maximum discovered. in three-quarters of economies globally (1 of 15 points): transparency and qual- point). By national law, these inspections ity of building regulations (2 points); Across the nine locations measured, must be phased (1 point) rather than risk- quality control before (1 point), during the accessibility and clarity of building based (2 points).12 (3 points) and after construction (3 regulations are on par with OECD high- points); liability and insurance regimes income and BRIC economies (figure After construction, more than 90% of (2 points); and professional certifica- 3.4). National building regulations and global economies require either an in- tions (4 points). building standards are publicly available house supervising engineer, an external online (1 point), though access to most of supervising engineer or a government All South African locations except Buffalo them is not free of charge.11 Additionally, agency to conduct the final inspection. City score 3 points shy of the maximum the list of documents to be submitted, South Africa is among this majority building quality control index score (12 of preapproval requirements for building (2 points). Among the 175 economies 15 points). This is higher than the aver- plans and fee schedules are available requiring a final inspection, 25% of them ages for OECD high-income and BRIC online or by request via e-mail, telephone rarely implement it in practice. In South economies, which score 11 and 10 points, or in person (1 point). Africa the final inspection is always con- respectively. Buffalo City’s lower score ducted (1 point). (11 points) is mainly due to its inspection In South Africa building control officers practices during construction. In this and plan examiners are vital to quality When structural defects are discovered location the building inspector does not control before construction. These public during construction, they are more than always inspect the construction work, officials verify that building plans comply likely to be remedied. But some defects due to staffing limitations. Instead, the with regulations before construction can be discovered only after the building municipality relies on the assurance of begins. Moreover, because building has been occupied. Remedying defects 34 DOING BUSINESS IN SOUTH AFRICA 2018 FIGURE 3.4  Despite surpassing almost two-thirds of all economies on the building engineering, have a minimum number of quality control index, South Africa receives no points on liability and insurance regimes years of practical experience, be a regis- tered member of the national association Transparency and quality of building regulations of architects or engineers and pass a (2 points) certification exam (4 points). 4 3 Professional certifications Quality control before construction WHAT HAS CHANGED? 2 (4 points) (1 point) 1 Since 2015 five municipalities have intro- 0 duced improvements making construction permitting easier by reducing building plan approval times, improving electronic Liability and insurance regimes Quality control during construction platforms or both. These are Cape Town, (2 points) (3 points) Mangaung, Msunduzi, Nelson Mandela Bay and Tshwane (table 3.2). Quality control after construction (3 points) South Africa average Mangaung and Tshwane cut the time to BRIC average obtain the occupancy certificate by 17% OECD high income (four days) and almost 30% (two days), respectively, while Nelson Mandela Bay Source: Doing Business database. reduced the time to obtain preconstruc- tion approval of the site development at that stage can be both costly and in use (0 points).14 In most economies plan by more than 12% (five days). In time-consuming. It is important that the architect who designed the plans or Tshwane the building control department the responsible party be held liable and the construction company will be held became more efficient by training and that the parties involved in the building liable for any structural defects. coaching staff in processing applica- design, supervision and construction tions faster. Similarly, a change in the obtain insurance to cover the costs of any It is important that professionals in the management team in Mangaung has structural defects. In South Africa the law construction industry have baseline increased the administrative efficiency does not specify upfront who is liable for technical qualifications. In South Africa of the process over the last three years. structural defects (0 points),13 and there both the professionals reviewing the Officials from Nelson Mandela Bay met is no legal requirement to obtain a latent plans and those supervising the con- with counterparts from Tshwane and defect liability insurance policy to cover struction on the ground are required to Johannesburg to better understand structural flaws in the building once it is hold a university degree in architecture or how these municipalities organize their TABLE 3.2  Who has made it easier to deal with construction permits since 2015? Reduced Streamlined Improved electronic Location Overall approval time procedures Reduced fees platforms Buffalo City (East London) û û Cape Town (Cape Town) û ü û û ü Ekurhuleni (Germiston) û û eThekwini (Durban) û û Johannesburg (Johannesburg) û û Mangaung (Bloemfontein) û ü û Msunduzi (Pietermaritzburg) û û ü Nelson Mandela Bay (Port Elizabeth) û ü û Tshwane (Pretoria) û ü û Source: Doing Business database. Note: This table records all Doing Business improvements and changes that occurred between January 2015 and May 1, 2018. ü= Doing Business improvement making it easier to deal with construction permits. û = Doing Business change making it more difficult to deal with construction permits. DEALING WITH CONSTRUCTION PERMITS 35 workflow and identify bottlenecks. These Not all changes made life easier for entrepreneurs. Among peer-learning engagements allowed Nelson Mandela Bay to optimize its own the main constraints to greater efficiency are the lack of workflow and better monitor incoming a streamlined process for preapprovals and the use of applications, with more quality control. inefficient paper-based systems. Thanks to the successful implementa- already gone through the pre-scrutiny locations municipalities raised construc- tion and continuous improvement of the process (box 3.1). However, in Msunduzi tion approval fees. In Buffalo City, Cape Development Application Management this has yet to show a reduction in time Town and eThekwini the magnitude of System (DAMS) platform, the time to because of other factors—chief among local tariff increases made business con- obtain approval of building plans in Cape them the decrease in the number of staff ditions worse. Building plan approval fees, Town dropped by 18%, from 45 to 37 at the building control office. along with the cost to connect to water days. In Msunduzi a similar electronic and sewerage went up by more than half platform was introduced, focusing on Not all changes made life easier for over the last three years, far exceeding building plan applications that had entrepreneurs (figure 3.5). In fact, in all the rate of inflation for the same period. BOX 3.1 Electronic platforms for construction permitting in South Africa—the road ahead Across South Africa many municipalities have a paper-based system to manage construction permit applications. For builders, paper submissions involve circulating files back and forth between departments. This sometimes results in document loss. In locations such as Tshwane and Johannesburg, where the municipality does not circulate building plans internally (across departments), builders and architects often have to hire a middleman or “runner” to move files through the process. This adds to the cost. Additionally, building control departments across the country are faced with overextended staff and pressure to improve service delivery. The use of electronic platforms in construction permitting is changing the way building authorities One-stop shops for a more efficient construction permitting process serve the public (see figure). In the past decade Doing Business has recorded more than 20 im- provements resulting from the introduction of a one- stop shop for construction permitting. In Kisumu, Reduce cost of construction Kenya, the introduction of an electronic platform permitting in October 2015 reduced the time to deal with con- struction permitting by more than 14 days during its first year.a China and India have reduced delays Streamline Reduce delays in preconstruction building permit in dealing with construction permits by introducing clearances and approvals electronic processing of building permit applications procedures and centralizing preconstruction approvals. In South Africa a few municipalities have already One-STOP started the digital transformation journey. Of shop in the locations measured, Cape Town has the construction fastest construction permitting process. There, Improve quality of builders have direct access to a single electronic Reduce possibility inspections with platform where they can submit and track their of corruption and better scheduling the use of "runners" and enhanced building plan applications. Building plans are reporting circulated internally by the municipality through a Development Application Management System Increase accountability and (DAMS).b Comments from relevant departments improve system of are obtained simultaneously during the electronic monitoring “circulation” workflow stage. All requirements from relevant departments are consolidated in a. This electronic platform was the result of a cooperation agreement signed in March 2014 between Kisumu County and the World Bank Group through the Kenya Investment Climate Program II (KICP II), funded by the Dutch government and aid from the U.K. government. b. Cape Town’s electronic platform is available at https://eservices.capetown.gov.za/irj/portal/. 36 DOING BUSINESS IN SOUTH AFRICA 2018 BOX 3.1 Electronic platforms for construction permitting in South Africa—the road ahead (continued) the letter of decision and sent to the applicant, also electronically, speeding up the building plan approval process and ensuring its overall efficiency. Msunduzi has undertaken a similar project. Once an application has been accepted by the building control department, the application is then processed for approval on the ENGAGE System (the building plan management software). Although this platform does not give the builder direct access, it does allow the municipality to easily track the application. This ensures that all steps—including the plan review, inspections and final approval—are coordinated. However, due to staff departures and retirements over the past two years (among plan examiners and building inspectors), the use of an electronic platform has not led to major reductions in time delays. Improvement and replication of an efficient electronic platform in other South African municipalities would not only reduce the overall complexity associated with the approval of building plans but would also reduce opportunities for corruption by decreasing the number of human interactions. To reap the benefits of going electronic, municipalities will need to ensure that they maintain the requisite capacity to manage workloads, train staff on how to use new systems and enforce time limits. More specifically, building control officers, plan examiners and building inspectors need to be trained to use new software and other tools. On-the-job training prevents delays caused by poor institutional capacity to review building documents or carry out on-site inspections. Additionally, having an up- to-date zoning masterplan and integration with the geographic information system increases the overall transparency of the system and may make some procedures (such as preliminary clearances from utilities) redundant and thus unnecessary. Municipalities like Nelson Mandela Bay, Johannesburg, Buffalo City and eThekwini have already shown interest in these technologies, but further exchanges, peer-to-peer learning events and cost-benefit analysis—accompanied by willingness and commitment at the municipal management level—will need to follow if implementation is to be successful. Some local initiatives also made the pro- as a separate requirement—versus part cess more burdensome. Cape Town now of the approval process, as in other loca- WHAT CAN BE IMPROVED? requires the approval of a waste integrated tions—has contributed to a drop in Cape plan as a mandatory preconstruction pro- Town’s overall performance in efficiency to Making the process of dealing with cedure. This requirement was introduced below the average for OECD high-income construction permits easier has several through a 2016 bylaw as part of the munici- economies. In 2016 Mangaung introduced benefits. First, economies with simpler pal environmental agenda to minimize the a fee of ZAR 5,500 ($400) to obtain an procedures and less costly regimes have waste going to landfills by making sure occupancy certificate, becoming the only larger construction industries. Second, construction waste is recycled in the cor- municipality measured to charge a fee for reducing the cost and hassle of obtain- rect facilities. The addition of this procedure this procedure. ing construction approvals keeps more construction in the formal economy, therefore improving public safety. Finally, FIGURE 3.5  Cost increases and a large number of procedures are making dealing with construction permits less efficient a simpler and faster building approval process benefits both the public and pri- Average distance to frontier score for the efficiency of dealing with construction permits vate sectors. A study in the United States (procedures, time and cost*) shows that accelerating permit approvals Cape Town by three months could increase a local eThekwini 2015 2018 government’s property-tax revenue by Buffalo City Msunduzi 16% and overall construction spending Ekurhuleni by 5.7%,15 expanding the benefits of Nelson Mandela Bay increased construction activity to the rest Mangaung Johannesburg East Asia OECD of the economy. Tshwane & Pacific high income average average 73.01 74.91 While some South African localities— 60 62 64 66 68 70 72 74 76 such as Cape Town and eThekwini— stand out in the process of construction Source: Doing Business database. permitting when compared with BRIC Note: The figure illustrates the change in each location’s average distance to frontier score (DTF) for procedures, time and cost to deal with construction permits, between 2015 and 2018. The DTF score shows how far a location is from the best or OECD high-income economies, other performance achieved by any economy on the dealing with construction permits indicator. The DTF score is normalized lagging localities show different strengths to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more information, see the chapter “About Doing Business and Doing Business in South Africa 2018” and the data notes. in managing construction permitting. The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific This means that there is room to improve averages are based on economy-level data for the 25 economies of East Asia and the Pacific. *For the cost DTF score, this figure uses the same income per capita for both years. and learn from other locations. DEALING WITH CONSTRUCTION PERMITS 37 The following list of recommendations Streamlining preconstruction clearances by improving is based on good practices both within South Africa and from other economies coordination and consolidating procedures is a key factor around the world and points to potential in making the construction permitting process more ways to introduce those improvements. efficient. Consider differentiating buildings, plus additional inspections their construction industries without projects by risk and introducing based on the building’s risk level. High- compromising the safety of workers, the risk-based inspections risk sites must undergo extra inspections. public or buildings. Categorizing building projects based on The assessment is adjusted accordingly risk and adopting risk-based inspections during construction. Increase efficiency by improving can streamline preconstruction approvals coordination, consolidating and procedures during construction for To set up a risk-based inspection system, procedures and implementing low-risk buildings and allow munici- South Africa should develop a detailed electronic platforms palities to better allocate resources. Yet system to categorize building risks, based Streamlining preconstruction clearances in South Africa the building plan approval on several criteria, including building is a key factor in making the construc- process does not differentiate by a con- classification, nature of use and occupan- tion permitting process more efficient. In struction project’s size or its level of risk cy. Classifying and assessing buildings is South Africa builders must complete five to public safety. All projects are subject important for determining the frequency more steps than in the average OECD to the same level of scrutiny, regardless of inspections. Because not all buildings high-income economy and the average of complexity. This may cause delays as are similar in terms of risk levels, an economy in East Asia and the Pacific. well as an inefficient use of resources, understanding of risks associated with especially where projects are relatively distinct types of buildings is essential. In locations such as Johannesburg, simple and routine. Mangaung, Nelson Mandela Bay and Differentiating projects by risk can also Tshwane the applicant must take the It also makes the inspection process inef- allow municipal departments to allocate plans to the different municipal depart- ficient. In South Africa inspections occur more resources to riskier projects while ments (such as water and sanitation, during specific phases of construction, maintaining required levels of inspec- fire, roads and stormwater, and energy) regardless of a building’s size, location tions for low-risk projects. Departments to obtain their comments. One way to or intended purpose. Phased inspection involved in issuing building plan approvals simplify this process is by establishing requires that authorities have enough could assess the actual costs of reviewing one-stop shops. Today, more than 37 resources to inspect buildings at each plans and conducting inspections and economies around the world have a one- phase. When all projects are subject to calculate fee rates accordingly. Additional stop shop for construction permitting. the same stringent regime, resources are brackets could be added based on risk Serbia made it mandatory to request more likely to be strained. For example, categories. This way, larger projects with a building permit online through the in Buffalo City the phased inspections do more substantial building fees could e-permit system. Singapore introduced not always occur in practice, due to an subsidize smaller ones. In economies that the CORENET (Construction and Real insufficient number of inspectors. This have adopted good practices in this area, Estate Network) electronic submission can lead to missed, hurried or incomplete building approval fees are generally set to system in 2013. This has streamlined inspections. recover the costs of the service provided the process for building professionals to and may vary depending on the size or request and obtain several approvals from Though many risk-based inspection complexity of the project. This approach different authorities. Obtaining approvals systems include a minimum number of can also be applied to inspections. for building and fire safety plans, com- phased inspections for all buildings, they mencement permits, environmental typically give priority to buildings with Introducing risk-based categories is chal- and parking clearances, and workplace high risks, such as environmental risks. lenging. Among the many prerequisites safety and health notifications are among Having fewer inspections for less risky are: sound legislation, accurate catego- the services that can be done through buildings lowers costs without compro- rization of buildings, effective agencies CORENET. However, the success of one- mising safety. This increases flexibility with sufficient resources and well-trained stop shops hinges on efficient coordina- and enables inspectors to move away workers with legal mandates to conduct tion among all departments involved and from random and phased inspections. inspections. Economies that have suc- often requires comprehensive legislation For example, the United Kingdom has cessfully implemented such systems that ensures information-sharing and defined key stages of inspections for all have seen more efficient inspections of establishes oversight mechanisms. In 38 DOING BUSINESS IN SOUTH AFRICA 2018 early 2017 Lagos, Nigeria, expanded Requirements,” which are the technical to cover these costs even if not required its electronic platform to the public by conditions needed to prepare the design to do so by law. In other economies, introducing an electronic title search at documentation. The municipality gath- however, liability is generally shared by the Lagos State Land Registry. As a result, ers these technical requirements from the contractor and the architect, often for the local authority eliminated the need to all departments, then gives them to the 10 years. In Australia, for example, both obtain an affidavit from a commissioner builder. This approach can significantly the contractor and the architect must of oath for title search, which used to be reduce preconstruction procedures and have insurance for 10 years. But even a required document when applying for a ease the applicant’s burden of having to among high-income economies, very few development permit. This reform reduced circulate building plans. make this insurance mandatory. In more the number of procedures and improved than 60% of economies, the architect coordination among local authorities. Introduce stringent liability and who designed the plans or the construc- insurance regimes for latent tion company will be held liable for any In the initial phase, South African munici- defects defects, but not the supervising engineer palities with a paper-based approach While builders and architects in South or the agency that conducted inspections can start by streamlining procedures and Africa are held liable for structural during construction. In most cases the processes. Analyzing the workflow to flaws or problems in the building, liabil- question of who is held liable depends eliminate redundancies and identifying ity coverage is not required by law but is on the origin of the defect. For example, bottlenecks can lead to better monitoring addressed through a contract between if the defect was a result of an error at the of incoming applications. These steps, parties. Additionally, there is no legal design stage, the architect is usually held combined with a risk-based approach, requirement for any party to obtain a liable. can reduce approval times without 10-year liability insurance policy to cover compromising safety. In the longer term, structural defects in the building once it Having insurance to cover costs that arise municipalities can start implementing is in use, nor do most parties obtain such from structural defects benefits all par- electronic platforms, which allow them insurance in practice. Liability regimes ties involved, from clients to contractors. to use a computerized workflow system should be coupled with a compulsory It ensures that damages will be covered across key departments, and gradually insurance system for owners, designers if defects occur once the building has open the system to integrating more ser- and contractors. Liability and insurance been occupied—and gives parties assur- vices in the permitting process. However, regimes are crucial in the construction ance that they are protected, which can building control authorities should sector because they ensure the account- encourage more construction. Having balance the costs and benefits of going ability of practitioners and the enforce- insurance to protect against excessive electronic. To determine cost effective- ment agencies themselves. Available costs from potential damages can be ness, having solid statistics—showing insurance systems also contribute to a particularly important for small and the number of building plans reviewed, restitution mechanism for an aggrieved medium-size construction companies. inspections conducted and certificates of party or plaintiff. In France government occupancy granted—can help a building legislation has established an insurance- Involve private sector control department identify where and driven building control process. The professionals in the when problems occur. Analyzing these result has been a construction regulation construction permitting process statistics can facilitate an understanding system that functions with very minimal Partnering with the private sector to sup- of how an electronic platform can bring state involvement and a largely simple plement municipalities’ strained capacity significant benefits in quality, provide and straightforward permitting process. to oversee building design, control and better service, reduce staff time and inspections can make the construction improve coordination with other munici- Contract and tort laws may specify a permitting process faster and more effi- pal departments. warranty period for the liability—a period cient. The South African locations where that can be extended for an additional the process takes the longest—such as Smaller South African municipalities, cost to the owner (if the builder pays Ekurhuleni, Johannesburg and Tshwane— where the cost of going electronic may an additional premium to the insur- could reap numerous benefits if private not be justified, could follow Lithuania’s ance company). In Belize, New Zealand sector involvement were carefully imple- example. The Vilnius municipality acts as and the United Kingdom, for example, mented within a coherent regulatory a one-stop shop that collects information the warranty period can range from framework. Most EU member economies from different departments on behalf of one to three years after the building is have made a complete shift from public the applicant. The builder submits only completed. During this time the build- to private governance mechanisms in one consolidated form to the municipal- ing contractor must repair any defects. building regulation, reflecting a desire ity requesting the “Special Architectural Contractors commonly hold insurance to improve the quality of regulation, DEALING WITH CONSTRUCTION PERMITS 39 reduce the administrative burden for building professionals to reduce public installations; the structural system; fire protection and fire installation systems; applicants and support a greater focus controls. Austria and Germany use quali- plumbing, drainage and sewerage works; and on risk mitigation.16 Japan established a fied professionals for plan reviews and any other certificates deemed necessary by successful regulatory system that relies inspections. Austria, Australia, Canada, the local authority (for example, roof truss, gas and glazing). on third-party checks, thereby increas- Germany, Japan, New Zealand, Singapore 8. In Buffalo City and Cape Town the builder ing its capacity to detect deficiencies in and the United Kingdom allow private can meet with the municipal town planning building design and construction. The professionals to conduct inspections. authority to ensure that the project complies with the town planning regulations. This former Yugoslav Republic of Macedonia pre-application consultation, although not initiated sweeping construction reforms mandatory, is a customary practice for new in 2007/08, mandating the use of private builders because it helps them ensure a streamlined building plan submission process. engineers licensed by the Chamber of 9. Like the site development plan, the pre- Engineers to undertake independent NOTES scrutiny stage in these municipalities serves building plan reviews. Since then, FYR to evaluate the building plans in terms of the 1. PricewaterhouseCoopers in South Africa. 2016. relevant development controls under the land Macedonia has seen significant improve- use scheme and to ensure compliance with “SA construction, 4th edition: Highlighting ments in the efficiency of construction as trends in the South African construction the town planning scheme. In eThekwini this measured by Doing Business. industry.” stage is known as a pre-assessment plan, and 2. National Planning Commission. 2012. in Msunduzi it takes the form of a pre-scrutiny “National Development Plan 2030: Our future inspection by both the land survey and town For the private sector to successfully –make it work.” planning departments. assume such an important regulatory 3. Hamman, Sonia. 2014. “Housing Matters.” 10. World Bank. 2009. Doing Business 2010: World Bank Policy Research Working Paper Reforming through difficult times. Washington, role, a robust vetting system should be in DC: World Bank Group. 6876. Washington, DC: World Bank. place. Private third-party entities carrying 4. The National Building Regulations and Building 11. The National Building Regulations and Building out controls on construction are entrust- Standards Act (Act No. 103 of 1977). The Standards Act (Act No. 103 of 1977) is act, which has been amended several times available free of charge at http:/ /www.nrcs ed to promote compliance with building .org.za. The associated regulations (Building since 1977, establishes the national regulatory codes and regulations and enforce framework for construction activity in South Standards SANS 10400-parts A to X) are rigorous safeguards in favor of the public Africa. Relatively general in format, this national available online but for purchase only at building code relies on the South African https://www.sabs.co.za. interest. To do so, public agencies could 12. A score of 2 is assigned for one of the National Standards (SANS-10400), which enforce professional certification criteria provide a code of practice for the application following options: a government agency, to ensure that individuals and firms are of the national building regulations and cover in-house supervising engineer, external the technical aspects of construction. These supervising engineer or external inspections eligible to take on a regulatory mandate. firm is legally mandated to oversee standards are published by the South African This is important because individuals Bureau of Standards (SABS). construction of the building throughout the and firms with poor qualifications would 5. Additional documents may be requested if entire construction period, or risk-based deemed necessary by the local municipality inspections are legally mandated. undermine the objective of such a regula- 13. To score a point on this section, the law must to comply with the town planning scheme. tory mechanism, as the quality of service An example of this is the site development explicitly hold a party liable. It cannot be provided by these professionals would plan (SDP). If the zoning certificate stipulates determined by a court or contract as in South that an SDP must be approved prior to the Africa. In South Africa the parties held liable fail to meet required safety standards. are determined by a contract, usually done by commencement of building work, then approval of the SDP must be obtained before the Joint Building Contracts Committee. However, third-party inspections may submission of the building plans. 14. The liability insurance section of the building 6. Although zoning requirements may already quality control index does not take into cost more. Doing Business data show that consideration professional insurance, which be met after a township has been established hiring a qualified third-party professional on a farm property, an unoccupied parcel is legally mandated in most countries—as on construction projects raises the cost of may be unstable due to underlying dolomite in South Africa. That generally applies only or undermined land. In South Africa it is to what happened on the construction site regulatory compliance by 1.3% on aver- during the construction phase and does not common practice to obtain an in-depth age in upper-middle-income economies. geotechnical and topographical survey of the extend past construction. The trade-off in economies with lower land plot. The geotechnical survey will provide 15. PricewaterhouseCoopers. 2005. “The information on the ground’s load-bearing Economic Impact of Accelerating Permitting prices is that regulatory compliance takes Process of Local Development and capacity and stability. This information is used longer than in those economies with by the appointed civil or structural engineer Government Revenues.” Report prepared third-party involvement. Municipalities to design an economical and technically for the American Institute of Architects, sound foundation system. A large-scale Washington, DC. in South Africa should take into consid- 16. Visscher, Henk, and Frits Meijer. 2005. topographical survey will show the main eration the cost-benefit tradeoff when physical features of the ground and provide “Certification of Building Control in the deciding whether to delegate some of accurate details about the changes in levels Netherlands.” OTB Research Institute for (elevation or vertical height) and the layout Housing, Urban and Mobility Studies. Delft their functions. Many economies with university of Technology, The Netherlands. contour lines and limitations of the land well-developed construction industries plot. These details are needed to design the have successfully implemented some drainage and stormwater circulation systems. level of collaboration with licensed private 7. These certificates of compliance may include: electrical wiring and other electrical Getting Electricity MAIN FINDINGS ƒƒ Connecting a business to the grid in South Africa requires only a handful of procedures, but it takes on average 114.2 days and costs 391.5% of income per capita, making this step longer and costlier than in comparable economies. ƒƒ Getting electricity is easiest in Cape Town, where it takes four procedures and 91 days and costs 597.2% of income per capita. It is more difficult and almost as expensive in Nelson Mandela Bay, where it takes six procedures and 190 days and costs 523.8% of income per capita. ƒƒ Cape Town, eThekwini and Johannesburg significantly improved the ease of getting electricity by starting to record standardized data on reliability of supply. ƒƒ Nelson Mandela Bay had the most meaningful reduction in time of all locations since 2015—it adopted reforms to streamline the process of getting electricity, which resulted in a decrease of more than five months. ƒƒ To further improve the ease of getting electricity, South Africa should enhance efforts to monitor and improve the reliability of supply, identify bottlenecks in the internal processes to reduce time, streamline the wayleave and excavation permit systems, make the cost and process of getting electricity more transparent to the customer and reduce the burden of the security deposit. GETTING ELECTRICITY 41 T he impact of electrification on has the strongest impact on company While in some countries the time to education, labor and income is productivity.2 It is estimated that a weak connect to the grid is as short as 10 days, well-documented. In fact, esti- power infrastructure in Sub-Saharan in others it can take over a year. The effi- mates suggest that the electrification of Africa drags down economic growth ciency of the process of getting electricity, a household leads to average increases of by about 2 percentage points per year.3 however, is only one part of the equation. around 7% in school enrollment, 25% in Moreover, studies suggest that firms per- Equally important is what happens once employment and 30% in incomes.1 From form better in terms of sales in countries the business is connected to the grid, as a business perspective, a country’s elec- where it is easier and less costly to get an outages may occur or electricity con- tricity supply is one of the elements that electricity connection.4 sumption may be prohibitively expensive. WHAT DOES GETTING ELECTRICITY MEASURE? Doing Business records all procedures required for a business to obtain a permanent electricity connection and supply for a standardized warehouse. These procedures include applications and contracts with electricity utilities, all necessary inspec- tions and clearances from the distribution utility and other agencies, and the external and final connection works. To make the data comparable across locations, several assumptions about the warehouse and the electricity connection are used. The location of the warehouse is assumed to be within city limits, the subscribed capacity of the connection is 140 kilovolt- ampere (kVA) and the length of the connection is 150 meters. In 2015 Doing Business started measuring how reliable the supply of electricity is and how transparent the consumption tariffs are. The reliability of supply and transparency of tariffs index encompasses quantitative data on the duration and frequency of power outages as well as qualitative information on several aspects: the mechanisms put in place by the utility for monitoring power outages and restoring power supply, the reporting relationship between the utility and the regulator for power outages, the transparency and accessibility of tariffs and whether the utility faces a financial deterrent aimed at limiting outages. The index accounts for one-fourth of the distance to frontier score for getting electricity (see figure). In addition, Doing Business records the price of electricity in each location covered.a Getting electricity: measuring efficiency, reliability and transparency Rankings are based on distance to Total duration and frontier scores for four indicators Measures the total duration (SAIDI) and frequency (SAIFI) of frequency of outages power outages per customer in a year per customer a year Days to obtain Cost to obtain a an electricity connection, as % of connection income per capita Mechanisms for Assesses whether the distribution utility uses automated tools to monitoring outages monitor power outages Mechanisms for Assesses whether the distribution utility uses automated tools to 25% 25% restore power supply Time Cost restoring service 25% 25% Procedures Reliability of supply and Assesses whether a regulator—that is, an entity separate from transparency Regulatory monitoring the utility—monitors the utility’s performance on reliability of of tariffs index supply Steps to file a connection Assesses whether the utility either pays compensation to Financial deterrents customers or faces fines by the regulator (or both) if outages application, complete works, go through aimed at limiting outages exceed a certain cap inspections and sign a supply contract Communication of tariffs Assesses whether effective tariffs are available online and tariff changes a. While Doing Business records the price of electricity, it does not include these data when calculating the distance to frontier score or the ranking on the ease of getting electricity. 42 DOING BUSINESS IN SOUTH AFRICA 2018 Research shows that power outages have FIGURE 4.1  Over twenty power stations generate electricity across the country a negative impact on the production effi- ciency of firms in Sub-Saharan Africa.5 The FUTURE HYDROELECTRIC POWER SYSTEM ZIMBABWE FUTURE THERMAL POWER STATION impact is particularly hard on small and MOZAMBIQUE HYDROELECTRIC POWER STATION BOTSWANA 400 kV medium enterprises (SMEs) because they INTERCONNECTION SUBSTATION FUTURE RENEWABLES Polokwane Medupi typically lack resources to buy generators. RENEWABLES Matimba THERMAL POWER STATION Corumana Data from World Bank Enterprise Surveys NUCLEAR POWER STATION 132 kV Kusile NAMIBIA show that 38% of SMEs in developing FUTURE GAS STATION PRETORIA kV GAS POWER STATION 765 countries own a generator, as opposed to FUTURE SUBSTATION Johannesburg ESWATINI POSSIBLE FUTURE GRID SYSTEM 60% for larger firms.6 EXISTING GRID SYSTEM 40 0k V Mercury NOT YET COMPLETE V 0k Upington 40 Ingula 765 kV In South Africa unreliable electric- Kimberley Bloemfontein Drakensberg Richards Bay 765 kV ity supply was one of several domestic LESOTHO factors contributing to the economy’s Durban 400 kV kV 765 Umgeni poor growth over the past few years.7 Vanderkloof As the South African economy thrived kV Gariep 400 following democratization in 1994, IBRD 43907 | Klipheuwel Atlantis electricity demand increased. But the AUGUST 2018 765 This map was produced by the Koeberg Kappa kV CITY Cartography Unit of the World East London electricity supply did not keep pace with Bank Group. The boundaries, colors, denominations and any other Acacia Port Rex NATIONAL CAPITAL information shown on this map do not imply, on the part of the World Port Elizabeth PROVINCE BOUNDARIES the demand, which eventually resulted in Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of Cape Town Palmiet Gourikwa Mossel Bay INTERNATIONAL BOUNDARIES an energy crisis in 2008. Reserve sup- such boundaries. ply margin dropped from 25% in 2004 to 8% in 2008, and load shedding was Source: Eskom (May 2018). a widespread practice to reduce the strain on the electricity grid.8 Since then the country (figure 4.1). The current rate same throughout the measured locations. there has been significant improvement of access to electricity in South Africa There are three common procedures to in the country’s reliability of supply. is 84.2%. Access is much lower in rural connect to the grid in South Africa. A Nevertheless, risks continue in 2018, areas (67.9%) than in cities (92.9%).15 few additional intermediary steps apply, with coal shortages and industrial labor depending on the location (figure 4.2). actions threatening to affect the reliability Electricity distribution is a shared under- of electricity supply and hurt business. taking: South African municipalities First, the customer submits an application handle most of the urban distribution, to the distribution utility for a new electric- while Eskom distributes power primarily ity connection. In Cape Town, Ekurhuleni, HOW DOES GETTING to rural areas and smaller cities. In each eThekwini, Mangaung, Nelson Mandela ELECTRICITY WORK IN of the nine locations benchmarked, a dif- Bay and Tshwane the application forms SOUTH AFRICA? ferent distribution utility is measured. All can be downloaded online. Although the distribution utilities covered purchase almost all the municipalities measured Electricity services in South Africa electricity from Eskom and negotiate the accept applications via e-mail, customers are governed by an expansive regula- tariffs annually with that company under usually submit the application to the utility tory framework.9 The National Energy NERSA’s supervision. Distribution utilities in hard copy.16 Regulator of South Africa (NERSA)10 is are governed by municipal bylaws that responsible for regulating electricity.11 typically provide step-by-step descriptions Second, the utility prepares the project NERSA issues licenses with terms and of how the process of getting electricity design for the external connection and conditions for generation, transmission should work, the documents required for issues a connection fee estimate stating and distribution.12 Eskom, a state-owned the application and the responsibilities of the costs for material, labor and network electricity company, generates and utilities and customers. charges. These costs vary among loca- transmits roughly 95% of South African tions. The issuance of a connection fee electricity.13 The remaining 5% is pro- The process of obtaining a permanent estimate is usually preceded by an exter- duced by independent power suppliers or electricity connection is generally the nal site inspection by the utility’s planner. small municipal generators.14 Electricity is produced by over 20 power stations The process of obtaining a permanent electricity connection currently in operation, and coal accounts for almost 83% of power generation in is generally the same throughout the measured locations. GETTING ELECTRICITY 43 FIGURE 4.2  Getting a permanent electricity connection in South Africa takes four to Getting electricity is easiest in Cape six procedures Town, where it takes four procedures and 91 days and costs 597.2% of income Submit an application for electricity connection to distribution utility and obtain connection fee estimate per capita (table 4.1). It is more difficult in Nelson Mandela Bay, where it takes Await external site inspection by distribution utility* six procedures and 190 days and costs Await utility’s inspection of meter box/circuit breaker 523.8% of income per capita. Await completion of external connection works by distribution utility How the process compares Differences among locations depend Open customer account, sign supply contract with distribution utility and submit proof of payment of security deposit largely on whether inspections are Obtain certificate of compliance (COC) for the internal wiring and submit to distribution utility to obtain required. The process of getting electricity final connection is simpler in Cape Town and Mangaung, Distribution utility Customer's electrical engineer/ Procedure present with only four procedures. It is more consultant/contractor in all locations complex in Ekurhuleni, Msunduzi, Nelson * Procedure usually happens simultaneously with the previous one. Mandela Bay and Tshwane, where six steps are required. In these locations the Source: Doing Business database. distribution utility typically carries out two inspections: an external site inspec- In some locations the utility requires is a statutory requirement for every user or tion before the connection fee estimate is the customer to install a meter box, a lessor of an electrical installation to have a issued and a meter box inspection before step that would be followed by another valid COC for every such installation; this the connection works begin. In Ekurhuleni inspection by the utility. In Johannesburg must be signed by a licensed electrical and Tshwane the utility performs a third the procedures are slightly different. contractor registered with the Department inspection to test the voltage after the Instead of inspecting the meter box, the of Labour.19 Submission of a copy of the connection works are finalized and the utility performs a “trip test” in the circuit COC to the distribution utility is usually meter is installed. breaker and schedules a “kickoff” meet- the last procedure, after which the power is ing with all stakeholders before connec- switched on. More inspections imply more proce- tion works can start.17 dures, which means a longer time to On average across South Africa, getting obtain a connection (figure 4.4). While As a following general step, the customer electricity takes five procedures lasting inspections of internal wiring and meter submits proof of payment of the connec- 114.2 days and costs 391.5% of income boxes are important in the South African tion costs and awaits the completion of per capita. The number of steps is com- context for safety concerns, they could external connection works by the distri- parable to OECD high-income economies happen with minimal customer engage- bution utility. South African distribution (4.7) and outperforms Mexico (6.8) and ment. Locations where utilities perform utilities are responsible for the external Nigeria (10). However, connecting a busi- two or more inspections have longer connection works up to the customer’s ness to the grid in South Africa takes a delays—on average, almost two months boundary—including the meter installa- month longer and is three times costlier longer—than places where there are no tion. The internal wiring up to the meter than in the BRIC economies (Brazil, the inspections or only one. box is the customer’s responsibility. In all Russian Federation, India and China), locations except Johannesburg and Cape where it takes 84.1 days and costs 137.2% The time it takes to connect a business to Town, the customer is required to sign a of income per capita on average (figure the grid varies substantially across the nine supply contract with the distribution util- 4.3). On the reliability of supply and locations measured. Buffalo City remains ity for billing purposes.18 transparency of tariffs index, South Africa the fastest place to obtain an electric- has a notably lower average score (1.6 ity connection in South Africa, taking 76 Finally, once the connection works are points) than BRIC (6.6 points) and OECD days—faster than the United Kingdom completed, the customer’s electrical con- high-income economies (7.4 points). (79 days) and Kenya (97 days). Nelson tractor tests the internal wiring and issues a certificate of compliance (COC). As a glob- Locations where utilities perform two or more inspections ally recognized good practice, South Africa have longer delays—on average, almost two months ensures safety by regulating the electrical profession and establishing clear liability longer—than places where there are no inspections or arrangements for electrical contractors. It only one. 44 DOING BUSINESS IN SOUTH AFRICA 2018 FIGURE 4.3  Getting electricity in South Africa requires the same number of steps as in OECD high-income economies, but the cost and the reliability of supply and transparency of tariffs index put them worlds apart EEFFICIENCY OF GETTING ELECTRICITY RELIABILITY OF SUPPLY AND TRANSPARENCY OF TARIFFS Procedures Time Cost Index (number) (days) (% of income per capita) (0–8) Malaysia, 0 0 United Kingdom United Arab Emirates Japan (global best) and 26 other (global best) 10 Australia 50 8 economies United Kingdom (global best)* 1 20 Malaysia 100 OECD OECD high income high income 7 30 Chile 150 Malaysia Mexico, Australia Rwanda BRIC Johannesburg 40 200 BRIC United Arab 2 Namibia Cape Town Namibia, Chile 6 Emirates Chile 50 250 (global best) 60 300 eThekwini Kenya, 3 Mexico Buffalo City 5 United Kingdom East Asia 70 Namibia 350 Ekurhuleni & Pacific Australia 80 Buffalo City 400 South Africa Kenya eThekwini, United Kingdom, average 4 Johannesburg 4 90 450 East Asia & Pacific Malaysia, Rwanda Cape Town, OECD high income Cape Town Tshwane BRIC Mangaung BRIC 100 500 Mangaung Kenya eThekwini East Asia & Pacific Nelson 3 Buffalo City, Mexico 110 Ekurhuleni 550 OECD high income 5 Mandela Bay South Africa eThekwini, Mangaung Australia, Chile Johannesburg 120 Johannesburg 600 range Cape Town (9 locations) South Africa Tshwane 2 140 South Africa average 650 average South Africa 6 Msunduzi East Asia average Namibia Ekurhuleni, 150 & Pacific 700 Msunduzi, Kenya 1 Nelson Mandela Bay, 190 750 Nelson Mexico 7 Tshwane Mandela Bay Rwanda 6 South African 200 2800 Rwanda locations 0 Source: Doing Business database. Note: The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, Russia, India and China. *These are Belarus; Belgium; Costa Rica; Cyprus; the Czech Republic; Estonia; Finland; France; Germany; Hong Kong SAR, China; Ireland; Japan; Kazakhstan; Republic of Korea; Lithuania; the Netherlands; Panama; Portugal; the Russian Federation; the Slovak Republic; Slovenia; Spain; Sweden; Taiwan, China; the United Arab Emirates; and Uzbekistan. FIGURE 4.4  Obtaining a new connection takes two more procedures and almost 100 days longer for an entrepreneur in Nelson Mandela Bay than for one in Cape Town Submit an application for electricity connection to distribution utility and Nelson Mandela Bay obtain connection fee estimate Await external site inspection by distribution utility Await utility’s inspection of meter box - 99 days Cape Town Await completion of external connection works by distribution utility Open customer account, sign supply contract with distribution utility and await meter installation Obtain certificate of compliance (COC) for the internal wiring and submit to distribution utility to obtain final correction 0 20 40 60 80 100 120 140 160 180 200 Time to get electricity (days) Source: Doing Business database. Mandela Bay remains the slowest, at 190 Delays affecting the total time are related connection works by the distribution days. On average, South African businesses to the issuance of a connection fee esti- utility (more than half of the total time) wait almost a month longer to connect to mate (which takes about one-third of the (figure 4.5). In Cape Town, Ekurhuleni, the grid than their BRIC counterparts. total time) and the completion of external eThekwini and Johannesburg delays GETTING ELECTRICITY 45 TABLE 4.1  Getting electricity in South Africa—where is it easier? Reliability of 2018 2015 supply and Distance to Distance to Cost transparency of Rank frontier score frontier score Procedures Time (% of income tariffs index Location (1–9) (0–100) (0–100) (number) (days) per capita) (0–8) OECD high income average 84.44 83.60 4.7 79.1 63.0 7.4 BRIC average 82.33 74.60 4.4 84.1 137.2 6.6 East Asia & Pacific average 72.23 68.81 4.5 71.6 712.0 3.7 South Africa average 58.92 52.05 5.2 114.2 391.5 1.6 Cape Town (Cape Town) 1 79.81 60.27 4 91 597.2 6 eThekwini (Durban) 2 69.40 57.52 5 100 277.2 4 Johannesburg (Johannesburg) 3 68.77 41.81 5 109 165.4 4 Mangaung (Bloemfontein) 4 59.82 62.59 4 106 468.2 0 Buffalo City (East London) 5 59.40 59.47 5 76 313.0 0 Ekurhuleni (Germiston) 6 52.09 52.35 6 104 343.4 0 Tshwane (Pretoria) 7 51.24 51.24 6 110 407.0 0 Msunduzi (Pietermaritzburg) 8 47.59 47.54 6 143 428.5 0 Nelson Mandela Bay (Port Elizabeth) 9 42.19 35.69 6 190 523.8 0 Source : Doing Business database. Note: Rankings are based on the average distance to frontier score (DTF) for the procedures, time and cost associated with getting electricity as well as for the reliability of supply and transparency of tariffs index. The DTF score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). The DTF score from the 2015 report includes all data revisions and methodological changes implemented since then. For more details, see the chapter “About Doing Business and Doing Business in South Africa 2018.” Locations that do not use the SAIDI and SAIFI benchmarks to calculate outages are ineligible to score on the reliability of supply and transparency of tariffs index and thus receive 0 points on this indicator component. The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, Russia, India and China. in the connection works are related to in the vicinity.20 Connection works cannot The cost to get electricity in South Africa obtaining wayleaves and excavation start before wayleaves are issued—these ranges from 165.4% of income per capita permits from municipal departments and agreements establish rights of access in Johannesburg to 597.2% in Cape Town agencies as well as from relevant utilities while the work is being done—and the (figure 4.6). This is much higher than and other service providers that may wayleave application process can take in the Russian Federation and Brazil, for already have underground infrastructure from a week to several months. instance, where connection costs amount to 41.5% and 54.5% of income per capita, respectively. Two main reasons account FIGURE 4.5  South African utilities take an average of 39 days to issue a connection for the variation in cost: the requirement fee estimate and 66 days to complete external connection works for installation or upgrade of a mini- substation or transformer, and the amount Nelson Mandela Bay 68 105 17 190 of security deposit charged by the utility. Msunduzi 30 105 8 143 South Africa average 39 66 10 115 Connecting the Doing Business warehouse Tshwane 30 68 12 110 to the grid in the industrial areas measured Johannesburg 60 42 7 109 requires the installation of a mini-substation or transformer in all the benchmarked loca- Mangaung 50 45 11 106 tions except eThekwini and Johannesburg. Ekurhuleni 25 60 19 104 The cost associated with a transformer eThekwini 29 60 11 100 tends to significantly increase the total cost Cape Town 25 60 6 91 to connect to the grid. However, distribu- tion utilities in South Africa subsidize the Buffalo City 30 45 1 76 cost, which means that an entrepreneur Time (days) does not have to pay the full price of a mini- Connection fee estimate Connection works Others* substation when a network extension is required. Rather, this cost is prorated to the capacity of the warehouse and embedded Source: Doing Business database. *“Others” include inspections and the signing of a supply contract with the distribution utility. in the connection fee estimate. 46 DOING BUSINESS IN SOUTH AFRICA 2018 FIGURE 4.6  A firm pays four times more to connect to the grid in Cape Town than in well as clarity in the information provided Johannesburg by the supplier on consumption costs. The scoring is based on six components, Johannesburg South Africa average Security 391.5% for a total of 8 possible points. The first deposit eThekwini five components relate to power outages: 25% Buffalo City total duration and frequency of outages 20% Ekurhuleni per customer per year (3 points), mecha- 5% nisms for monitoring outages (1), mecha- Tshwane nisms for restoring service (1), regulatory Connection costs 75% Msunduzi monitoring (1) and financial deterrents Mangaung aimed at limiting outages (1). The sixth Nelson component relates to the transparency of Mandela Bay Lost interest earnings with electricity tariffs (1 point). the security Cape Town deposit 0 100 200 300 400 500 600 700 Scoring 6 points, Cape Town has the best Average cost breakdown to Average cost of electricity in South Africa performance on this index, followed by get electricity in South Africa (% of income per capita) eThekwini and Johannesburg, which both score 4 points. Buffalo City, Ekurhuleni, Source: Doing Business database. Mangaung, Msunduzi, Nelson Mandela Note: Doing Business does not record the full amount of the security deposit. Instead, it records the present value of the losses in interest earnings experienced by the customer because the utility holds the security deposit over a Bay and Tshwane do not score any points prolonged period, in most cases until the end of the contract (assumed to be after five years). For more details, see on the reliability of supply and transpar- the data notes. ency of tariffs index (table 4.2). The As in half of the 190 economies mea- but almost double the cost in Mexico discrepancy lies in how reliability is mea- sured by Doing Business in 2016/17, entre- (6.5 cents). sured. Data related to the duration and preneurs in South Africa bear the cost of frequency of power outages are calculated a security deposit. Security deposits are Going beyond efficiency— by the system average interruption dura- charged to safeguard utilities against the reliability of supply and tion index (SAIDI) and the system average non-payment and are usually paid by the transparency of tariffs index interruption frequency index (SAIFI). If the customer before the supply contract is The reliability of supply and transparency municipality does not calculate SAIDI and signed. Across the locations measured, of tariffs index measures the quality of SAIFI (as defined by the Doing Business security deposits comprise almost a electricity services provided by distribu- methodology), it receives a score of 0 on quarter of the total cost to get electricity. tion utilities and suppliers (box 4.1). It the overall index, even if it would other- They range from 2.8% of the total cost in looks at stability in power distribution as wise score points on other components. Cape Town to 31.9% in Ekurhuleni, and the method for calculating the deposit also varies across locations.21 To reduce FIGURE 4.7  A firm in Johannesburg pays nearly two-thirds more for monthly the burden on customers, Buffalo City, consumption than a firm in Cape Town Mangaung and Tshwane accept a bank Price of electricity (U.S. cents per kilowatt-hour) guarantee to settle the security deposit. 15.5 15.7 14.9 South Africa average 14.1 13.0 13.7 In addition to the cost to obtain a new 11.7 11.8 connection and the security deposit, the 9.8 10.1 entrepreneur must pay for electricity consumption. Monthly electricity prices vary significantly across South African locations,22 ranging from 9.8 U.S. cents per kilowatt-hour in Cape Town to 15.7 cents in Johannesburg (figure 4.7). On average across the nine locations mea- sured, the monthly consumption cost Cape Town Nelson eThekwini Ekurhuleni Msunduzi Tshwane Buffalo Mangaung Johannesburg Mandela City is 13 cents per kilowatt-hour in South Bay Africa. This is slightly cheaper than the average for BRIC economies (13.8 cents) Source: Doing Business database. GETTING ELECTRICITY 47 BOX 4.1 Measuring reliability of supply—why does it matter? Distribution system reliability is “the ability of the distribution system to perform its function under stated conditions for a given period of time without failure.”a This is vital for any type of business. Unreliable distribution systems adversely affect productiv- ity, investments and competitive potential. Moreover, domestic and foreign capital tends to go to countries that can offer a reli- able supply of electricity.b It is not by chance that unreliable electricity service is identified as a major obstacle by nearly a third of firms surveyed globally.c To assess whether a distribution system is reliable or not, data on duration and frequency of power interruptions must be gath- ered. Collecting data is the first step to identifying bottlenecks and gaps in system reliability. It provides important input for stra- tegic development and remedial action. Measuring outages allows utilities to recognize problem areas in electric power systems and solve them, improving reliability of supply for the small and medium-size businesses they serve. The two benchmarks commonly used to calculate outages—SAIDI (system average interruption duration index) and SAIFI (sys- tem average interruption frequency index)—are standardized key performance indicators developed by the Institute of Electrical and Electronic Engineers Power & Energy Society.d This standard is used around the world to quantitatively measure distribution reliability. In addition to estimating interruptions by distribution systems, substations, circuits and defined regions, SAIDI and SAIFI allow an assessment of power outages from the customer’s perspective. Because SAIDI and SAIFI are measured by more than 120 economies around the world and require simple variables to be inter- preted, they allow utilities to compare performance with one another locally and globally. They also compel utilities to look at reliability from an equity perspective. First, the indices reflect the perspective of the average customer. Both large companies and small households have equal weight in the calculation. Second, they require mapping of all customers for the different feeders across the network. Therefore, they help identify where reliability is a big issue—which is often outside the main industrial areas. Finally, research shows that economies where SAIDI and SAIFI data are not available have more power outages on average and significantly less reliable service.e The Lao People’s Democratic Republic and Oman are examples of countries that reduced power outages once they began tracking SAIDI and SAIFI.f One likely reason is that authorities can now see where outages are most common at the feeder-station level. From there, they can target their investments to improve power network reliability in those areas. a. Hua, Bowen, et al. “Reliability Evaluation of Distribution Systems Considering Demand Response: ‘Application of IEEE Std 1366TM-2012.’” Available at http://www.standardsuniversity.org/wp-content/uploads/Reliability_Evaluation_of_Distribution_Systems_Considering_Demand_Response.pdf. b. World Bank. 2010. “Managing an Electricity Shortfall: A Guide for Policy Makers.” Available at https://openknowledge.worldbank.org/handle/10986/2999. c. According to 2010–17 data from World Bank Enterprise Surveys, 31.5% of the firms surveyed globally identify electricity as a major constraint to their activities. Enterprise Survey database (http:/ /www.enterprisesurveys.org), World Bank. d. IEEE Power and Energy Society. “IEEE Guide for Electric Power Distribution Reliability Indices.” Institute of Electrical and Electronics Engineers. Available at https:/ /ieeexplore.ieee.org/document/6209381/. e. Arlet, Jean. 2017. “Electricity Sector Constraints for Firms Across Economies: A Comparative Analysis.” Doing Business Research Notes No. 1/June 2017, available at http://documents.worldbank.org/curated/en/409771499690745091/pdf/117320-BRI-PUBLIC-Doing-Business-Research-Notes.pdf. f. Lao PDR started calculating SAIDI and SAIFI in 2017 and improved on the interruption duration index (SAIDI) from 49.28 to 8.4 in 2018 and on the interruption frequency index (SAIFI) from 9.42 to 7.2. Oman, which started calculating SAIDI and SAIFI in 2016, went from SAIDI 3.39 to 2.82 in 2018 and from SAIFI 2.24 to 1.36. All benchmarked municipalities have NERSA requires every utility to annu- As for financial deterrents aimed at supervisory control and data acquisition ally submit electricity distribution forms limiting outages—another component (SCADA) systems for monitoring out- (D-Forms), which measure medium- of the reliability of supply and transpar- ages and restoring service. A SCADA and high-voltage forced interruption ency of tariffs index—no such regulation system improves reliability of supply statistics.23 It also recommends that exists in South Africa, an omission that because it helps utilities detect a power utilities maintain their own records can negatively affect reliability of sup- outage and take action automatically and and keep track of data on each forced ply. Doing Business data reveal that low remotely—which reduces the average interruption. and lower-middle-income economies interruption time. Measuring outages allows utilities to recognize problem Concerning regulatory monitoring, the areas in electric power systems and solve them, improving National Energy Regulator of South Africa has the duty to monitor a utility’s reliability of supply for the small and medium-size performance on reliability of supply. businesses they serve. 48 DOING BUSINESS IN SOUTH AFRICA 2018 TABLE 4.2  Only Johannesburg, eThekwini and Cape Town score on the reliability of supply and transparency of tariffs index Johannesburg Mandela Bay Buffalo City Cape Town Ekurhuleni Mangaung eThekwini Msunduzi Tshwane Nelson Reliability of supply and transparency of tariffs index (0–8) 6 4 4 0 0 0 0 0 0 Total duration and frequency of outages per customer per year (0–3) 2 0 0 — — — — — — System average interruption duration index (SAIDI) 3.5 37.9 44.0 — — — — — — System average interruption frequency index (SAIFI) 0.9 2.5 6.5 — — — — — — What is the minimum outage time (in minutes) that the utility considers for the 5.0 5.0 5.0 — — — — — — calculation of SAIDI/SAIFI? Mechanisms for monitoring outages (0–1) 1 1 1 1 1 1 1 1 1 Does the distribution utility use automated tools to monitor outages? Yes Yes Yes Yes Yes Yes Yes Yes Yes Mechanisms for restoring service (0–1) 1 1 1 1 1 1 1 1 1 Does the distribution utility use automated tools to restore service? Yes Yes Yes Yes Yes Yes Yes Yes Yes Regulatory monitoring (0–1) 1 1 1 1 1 1 1 1 1 Does a regulator—that is, an entity separate from the utility—monitor the Yes Yes Yes Yes Yes Yes Yes Yes Yes utility’s performance on reliability of supply? Financial deterrents aimed at limiting outages (0–1) 0 0 0 0 0 0 0 0 0 Does the utility either pay compensation to customers or face fines by the No No No No No No No No No regulator (or both) if outages exceed a certain cap? Communication of tariffs and tariff changes (0–1) 1 1 1 1 1 1 1 1 1 Are effective tariffs available online? Yes Yes Yes Yes Yes Yes Yes Yes Yes Are customers notified of a change in tariff ahead of the billing cycle? Yes Yes Yes Yes Yes Yes Yes Yes Yes Source: Doing Business database. — = not available. Note: If SAIDI and SAIFI values are above 12 and below 100, no score is assigned but the economy is still eligible to score on this index. If SAIDI and SAIFI are 12 (equivalent to an outage of one hour each month) or below, a score of 1 is assigned. If SAIDI and SAIFI are 4 (equivalent to an outage of one hour each quarter) or below, 1 additional point is assigned. Finally, if SAIDI and SAIFI are 1 (equivalent to an outage of one hour per year) or below, 1 more point is assigned. Locations that do not use the SAIDI and SAIFI benchmarks to calculate outages are ineligible to score on the reliability of supply and transparency of tariffs index and thus receive 0 points on this indicator component. using such financial deterrents averaged those power interruptions. The means of 53 power interruptions in 2015, while communicating load-shedding plans are WHAT HAS CHANGED? economies in the same income group rather standardized throughout the coun- without the financial deterrents had try, and customers are notified at least Nelson Mandela Bay had the most three times more outages. Finally, all one week in advance. The most common dramatic reduction in time of all nine municipalities surveyed in South notification methods are publication on benchmarked locations (table 4.3). In Africa communicate tariffs and tariff the utility’s website and via newspaper addition to enhancing service delivery, changes to their customers online and and mail.24 the municipality managed to put pro- ahead of the billing cycle. tocols in place to retain staff and hold Buffalo City, Ekurhuleni, Mangaung, back the strikes that contributed to Transmission and distribution of electric- Msunduzi, Nelson Mandela Bay and prolonged delays in 2015. Thanks to ity can be affected by different factors Tshwane can improve in the reliability of successful measures—such as creat- (box 4.2). Aging infrastructure, faulty supply and transparency of tariffs index ing a “Getting Electricity Improvement equipment, electricity supply short- by starting to compute SAIDI and SAIFI Team” to improve service delivery in ages and even inclement weather can to meet international standards. Cape the application process, hiring external cause power interruptions. Although Town, eThekwini and Johannesburg service providers to perform connection planned outages and load shedding have can advance in the index by reducing works and procuring major items for significantly decreased in South Africa the number of power outages and their construction—the time to get electric- since 2015, the nine utilities assessed duration. ity in Nelson Mandela Bay dropped by still notify customers in advance of almost half, from 347 to 190 days. GETTING ELECTRICITY 49 BOX 4.2 Factors affecting the transmission and distribution of electricity Several factors can adversely affect network performance. In electricity supply, these factors are called losses. They refer to the amounts of electricity injected into the transmission and distribution grids that are not paid for by users. Losses can be technical or non-technical.a Technical losses are due to power dissipation in the transmission and distribution process. Non-technical loss- es are caused by actions external to the power system, such as cable theft and vandalism, illegal connections and non-payment, and errors in accounting and record-keeping. Losses can happen in electric power transmission and distribution. In South Africa the acceptable range Electric power transmission and distribution losses (% of output) of energy losses in distribution, ac- cording to the National Energy Regulator of South Africa, is 5% to 15.8 12%.b Currently, total distribution 13.6 13.8 losses amount to 7.7%, with a finan- 13.2 12.9 12.9 12.7 12.7 cial impact of $1.5 billion per year.c 12.1 The main causes of losses in South Africa are illegal connections and me- 9.8 9.5 8.8 8.7 ter tampering. 8.2 8.5 8.5 8.4 7.6 Non-technical losses—a critical issue 6.2 6.4 6.2 6.5 6.3 6.3 6.4 6.4 6.3 not only in South Africa but in other 6.3 6.0 5.9 5.8 5.8 developing economies—can have a 5.7 5.6 5.6 5.4 substantial economic impact. Brazil, 1990 2000 2008 2009 2010 2011 2012 2013 2014 for instance, lost around $2 billion South Africa East Asia & Pacific OECD high income BRIC because of non-technical losses in 2015.d In India, which has one of the highest levels of electricity losses in Source: World Bank, World Development Indicators. Note: The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia the world, non-technical losses can & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC exceed 20% in some states.e averages are based on economy-level data for Brazil, the Russian Federation, India and China. Transmission and distribution losses are lower on average in South Africa (8.4%) than in the BRIC economies (12.7%) but higher than in the OECD high-income economies (6.3%) and the economies of East Asia and the Pacific (5.4%) (see figure). Addressing non-technical losses demands a broad approach and a long-term effort. Among the strategies to reduce these losses: convert regular meters into smart meters to avoid meter tampering; disconnect illegal connections and electrify informal settlements; and fill in gaps and correct errors related to billing. Ekurhuleni, Tshwane and Johannesburg have been slowly introducing smart grid technology, following the national standard (NRS 049-2008). Smart grid technology helps detect illegal electricity usage and power outages, optimizes energy use and delivers enhanced levels of reliability and security of supply.f a. World Bank. 2009. “Reducing Technical and Non-Technical Losses in the Power Sector.” Background Paper for the World Bank Group Energy Sector Strategy. b. NERSA. 2014. Electricity Distribution Forms (D-Forms) Manual/Guide, available at http://www.nersa.org.za/Admin/Document/Editor/file/Electricity /Forms/Distribution%20Forms/Electricity%20Distribution%20Forms%20Completion%20Guide.pdf. c. Information provided by Eskom during a presentation to the subnational Doing Business project team on May 16, 2018. d. Instituto Acende Brasil. February 2017. 18 White Paper, Edition No. 18 “Perdas Comerciais e Inadimplência no Setor Elétrico,” available at http://www.acendebrasil.com.br/media/estudos/2017_WhitePaperAcendeBrasil_18_PerdasInadimplencias.pdf. e. U.S. Energy Information Administration. October 22, 2015. Today in Energy. “India aims to reduce high electricity transmission and distribution system losses,” available at https://www.eia.gov/todayinenergy/detail.php?id=23452. f. Sustainable Energy Africa. 2015. “Smart Metering: Overview and Considerations for South African Municipalities,” available at https:/ /africancityenergy.org/uploads/resource_127.pdf. Cape Town improved considerably by streamlining internal processes and improving the reliability of supply. Both starting to calculate SAIDI and SAIFI, phasing out the application fee for first- municipalities started calculating the which enabled it to score on the reliabil- time applicants, reducing the burden on total duration and frequency of outages ity of supply and transparency of tariffs customers.25 per customer using the SAIDI and SAIFI index. The municipality also reduced the methodology, making them eligible to time to issue a connection fee estimate Johannesburg and eThekwini have score on the reliability of supply and by nearly 20% (from 31 to 25 days) by also made it easier to get electricity by transparency of tariffs index. 50 DOING BUSINESS IN SOUTH AFRICA 2018 TABLE 4.3  What locations have made it easier to get electricity in South Africa since 2015? Streamlined Increased Started monitoring application Improved connection reliability of supply process and Removed connection costs or security using SAIDI/SAIFI Location Overall external works application fee process efficiency deposit benchmarks Buffalo City (East London) û û Cape Town (Cape Town) ü ü ü ü û ü Ekurhuleni (Germiston) û û eThekwini (Durban) ü û û ü Johannesburg (Johannesburg) ü û ü Mangaung (Bloemfontein) û û û Msunduzi (Pietermaritzburg) û û Nelson Mandela Bay (Port Elizabeth) ü ü ü û Tshwane (Pretoria) û û Source: Doing Business database. Note: This table records all Doing Business improvements and changes that occurred between January 2015 and May 1, 2018. ü= Doing Business improvement making it easier to get electricity. û = Doing Business change making it more difficult to get electricity. On the flip side, overall efficiency has lack of proactive communication with Monthly tariffs also increased over three deteriorated in five locations (figure 4.8). customers. The time to obtain a connec- years, following the multi-year price Buffalo City, Cape Town, Ekurhuleni, tion fee estimate in Mangaung more than determination and the tariff guideline eThekwini and Mangaung made changes doubled since 2015—from 24 to 50 days. established by NERSA.26 making the process of connecting to the In eThekwini it increased by nearly one- grid more burdensome. third, from 22 to 29 days. WHAT CAN BE IMPROVED? It now takes longer to obtain a connection Furthermore, the overall cost of getting fee estimate in eThekwini and Mangaung. electricity in South Africa (measured Monitor and improve the Connecting to the grid in both locations in terms of income per capita) is higher reliability of supply got longer due to an increased workload, than three years ago. All municipalities Measuring the number and duration of limited staff capacity at the utilities and have raised connection fees since 2015. power interruptions is a critical step to improve the process of getting electric- ity. Nevertheless, across the nine bench- FIGURE 4.8  Since 2015 overall efficiency of processes has deteriorated in five locations marked municipalities, only Cape Town, Average distance to frontier score for the efficiency of getting electricity (procedures, time and cost*) eThekwini and Johannesburg measure SAIDI and SAIFI data. Cape Town Mangaung 2015 2018 Buffalo City From a regulatory perspective, NERSA eThekwini can be a driving force to improve the reli- Ekurhuleni ability of electricity supply. The informa- Tshwane tion required by the national regulator in Msunduzi the D-Forms is very basic and does not Johannesburg** Nelson include an estimate of unserved energy Mandela Bay per customer.27 In the short term, NERSA 40 45 50 55 60 65 70 75 80 85 90 should consider adopting SAIDI and SAIFI as the official standards to calculate the Source: Doing Business database. reliability of electricity supply and require Note: The figure illustrates the change in each location’s average distance to frontier score (DTF) for procedures, time and cost to get electricity, between 2015 and 2018. The DTF score shows how far a location is from the best performance the utilities to publish this information on achieved by any economy on the getting electricity indicator. The DTF score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more information, see the chapter “About their websites.28 Doing Business and Doing Business in South Africa 2018” and the data notes. *For the cost DTF score, this figure uses the same income per capita for both years. Significant improvements in the qual- **The efficiency improvement in Johannesburg is due to external factors, namely the change in the location of the Doing Business warehouse from the concession area of Eskom to that of City Power. ity of power supply require substantial GETTING ELECTRICITY 51 be to persuade the agencies to dispatch South African municipalities that do not measure SAIDI technical representatives to a com- and SAIFI can start collecting data manually to map the mon location and grant them enough number of customers connected to each feeder and thus decision-making power to expedite the application process. A possible solution be able to manually calculate these indices. would be to develop a part-time system in which representatives from various investment targeting transmission Streamline the wayleave and agencies work at a single access point at losses and inadequate generation capac- excavation permit systems set times and days each week. ity. Although all municipalities have a Unlike in other countries worldwide, SCADA system to monitor outages in South African utilities typically apply for The most modern one-stop shops for high-voltage primary feeders, they still wayleaves and excavation permits on service approval are electronic, allow- use the traditional approach to restore behalf of the customer. This relieves the ing applicants to request all clearances service at the low-voltage level. In other customer of the burden of dealing with simultaneously by submitting one online words, the customer still needs to call the multiple agencies while applying for a form. Tshwane has a good practice that utility when there is a power interruption connection. However, delays related could be adopted elsewhere in South so that maintenance technicians will be to the approval process are common. Africa: the municipality has an electronic dispatched to the fault location. In Cape Town, for instance, the utility wayleave platform. It is controlled by the sends a hard copy letter to each service roads department and allows applicants As part of a long-term effort to increase authority and has no means of tracking to submit a single application for all rel- network reliability, South African utilities the application progress. In some cases, evant authorities within and outside the should consider upgrading and expand- it can take up to six months for a single municipality. ing the coverage of their SCADA system wayleave to be issued. and installing an advanced distribution Identify bottlenecks in the management system (ADMS)29 or an One possible short-term solution for internal process to reduce time outage management system (OMS).30 In these delays is to introduce a silence- Data related to the time it takes to get over 130 economies—including Mexico, is-consent rule: when the responsible electricity are either not available or Turkey, Indonesia and the BRIC econo- authority fails to respond within a given only partially available in all measured mies—utilities benefit from automation. time frame, the approval is automati- locations. Most utilities lack a manage- In South Africa, meanwhile, eThekwini cally granted. Italy, Poland and Spain are ment report system to track how long is on its way to installing an ADMS, and examples of countries that have adopted the municipality’s interventions take Cape Town has initiated the installation such rules and reduced delays as a result. and are therefore unable to assess the of an OMS. Alongside these rules, regulations should time required for each step of the con- establish a comprehensive risk clas- nection process from beginning to end. Despite being the most effective solution, sification schedule. The idea is to create To identify bottlenecks in the internal automation requires a dedicated budget. distinct levels of scrutiny—and thus process, utilities should start by creating As a phased approach—and following different time frames—for distinct levels a database and reporting on a monthly Cape Town, eThekwini and Johannesburg’s of complexity in the wayleave process. basis the average time between the main example—South African municipalities Some permits are technically easier to steps, such as issuance of a connection can start collecting data manually to map assess, while others are very complex fee estimate and completion of connec- the number of customers connected to and demand lengthier technical analysis. tion works. This can help increase inter- each feeder and thus be able to manually It allows approvals for simple connec- nal accountability, and once bottlenecks calculate SAIDI and SAIFI. tions to be fast-tracked. are identified, more specific measures can be taken to streamline service Once the mechanisms to monitor and Another way to reduce delays is to delivery. restore outages are operative, the next centralize the wayleave system inter- regulatory step would be for NERSA to nally, setting up a one-stop shop to In South Africa—as in Russia, Singapore consider imposing financial deterrents coordinate the process and issue a single and the United Kingdom—regulators on distribution utilities that fail to provide consolidated approval to the applicant. require utilities to meet minimum legal reliable electricity to their customers as a This approach would also avoid the risk parameters for connecting customers strategy to reduce power interruption. of contradictory decisions on the same to the grid.31 However, South Africa’s project by different service providers. time frames are too generous and do not The main challenge in this case would help in optimizing utilities’ performance. 52 DOING BUSINESS IN SOUTH AFRICA 2018 Currently, most locations comply with Upgrade geographic information one or two years if customers are in good NERSA’s time limits. Yet except for Buffalo systems to eliminate external standing, rather than at the end of the City, all South African locations still fall site inspection connection contract—or, alternatively, to behind the averages of BRIC and OECD South African locations should make the return the deposit with interest. high-income economies on the time to process more efficient by reducing the get an electricity connection. Therefore, number of steps to connect to the grid. Buffalo City, Mangaung and Tshwane NERSA should consider reducing time The utility’s inspections—for which the allow customers to settle the security limits in the national regulations by at customer is typically present, even when deposit with a bank guarantee or bond least 30% to promote improvements in his or her presence is not required—offer rather than paying the utility the entire efficiency. an opportunity for simplifying the pro- amount upfront. The service for bank cess. Before issuing a connection fee guarantees usually amounts to less than Make the cost and process estimate, utilities perform an external the interest that customers would lose of getting electricity more site inspection to analyze infrastructure, on the deposit, and customers maintain transparent to the customer confirm site layout and prepare the proj- control of their assets. Connection costs should be as transpar- ect design. ent as possible to allow customers to contest a charge when they feel they are Technology could help simplify the overpaying. Johannesburg, for instance, process, and here South Africa could has fully standardized costs—customers look to other economies such as Mexico NOTES can know how much they will pay by and Turkey, where utilities have made looking in the utility’s tariff book. In most site visits obsolete by using geographic 1. Jimenez, Raul. 2017. “Development Effects of Rural Electrification.” Policy Brief IDB-PB-261, locations either utilities present custom- information systems (GIS) to map the IDB Infrastructure and Energy Division, Inter- ers with individual quotes, or costs are distribution network. In South Africa all American Development Bank, Washington, divided into two categories: a regulated the benchmarked municipalities have DC. 2. Escribano, A., J.L. Guasch and J. Pena. 2009. connection fee and variable costs for GIS technology installed, but they still do “Assessing the Impact of Infrastructure labor and material. Having standardized not map or update network infrastructure Constraints on Firm Productivity in Africa.” costs not only streamlines the issuance and points of supply. Utilities should Working Paper 9, Africa Infrastructure Sector Diagnostic, World Bank, Washington, DC. of a connection fee estimate but also therefore phase out external site inspec- 3. Arlet, Jean. 2017. “Electricity Tariffs, ensures predictability. tions by upgrading their GIS to map their Power Outages and Firm Performance: A network infrastructure and to maintain Comparative Analysis.” Global Indicators Group, Development Economics, World Bank, In addition to being transparent on updated records of their network assets Washington, DC. costs, utilities should clarify the pro- and their customer database. 4. Geginat, Carolin, and Rita Ramalho. 2015. cess of connecting to the grid and “Electricity connections and firm performance in 183 countries.” Policy Research Working explain to customers what is necessary Reduce the burden of the Paper No. 7460, World Bank, Washington, to obtain an electricity connection. security deposit DC. Comprehensive guidelines should cover Security deposits should work as a 5. Abotsi, A. K. 2016. “Power Outages and Production Efficiency of Firms in Africa.” information about key steps and docu- guarantee against the possible failure of International Journal of Energy Economics and mentation requirements as well as the customers to pay their bills for electricity Policy 6 (1): 98-104. corresponding time frames and fees. This consumption. However, research shows 6. Arlet, Jean. 2017. “Electricity Tariffs, Power Outages and Firm Performance: A information should be available online that the collection ratio is not necessarily Comparative Analysis.” Global Indicators and easily accessible through mobile lower in economies where the security Group, Development Economics, World Bank, devices. It would help cut time and cost deposit is charged. Deposits end up being Washington, DC. 7. World Bank. September 2017. “South Africa by reducing the number of incomplete an interest-free credit granted to the util- Economic Update: More Innovation Could and incorrect applications. An example ity over the life of a supply contract.33 Improve Productivity, Create Jobs, and Reduce of good practice is eThekwini. The util- Poverty.” Available at http:/ /www .worldbank.org/en/country/southafrica ity there has an application guide on its The benchmarked locations should make /publication/south-africa-economic-update website with a step-by-step explanation an evaluation of cost recovery rates in -more-innovation-could-improve-productivity of how to fill out an application form order to assess the real need to charge -create-jobs-and-reduce-poverty. 8. Khobai, H., G. Mugano and P. le Roux. 2017. as well as a detailed description of the a security deposit. Where cash flow “The causal relationship between electricity process of getting electricity.32 considerations are not the motivation supply and economic growth in South Africa.” for this charge, utilities should at least Studies in Economics and Econometrics 41 (2): 69-86. consider lessening the financial burden. A 9. The regulatory framework is available on the start would be to return the deposit after website of the Department of Energy of the GETTING ELECTRICITY 53 Republic of South Africa, at http:/ /www deposit is a flat rate for connections up to a management; and support for microgrids .energy.gov.za/files/policies_frame.html. certain capacity. and electric vehicles.” Gartner IT Glossary, 10. NERSA was established by the National 22. Doing Business calculates consumption fees available at https:/ /www.gartner.com/it- Energy Regulator Act (Act No. 40 of 2004), based on the following assumptions: The glossary. available at http://www.energy.gov.za warehouse operates 30 days a month from 30. “An outage management system (OMS) /files/policies/National%20Energy%20 9:00 a.m. to 5:00 p.m. (eight hours a day), is a utility network management software Regulator%20Act%2040%20of%202004.pdf. with equipment utilized at 80% of capacity on application that models network topology 11. The Electricity Regulation Act or ERA (Act average. For simplicity, it is assumed that there for safe, efficient field operations related to No. 4 of 2006) grants NERSA the mandate to are no electricity cuts. The monthly energy outage restoration. OMSs tightly integrate regulate electricity in South Africa. consumption is 26,880 kilowatt-hours (kWh); with call centers to provide timely, accurate, See http:/ /www.energy.gov.za/files/policies hourly consumption is 112 kWh. If multiple customer-specific outage information, as well /ELECTRICITY%20REGULATION%20 electricity suppliers exist, the warehouse as supervisory control and data acquisition ACT%204%20OF%202006.pdf. is served by the cheapest supplier. Tariffs (SCADA) systems for real-time-confirmed 12. The mandate to regulate the electricity effective in March of the current year are used switching and breaker operations. These industry is derived from the Electricity to calculate the price of electricity for the systems track, group and display outages Regulation Act. NERSA’s electricity division warehouse. Although March has 31 days, for to safely and efficiently manage service has four departments that serve as a platform calculation purposes only 30 days are used. restoration activities.” Gartner IT Glossary. to achieve its mandate: Licensing and 23. D-Forms are required pursuant to the 31. Time limits and service standards to issue Compliance, Pricing and Tariffs, Electricity Electricity Regulation Act (Act No. 4 of quotes and supply electricity in South Africa Infrastructure Planning and Regulatory 2006), as well as to section 4 of NRS 048- are regulated by NERSA in section 4.2 of NRS Reform. See NERSA website at 3:2002, Rationalized User Specification, 047-1:2002, Rationalized User Specification, http:/ /www.nersa.org.za. Electricity Supply Quality of Supply, Part 3: Electricity Supply Quality of Service, Part 1: 13. See Eskom Holdings SOC Ltd. website at Procedures for measurement and reporting, Minimum standards, Preferred Requirements http:/ /www.eskom.co.za/Pages/Landing.aspx. Requirements for applications in the Electricity for Applications in the Electricity Supply 14. Information obtained in a meeting with Supply Industry. The Electricity Distribution Industry. NERSA representatives at NERSA’s Forms (D-Forms) Manual/Guide is available 32. “Guide to complete application forms,” headquarters in Pretoria, on May 16, 2018. at http://www.nersa.org.za/Admin/Document available at http:/ /www.durban.gov.za 15. Data from World Development Indicators /Editor/file/Electricity/Forms/Distribution% /City_Services/electricity/Online%20Forms database: “Access to electricity (% of 20Forms/Electricity%20Distribution%20 /Documents/ApplicationFormsGuide.pdf. population),” available at https://data Forms%20Completion%20Guide.pdf. 33. World Bank. 2010. Getting Electricity: A pilot .worldbank.org/indicator/EG.ELC.ACCS.ZS. 24. In Buffalo City and Nelson Mandela Bay indicator set from the Doing Business project. 16. Johannesburg, Msunduzi and eThekwini load shedding and planned outages are also Washington, DC: World Bank. accept only hard copies of the application. communicated through social media. Customers cannot submit the application via 25. The City of Cape Town Electricity Generation e-mail. Nevertheless, even for the utilities that and Distribution Department still charges the do accept applications via e-mail, customers application fee on the third application, after find it more reliable to submit the application the connection fee estimate has lapsed twice. in hard copy. 26. The multi-year price determination is the 17. The circuit breaker inspection, or “trip test,” process NERSA uses to determine electricity ensures that the rated characteristic of the prices over a number of years. Usually circuit breaker is exact and that there are no Eskom obtains the license from NERSA and mechanical or electrical faults. negotiates tariff increases individually with the 18. In Cape Town and Johannesburg, the distribution utilities. The negotiation must be customer is not required to sign a supply approved by NERSA and becomes effective contract with the distribution utility. Instead, on July 1 of each year. All monthly tariffs are the customer simply presents the number of available on the websites of NERSA, Eskom a “rates and services account” upon applying and the distribution utilities. for an electricity connection. This account is See http:/ /www.eskom.co.za/CustomerCare opened at the corresponding municipality’s /TariffsAndCharges/Pages/Multi_Year customer service office and comprises water, _Price_Determination_MYPD.aspx. sewerage, refuse and property rates in one 27. World Bank. “List of Recommendations for municipal bill. Once connection works are the National Energy Regulator Authority of finalized and the meter is installed, the utility South Africa to Improve the Getting Electricity links the meter number to the customer Process.” (Prepared by the World Bank Group account for billing purposes. as part of the South Africa Urban Knowledge 19. Department of Labour. Occupational Health Hub – Urban Technical Assistance). and Safety Act (Act No. 85 of 1993). 28. IEEE Guide for Electric Power Distribution 20. An electricity connection project may involve Reliability Indices (IEEE Std 1366-2012), obtaining wayleaves not only from municipal available at https:/ /ieeexplore.ieee.org authorities but from pipeline operators, /document/6209381/. telecommunications companies or other types 29. “An advanced distribution management of service providers with infrastructure in the system (ADMS) is the software platform area. that supports the full suite of distribution 21. The security deposit is calculated as an management and optimization. An ADMS estimate of two months’ consumption in includes functions that automate outage Ekurhuleni, Msunduzi and Tshwane. In restoration and optimize the performance of Mangaung and eThekwini the security deposit the distribution grid. ADMS functions being is calculated for a three-month period, based developed for electric utilities include fault on the assumption that the connection will be location, isolation and restoration; volt/volt- used at 70% of its maximum capacity. In Cape ampere reactive optimization; conservation Town and Nelson Mandela Bay the security through voltage reduction; peak demand Registering Property MAIN FINDINGS ƒƒ Across South Africa, transferring property requires seven to nine steps. Seven steps are common to all locations, and variations stem from local requirements. ƒƒ Mangaung is the easiest place to transfer property and Msunduzi is the most difficult. ƒƒ National fee increases—including a nearly 50% increase in the transfer duty for the property in the Doing Business case study—have made property registration more burdensome in most locations and limited the scope of potential improvement. ƒƒ Mangaung is the top improver since 2015. It reduced the procedural complexity of property transfers and cut a month off the process, propelling it to the top of the ranking. ƒƒ There is ample room for improvement. South African locations perform uniformly on the quality of land administration systems index and score only half the 30 possible points—placing them behind 43% of economies globally. REGISTERING PROPERTY 55 L and tenure has long been at the fore- Land registries, together with cadastres transaction costs in financial markets front of the South African national that identify the location of a property, and makes it easier to use property as debate. It remains so because land are tools used around the world to map, collateral.5 is recognized around the world as an prove and secure property rights. These important source of wealth.1 Where land are part of an economy’s land information ownership is secure, the value of these system. For governments, having reliable, HOW DOES REGISTERING assets is certain for all owners. In the up-to-date information in cadastres and PROPERTY WORK IN SOUTH post-apartheid era, research has shown land registries is essential to correctly AFRICA? that “property rights are critical for all assess and collect tax revenues. With up- South Africans to leverage their assets in to-date land information, governments The Deeds Registries Act 47 of 1937 and support of economic growth, household can map out the varying requirements its amendments govern land administra- incomes, and jobs.”2 Moreover, evidence location by location and strategically plan tion in South Africa.6 Because this is suggests that insecure property rights the provision of services and infrastruc- a national law, land registries (deeds may be among the factors driving local ture in the areas where they are most offices) follow the same process to trans- businesses to invest abroad instead of in needed.4 The ability to access official fer property across the country. However, South Africa.3 information on ownership also reduces varying municipal requirements and local WHAT DOES REGISTERING PROPERTY MEASURE? Doing Business records the full sequence of procedures necessary for a business to purchase a property from another business and formally transfer the property title to the buyer’s name. The process starts with obtaining the required documents, such as a copy of the seller’s title, and ends when the buyer is registered as the new property owner. Every procedure required by law or necessary in practice is recorded—along with the associated time and cost—whether it is the responsibility of the seller or the buyer and even if it must be completed by a third party on their behalf. In 2015 and 2016 Doing Business added components to the indicator to systematically assess the quality of the land administration system. The new index measures the land administration system’s reliability, transparency and coverage; the availability of dispute resolution mechanisms; and whether men and women have equal ownership rights to property. Rankings on the ease of registering property are based on the procedures, time and cost to register property as well as the quality of land administration index (see figure). Registering property: measuring the efficiency and quality of the land administration system Rankings are based on distance to frontier scores for four indicators Days to transfer Cost to transfer Measures whether the land registry and mapping system property between two property, as % of Reliability (cadastre) have adequate infrastructure to guarantee high local companies property value standards and reduce risk of errors Time Cost Transparency Measures whether and how the land administration system makes 25% 25% land-related information publicly available 25% 25% Procedures Quality of land administration Measures the extent to which the land registry and mapping index Coverage system (cadastre) provide complete geographic coverage of privately held land parcels Steps to transfer property so that it can be sold or used Measures the accessibility of conflict resolution mechanisms and Dispute the extent of liability for entities or agents recording land as collateral resolution transactions Equal access Measures the ownership rights of unmarried men and unmarried to property rights women as well as of married men and married women 56 DOING BUSINESS IN SOUTH AFRICA 2018 practices drive differences in the process the necessary compliance documenta- the property value. Procedurally, this of conveying property (figure 5.1). tion—such as an electrical compliance is twice as complex as in China and certificate,11 entomologist’s certificate12 the Russian Federation but on par with All property transfers require the ser- or plumbing certificate13—from certified Mexico. The average time is comparable vices of a conveyancer.7 These legal professionals. Next they pay the transfer to Brazil, where it also takes just over practitioners draft the transfer deed, duty (property transfer tax) to the South a month. The cost is steeper than the conduct due diligence on the parties African Revenue Service (SARS) online average for the BRIC economies (Brazil, and property, and undertake numerous and obtain a payment receipt required for Russia, India and China) and is among procedural requirements on behalf of the transfer.14 the 44 highest globally (figure 5.2). the seller and buyer. Conveyancers also Additionally, all locations score 15 of have exclusive rights to lodge deeds at The parties then sign the deed at the 30 points on the quality of land admin- the deeds office.8 conveyancer’s office. Lastly the convey- istration index—outperforming Brazil, ancer lodges the deed at the deeds office India, Indonesia and Nigeria but trailing For the assumed Doing Business case—a that has jurisdiction over the property behind Russia and China. Transferring commercial property transfer between in question. Upon lodgment and follow- property is easiest in Mangaung, where two companies—conveyancers start ing the initial intake, the deed is subject it takes 22.5 days and costs 7.62% of the with a title search. They check for liens to three levels of examination at the property value (table 5.1). It is most bur- or encumbrances on the property and deeds office. This process is the same densome in Msunduzi, where the cost ensure that the selling company is the throughout the country.15 Once the deed is identical but the process takes nearly rightful owner. Simultaneously, they is deemed valid, the conveyancer signs it three times longer. The time needed in gather the information to draft the before the registrar or deputy registrar at Mangaung is on par with the average for deed and all necessary documents.9 the deeds office. Upon execution of the OECD high-income economies, while Conveyancers also conduct a com- deed, ownership is legally transferred to Msunduzi is behind the average for Sub- pany search with the Companies and the buyer, who will be able to transfer or Saharan Africa (59.3 days). Intellectual Property Commission10 to use the property as collateral as soon as confirm that the business is registered his or her name is captured by the data How the process compares and in good standing. unit, usually the next day.16 Although seven procedures are com- mon to all locations measured, property Conveyancers then apply for a municipal Across the nine South African loca- transfer processes are not identical in rates clearance certificate on behalf of tions measured, property transfers each place. In coastal locations—Buffalo the seller. Depending on the location, require on average eight procedures City, Cape Town, eThekwini, Msunduzi they also ensure that the seller obtains taking 31.7 days and costing 7.6% of and Nelson Mandela Bay—contractual practice requires the seller to obtain an entomologist’s certificate proving FIGURE 5.1  Transferring property in South Africa takes seven to nine steps that the property is free of infestation. Additionally, in Cape Town municipal Preregistration Registration bylaws require the parties to provide a The conveyancer plumbing certificate.17 conducts a title Obtain an search and checks Obtain a electrical Obtain a encumbrances plumbing compliance transfer duty The conveyancer The time it takes to register property on the property certificate certificate receipt lodges the deed varies widely, from 20 days in Nelson Mandela Bay to 63 days in Msunduzi. This is largely because of differences Obtain a Obtain an The conveyancer Parties sign all the in the time needed to obtain a rates rates clearance entomologist’s prepares and documentation at certificate certificate collects all the the conveyancer’s clearance certificate (figure 5.3), which required office confirms that any outstanding utility bills documentation or charges due to the municipality have Procedure present in all locations been paid—a necessary step before the Procedure completed simultaneously in all locations property can be transferred. Obtaining a Procedure present in certain locations only rates clearance certificate takes almost seven times longer in Msunduzi than in Source: Doing Business database. Nelson Mandela Bay. Note: For more details on these procedures, see Doing Business in South Africa 2015. REGISTERING PROPERTY 57 FIGURE 5.2  South African locations have room for improvement across all aspects of land administration EFFICIENCY OF PROPERTY REGISTRATION QUALITY OF LAND ADMINISTRATION Procedures Time Cost Index (number) (days) (% of property value) (0–30) 0 0 3 economies 5 economies (global best)** 5 (global best)*** Singapore 30 1 Rwanda (global best) 29 4 economies Australia 1 (global best)* Rwanda 10 Rwanda Chile Malaysia 28 2 Malaysia 15 2 27 20 26 3 United Kingdom Nelson Mandela Bay Rwanda 3 United 25 OECD high income 25 Buffalo City Kingdom Mangaung 24 4 Chile 30 Malaysia Johannesburg OECD OECD BRIC BRIC 4 high income 23 35 Tshwane high income 5 Cape Town OECD high income 22 Australia Mexico 40 South Africa average East Asia 5 21 East Asia & Pacific South Africa range Ekurhuleni & Pacific Australia 6 (9 locations) 45 United Kingdom 20 Chile, Ekurhuleni, United Kingdom Johannesburg, Australia 6 17 50 eThekwini BRIC 7 Mangaung, Mexico Mexico Tshwane Namibia Kenya 16 All 9 55 Kenya South African BRIC South Africa average 7 East Asia 15 locations Mexico 8 Buffalo City, 60 & Pacific Kenya All 9 14 Malaysia, eThekwini, Msunduzi, Msunduzi Chile Nelson Mandela Bay, 65 South African Namibia 9 Namibia 9 8 locations Kenya Cape Town 70 8 East Asia 1 10 & Pacific 75 Namibia 14 0 Source: Doing Business database. Note: The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, Russia, India and China. * These are Georgia, Norway, Portugal and Sweden. ** These are Georgia, New Zealand and Portugal. *** These are Belarus, Georgia, Kiribati, Saudi Arabia and the Slovak Republic. TABLE 5.1  Registering property in South Africa—where is it easier? 2018 2015 Quality of land Distance to Distance to Cost administration Rank frontier score frontier score Procedures Time (% of property index Location (1–9) (0–100) (0–100) (number) (days) value) (0–30) OECD high income average 76.81 76.71 4.6 22.3 4.2 22.7 BRIC average 66.14 67.03 7.4 29.2 3.8 16.6 South Africa average 57.23 58.69 7.7 31.7 7.6 15.0 East Asia & Pacific average 57.21 56.61 5.5 74.5 4.3 15.8 Mangaung (Bloemfontein) 1 59.73 55.89 7 22.5 7.62 15 Johannesburg (Johannesburg) 2 59.68 61.45 7 23 7.61 15 Tshwane (Pretoria) 3 59.39 60.56 7 25.5 7.61 15 Ekurhuleni (Germiston) 4 58.48 60.25 7 33 7.61 15 Nelson Mandela Bay (Port Elizabeth) 5 57.93 59.10 8 20 7.63 15 Buffalo City (East London) 6 57.81 59.22 8 21 7.63 15 Cape Town (Cape Town) 7 54.69 56.45 9 29.5 7.64 15 eThekwini (Durban) 8 54.58 58.62 8 48 7.63 15 Msunduzi (Pietermaritzburg) 9 52.78 56.70 8 63 7.63 15 Source: Doing Business database. Note: Rankings are based on the average distance to frontier score (DTF) for the procedures, time and cost associated with registering property as well as for the quality of land administration index. The DTF score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more details, see the chapter “About Doing Business and Doing Business in South Africa 2018.” The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, Russia, India and China. 58 DOING BUSINESS IN SOUTH AFRICA 2018 FIGURE 5.3  In five locations, time to obtain a rates clearance certificate is the main This is not the case in Msunduzi—the driver of total time to register property slowest location to issue rates clearance certificates—where applications are circulated to different departments for Msunduzi 48 15 63 approval. eThekwini 33 15 48 Ekurhuleni 21 12 33 Additionally, the list of application docu- Cape Town 14 15.5 29.5 ments varies among municipalities. In Tshwane 15 10.5 25.5 Cape Town and Mangaung a printout of the title search must be included along Johannesburg 11 12 23 with the application. Applications that Mangaung 12 10.5 22.5 do not include one will be rejected. In Buffalo City 10 11 21 Tshwane the requirements are equivocal. Nelson Mandela Bay 7 13 20 Depending on the application counter Time (days) and clerk, a title search may be required; conveyancers always include one to Days to obtain a rates clearance certificate avoid delays. Consequently, in these Days to complete other property transfer procedures three locations the conveyancer cannot simultaneously conduct a title search and Source: Doing Business database. apply for a rates clearance certificate. Municipalities differ in how they receive applications Time variations may also stem from for and issue rates clearance certificates—which has different workloads and staffing at significant impact on the total time to transfer property. municipal and deeds offices. Take, for example, the number of rates clearance Municipalities differ in how they receive manual system. Another outlier is eThe- certificate applications received in 2017 applications for and issue rates clear- kwini, which despite its e-application in three municipalities: Mangaung, 8,019; ance certificates—which has significant process has a lag—largely due to staffing Ekurhuleni, 24,209; and eThekwini, impact on the total time to transfer prop- shortages and a difficult implementation 33,168.19 Moreover, eThekwini currently erty.18 Electronic application is available of new back-office systems. has nine staff vacancies in the depart- and widely used by conveyancers in four ment that processes such applications.20 locations (table 5.2). This is also available Mangaung and Buffalo City also issue This matches the municipalities’ relative in Johannesburg but has yet to catch on rates clearance certificates electronical- speed in issuance of clearance certifi- with the private sector. Municipalities ly. For back-office functions, all locations cates and overall performance. Similarly, with e-application systems seem to use an electronic revenue management differences in workloads, staffing and perform better. Nelson Mandela Bay is system to determine municipal account reliability of computer systems across an exception because it has an efficient dues for a property before issuing the deeds offices impact the time needed rates clearance certificate. However, to register a property transfer. Over the locations experience different back- past two years, in addition to the regular TABLE 5.2  Six municipalities offer e-application for rates clearance office delays. These may stem from high number of lodgments, the Cape certificates the following factors: reliability of the Town Deeds Office—one of the locations revenue management system platform, where lodging a deed takes the longest— Electronic Location application whether municipal systems have been has faced an important backlog due to Buffalo City (East London) ü connected across departments, the failure of information technology (IT). An Cape Town (Cape Town) ü number of departments that must action plan was adopted to address the Ekurhuleni (Germiston) l provide inputs on rates and whether problem. these details are up to date for most eThekwini (Durban) ü accounts. On average, municipalities Cost varies marginally—from 7.61% Johannesburg (Johannesburg) l have to obtain inputs from six to eight of the property value in Ekurhuleni, Mangaung (Bloemfontein) ü departments—including electricity, Johannesburg and Tshwane to 7.64% in ü Fully implemented water, waste, valuation and housing. In Cape Town—with rates clearance and l Available, but not commonly used by conveyancers l Currently being piloted Mangaung these departments are inter- compliance certificate fees accounting Source: Doing Business database. connected through the SOLAR platform. for the main differences.21 This is because REGISTERING PROPERTY 59 the largest share of fees (including the The gold standard is a fully digital, unified or linked transfer duty, conveyancers’ fees and lodgment fees) are regulated nation- property registry and cadastral mapping system that ally. The transfer duty alone accounts for allows staff to electronically search and update records. 86% percent of the total cost to transfer property. ensuring reliability. The gold standard is the transparency of information index. a fully digital, unified or linked property In South Africa general information on Going beyond efficiency—the registry and cadastral mapping system time limits for completing property trans- quality of land administration that allows staff to electronically search actions is displayed on public boards index and update records. The nine locations located in all deeds offices (0.5 points), While procedural complexity, time and measured score 5 of the 8 possible points but the list of necessary documents is cost of property registration all matter on the reliability of infrastructure index. accessible only through conveyancers. for businesses, good land administra- Historical land records (cadastral maps Additionally, although deeds offices tion goes beyond efficiency. It ensures and property titles) are either scanned track the number of property transac- property owners a secure title, backed images or microfilms (2 points). Deeds tions processed, this information is not by a reliable land administration system. offices and surveyor-general’s offices use publicly accessible. Anyone who pays the A reliable, transparent, complete and a common “erf” number to uniquely iden- fee listed online can access information secure land administration system is tify each property (1 point), but they have on property ownership (1.5 points).24 associated with greater access to credit, separate databases. The deeds office’s In this regard, the Office of the Chief lower income inequality and lower inci- DeedsWeb database also makes it pos- Surveyor-General makes effective use of dence of bribery at the land registry.22 sible to conduct an electronic search for technology. Anyone can access cadastral encumbrances on a given property (1 diagrams online,25 and general informa- Doing Business assesses the quality of this point). Lastly, surveyor-general’s offices tion—on fees and time limits to deliver system through five main dimensions: have a geographic information system an updated map—is also available on reliability of infrastructure (0 to 8 points), (GIS) that captures, stores and analyzes its website (1.5 points).26 Neither deeds geographic coverage (0 to 8), transpar- cadastral data (1 point). This is not to be offices nor surveyor-general’s offices ency of information (0 to 6), land dispute confused with municipal corporate GIS have a dedicated, separate mechanism resolution (0 to 8) and equal access to services (box 5.1). for clients to file complaints. property rights (−2 to 0). Results for these dimensions are then added for If deeds offices and surveyor-general’s Geographic coverage the overall score on the quality of land offices had a shared database, they Globally, only 22% of economies have administration index (table 5.3). would score an additional point. The a land registry that includes all privately use of a single database, updated with held land plots, and 24% have cadastral In South Africa land administration changes in real time, would ensure that mapping that covers all private land. falls under the purview of the national ownership and boundary data are linked Where land registries fall short of com- Department of Rural Development and across the two agencies. It would reduce plete geographic coverage, companies Land Reform. More specifically, the the potential for fraud, as each agency and individuals cannot be sure whether department’s chief registrar of deeds would have access to the most updated the areas not covered are relevant to their (land registry) and chief surveyor- information on land plots. Additionally, if interests.27 The locations measured score general (mapping agency) manage prop- land registry and cadastre historical files 2 of 8 possible points on geographic erty through their local offices. Quality were digitized and searchable (rather coverage. In urban areas28 privately standards are thus uniform across the than simply scanned), South Africa held land plots are mapped (2 points). country, and all locations score half the would score another 2 points—1 for each However, registration has yet to catch 30 possible points on the quality of land agency’s records being fully digital. up with mapping, even in urban areas. administration index—lagging behind 81 Additionally, private land in rural areas other economies globally (figure 5.4). Transparency of information is not yet fully covered by the cadastre Transparency is assessed by how the land and land registry. Many rural areas were Reliability of infrastructure administration system makes informa- formerly designated homelands, which A reliable land administration system tion publicly available. The best practice started being mapped only after 1994.29 provides clear information on prop- is for registries and cadastres to make Extending the coverage of deeds offices erty ownership and prevents fraudulent land-related information available either and surveyor-general’s offices to include transactions.23 Adequate infrastructure online or on a public board. All nine loca- all privately held land would result in a for keeping property records is key to tions score 3.5 of the 6 possible points on score on this index of the full 8 points. 60 DOING BUSINESS IN SOUTH AFRICA 2018 TABLE 5.3  South Africa scores half the possible points on the quality of land administration index Legal Property Both requirements Index (points scored) Index category registry agencies Cadastre and resources Surveyor- Deeds Office General’s Office Separate but linked databases (0 of 1 point) Registry Cadastre Computer/ Computer/ Reliability of infrastructure index State of records scanned n.a. scanned (5 of 8 points) (1 of 2 points) (1 of 2 points) Electronic database for checking Yes n.a. n.a. n.a. encumbrances? (1 of 1 point) Electronic database for recording Yes boundaries, checking plans and n.a. n.a. n.a. (1 of 1 point) providing cadastral information? Common and Interconnection between registry and unique property n.a. n.a. n.a. cadastre? number (1 of 1 point) Anyone who pays Freely accessible by n.a. Who can access ownership the official fee n.a. anyone information? (1 of 1 point) (0.5 of 0.5 points) Yes Yes n.a. Fee schedule publicly available? n.a. (0.5 of 0.5 points) (0.5 of 0.5 points) List of required documents publicly No n.a. n.a. Transparency of information index n.a. available? (0 of 0.5 points) (3.5 of 6 points) Yes Yes n.a. Commitment to on-time delivery? n.a. (0.5 of 0.5 points) (0.5 of 0.5 points) Separate mechanism to file No No n.a. n.a. complaints? (0 of 1 point) (0 of 0.5 points) Statistics on registry's transactions No n.a. n.a. n.a. publicly available? (0 of 0.5 points) Full coverage of privately held land No Yes n.a. n.a. Geographic coverage index plots at the municipality level? (0 of 2 points) (2 of 2 points) (2 of 8 points) Full coverage of privately held land No No n.a. n.a. plots at the state level? (0 of 2 points) (0 of 2 points) Yes Law requires registration of property? n.a. n.a. n.a. (1.5 of 1.5 points) Property registration is subject to a No n.a. n.a. n.a. guarantee? (0 of 0.5 points) No Law requires compensation for losses? n.a. n.a. n.a. (0 of 0.5 points) Land dispute resolution index Law requires due diligence on Yes n.a. n.a. n.a. (4.5 of 8 points) documents and parties? (1 of 1 point) Yes National database to check identities? n.a. n.a. n.a. (1 of 1 point) Time to resolve land dispute in first- 2-3 years n.a. n.a. n.a. instance court? (1 of 3 points) Statistics on number of first-instance No n.a. n.a. n.a. land disputes publicly available? (0 of 0.5 points) Equal access to property rights index Married and unmarried women have Yes n.a. n.a. n.a. (-2-0 points) the same ownership rights as men? (0 of -2–0 points) Quality of land administration index (total score: 15 of 30 points) Source: Doing Business database. Note: The equal access to property rights index ranges from -2 to 0 points, with negative values indicating a lack of equity between women and their male counterparts. n.a. = not applicable. REGISTERING PROPERTY 61 FIGURE 5.4  Globally, 43% of economies are closer than South Africa is to the frontier of best practices in the quality of land administration Singapore frontier (best performance) United Kingdom OECD high income Australia All 9 South African BRIC Malaysia Rwanda locations East Asia & Pacific Namibia Mexico Kenya Libya, Marshall Islands, Chile Micronesia, Timor-Leste 43% of economies 25th percentile 50th percentile 75th percentile 0 10 20 30 40 50 60 70 80 90 100 Distance to frontier score for the quality of land administration index (0–100) Source: Doing Business database. Note: The figure illustrates the distribution of the 190 economies in the Doing Business sample by their distance to frontier score (DTF) for the quality of land administration index. The DTF score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, Russia, India and China. BOX 5.1 Geographic information systems provide important input for municipal services The Office of the Chief Surveyor-General, based in Pretoria, is the national cadastral agency. It has eight local offices, one per province except for Northern Cape Province, which is administered by the Free State office. Each office has a geographic informa- tion system (GIS) comprising the national cadastre. The Office of the Chief Surveyor-General establishes cadastral boundaries and land plot dimensions throughout the country. It provides information to deeds offices for registration purposes. Its cadastral data—including plot-specific information and diagrams—are freely available online.a Each local surveyor-general’s office also has an email service through which clients can request diagrams not yet uploaded. This is an important resource for land owners who want to know their property boundaries or access other information on properties relevant to their interests. Separately, municipalities have their own corporate GIS units—often part of the planning authority—that serve a broader pur- pose. While municipal corporate GIS teams periodically obtain source data from the local surveyor-general’s office, they build on this information to create maps encompassing multiple layers of geographical information—cadastral, topographical, subter- ranean and other information—pertinent for providing municipal services. Municipalities mainly use this data internally, for land use and planning purposes. For example, having access to topographical information enables municipalities to zone and issue building plan approvals. The level of detail contained in the municipal GIS varies from one location to the next. This is mainly because municipalities have their own development priorities and thus collect different information. Unlike the surveyor-general’s office, which focuses on updating information on individual land plots, municipal GIS services tend to focus more broadly, such as on the characteris- tics of entire neighborhoods. For example, many municipalities use the GIS to monitor the creation and expansion of informal settlements. Nonetheless, some collect plot-specific information. For example, Mangaung uses aerial photography to identify unreported capital improvements on individual properties, for municipal valuation purposes. Lastly, because the municipal GIS is mainly used internally, municipalities differ in what information they make publicly available and by what means. In most locations residents can access GIS information in person at the municipality. Cape Town is among the minority to make its municipal GIS data available online, for free.b a. A searchable index is available through the website of the Office of the Chief Surveyor-General, available at http://csg.dla.gov.za. Diagrams can be consulted free of charge. b. Most of the GIS information is available on the Cape Town City Map Viewer, available at http://citymaps.capetown.gov.za/EGISViewer. 62 DOING BUSINESS IN SOUTH AFRICA 2018 Land dispute resolution property transaction is checked against a to property rights. In South Africa, as An economy with a model land admin- national database to confirm accuracy and in 175 other economies, married and istration system minimizes the number ownership (1 point), and documents prov- unmarried women have the same own- of land disputes by ensuring that clients ing the legality of the transfer are checked ership rights to property as their male receive accurate information, provides a by the conveyancer and the registrar, both counterparts.32 state guarantee for registration and com- of whom can be found liable for errors. pensates parties for losses incurred as a The state, however, does not provide result of errors by the property registry. In compensation for losses incurred because WHAT HAS CHANGED? addition, it ensures that an effective and of erroneous information provided by efficient court system exists to handle deeds offices. When land disputes do arise, Since 2015, both national and local regu- land disputes and provides statistics on parties can file claims at their High Court latory changes have affected the ease the number of such disputes in courts of provincial division, where cases typically of transferring property across South first instance.30 The nine South African take two to three years to resolve (1 point). Africa. At the local level, Buffalo City, locations score 4.5 of the 8 possible But no disaggregated data are available on Mangaung, Nelson Mandela Bay and points on the land dispute resolution the number of first-instance land disputes. Tshwane have improved efficiency at the index. The law governing property regis- If such statistics were available, if property municipality or local deeds office (table tration mandates that all property trans- registration were subject to a guarantee 5.4). However, national fee increases actions must be registered at the deeds and if the state compensated losses have hampered overall improvement in office to be opposable to third parties (1.5 incurred because of erroneous information most locations. points).31 However, property registration provided by the deeds office, South Africa in South Africa departs from the practice would score another 1.5 points. In addition, Most notable among the improvements in 146 economies worldwide because it faster resolution of land disputes would was Mangaung’s introduction of a new is not legally subject to a state or private lead to an increase of up to 2 points in this rates clearance application system in guarantee (such as title insurance). index’s score. June 2015.33 Previously this was a two- part process. First, the applicant had to But South Africa does require in-depth veri- Equal access to property rights obtain an assessment of electricity dues fication steps during a property registration Doing Business also assesses whether a from the utility (Centlec), pay the cor- (1 point). The identity of the parties to a person’s gender has a bearing on access responding amount and receive proof of TABLE 5.4  What locations have made it easier to transfer property since 2015? Local changes National changes Increased administrative Increased administrative Introduced new transfer efficiency at local deeds clearance certificate fee Increased transparency municipality’s finance Introduced new rates at the South African Increased efficiency at the deeds offices conveyancing fee Revenue Service efficiency at the Introduced new Introduced new registration fee department office duty Location Overall Buffalo City (East London) û ü û Cape Town (Cape Town) û û Ekurhuleni (Germiston) û û eThekwini (Durban) û û û Johannesburg (Johannesburg) û û û û û û ü Mangaung (Bloemfontein) ü ü û Msunduzi (Pietermaritzburg) û û û Nelson Mandela Bay (Port Elizabeth) û ü û Tshwane (Pretoria) û ü û Source: Doing Business database. Note: This table records all Doing Business improvements and changes that occurred between January 2015 and May 1, 2018. ü= Doing Business improvement making it easier to transfer property. û = Doing Business change making it more difficult to transfer property. REGISTERING PROPERTY 63 payment. With proof of payment in hand, line with other locations. These improve- transparency. Its service commitment the applicant could then apply in person ments also propel Mangaung from the charter, which states time limits for reg- for a rates clearance certificate34 from bottom of the ranking to the top, making istering deeds, is now available on public Mangaung Municipality. it the easiest place to transfer property in boards in the various deeds offices. South Africa. Mangaung has since launched an However, not all changes have made electronic application system and con- Similarly, Tshwane cut the time to obtain transferring property easier. The solidated the process. Now applicants a rates clearance certificate by five days. implementation of new electronic rates interact only with the municipality. When The municipality automated back-office clearance management and billing they lodge an application35 for a rates functions through the SAP software systems can also create delays. Both clearance certificate, the municipality system,36 consolidated its billing pro- eThekwini and Msunduzi are currently creates an e-task for Centlec to provide cedures37 and installed pigeonholes for facing significant backlogs because all the balance due on the corresponding conveyancers to collect certificates as systems were off for several weeks in account—through the municipality’s new soon as they are ready. 2016 and 2017, respectively, to ensure financial system, SOLAR. Applicants then proper data migration when they receive an assessment of the amount due Deed registration is now faster at the King adopted new revenue management to the electricity utility and for all munici- William’s Town Deeds Office—which platforms. These backlogs are also due pal accounts. The municipality issues a covers Buffalo City and Nelson Mandela to computer glitches, slowness of the single, consolidated clearance certificate Bay.38 This results from the broadening of new systems, implementation delays once all payments are made. this office’s geographical jurisdiction (box and lack of staff training. It now takes 5.2). Along with this change came more 19 days longer than in 2015 to obtain a This new system made obtaining a rates resources (including additional staff) to rates clearance certificate in eThekwini clearance certificate 3.5 times faster—a match the new workload. Additionally, in and 18 days longer in Msunduzi. These time reduction from 42 to 12 days. It also preparation for the jurisdictional change, new electronic systems may yet bear reduced the steps to transfer property staff at the deeds office also worked fruit in the future, because automation is (from eight to seven) by eliminating the extended hours to purge existing back- a long-term process which can take time need for a separate interaction with the logs and prevent future ones. to yield intended outcomes. utility. This brings Mangaung—formerly the sole municipality to require a sepa- At the national level, the Office of the Nationally, SARS is also taking longer rate electricity clearance certificate—in Chief Registrar of Deeds increased to issue transfer duty payment receipts. BOX 5.2 Realignment of deeds offices’ jurisdiction: an ongoing improvement South Africa generally has one deeds office per province. The Eastern Cape and Gauteng provinces are the exception, with two deeds offices each: in King William’s Town and Umtata (in the Eastern Cape) and Johannesburg and Pretoria (in Gauteng). In 2017 the Office of the Chief Registrar of Deeds started realigning the jurisdiction of deeds offices to match provincial bound- aries. The main purpose is to promote easier access for clients who sometimes travel long distances, beyond their province, to access deeds services. To date, the realignment has affected Eastern Cape, Northern Cape and Western Cape provinces. On March 1, 2017, proper- ties located in the Northern Cape but registered at the Cape Town Deeds Office (in the Western Cape) were reassigned to the Kimberley Deeds Office.a Similarly, as of December 4, 2017, Eastern Cape properties registered at the Cape Town Deeds Office— specifically those located in Port Elizabeth—now fall under the jurisdiction of the King William’s Town Deeds Office.b This will affect workloads, as Cape Town used to cover a much larger area than other deeds offices.c Because the deeds offices for Johannesburg and Pretoria are both in Gauteng Province, the Office of the Chief Registrar of Deeds was also considering adjusting their respective jurisdictions. However, this was suspendedd after the Pretoria Attorneys Association filed a case contesting the new demarcation. a. Registrar’s Circular 1/2017 (Cape Town); Registrar’s Circular 1/2017 (Kimberley). b. Registrar’s Circular 6/2017 (Cape Town); Registrar’s Circular 5/2017 (King William’s Town). c. According to the Office of the Chief Registrar of Deeds, in 2016-2017 a fourth of the deeds lodged in South Africa were lodged in the Cape Town Deeds Office. d. The Gauteng Division (Pretoria) of the High Court of South Africa issued an order regarding case 21152/18 on April 17, 2018. Available at: https://www .ppv.co.za/wp-content/uploads/2018/04/Pretoria-Attorneys-Association-Minister-of-Rural-Development-and-Land-Reform-Court-Order-17.04.2018.pdf. 64 DOING BUSINESS IN SOUTH AFRICA 2018 allow for electronic deeds to be delivered Overall, registering property has become less efficient to clients. It could thus ensure faster reg- and more burdensome in most locations measured. istration at the deeds office and delivery of the deed to its new owner. Anecdotal evidence suggests this is the national level, these changes are due to a lack of staff capacity to keep consistent across locations. It is now 1.5 up with its growing workload. However, times more expensive to register com- WHAT CAN BE IMPROVED? conveyancers complete this procedure in mercial property in South Africa, which tandem with other steps that take longer. is a disincentive to buying and selling Streamline issuance of rates Consequently, the increase in SARS’ land and could therefore hinder business clearance certificates processing time—from half a day to two expansion. Buffalo City, Cape Town, eThekwini and days—has no impact on the total time to Mangaung have implemented auto- transfer property. Overall, registering property has become mated application systems that enable less efficient and more burdensome conveyancers to request rates clearance Transferring property has also become in most locations measured. Although certificates directly from their office.41 costlier across the country since 2015. Buffalo City, Mangaung, Nelson Mandela Johannesburg has developed an online All municipalities measured increased Bay and Tshwane have made some effi- application system42 that is directly the fee to obtain a rates clearance ciency gains, national-level fee increases linked to its SAP-based billing system, certificate. Increases range from ZAR 5 disproportionately overshadow improve- but 70% of conveyancers still file their ($0.40) in Tshwane to ZAR 103 ($7.50) ments. Mangaung is the sole location applications manually. In addition, in Mangaung. However, the most mean- to improve overall; the magnitude of its Ekurhuleni has been piloting a web- ingful fee increases happened at the improvements outweighs the changes based application system scheduled national level and affect all locations. The making property transfers more difficult to go live soon.43 Msunduzi, Nelson transfer duty—which already accounted (figure 5.5). Mandela Bay and Tshwane still require for 85% of the cost of transferring prop- conveyancers to file applications in per- erty—went up by nearly half over three Future reforms are underway. The Office son.44 Electronic application systems are years for the commercial property in the of the Chief Registrar of Deeds is working a good practice because they prevent Doing Business case study.39 Similarly, on the implementation of an electronic file loss and facilitate communication conveyancing fees went up by 34%.40 deeds registration system that would between conveyancers and revenue The deed registration fee also increased enable conveyancers to lodge deeds departments. In addition to electronic from ZAR 1,100 ($80) to ZAR 1,275 electronically from anywhere in South applications, municipalities should ($93). Because they are regulated at Africa. This system is also expected to implement electronic issuance to allow conveyancers to print rates clearance certificates from their office. FIGURE 5.5  Mangaung is the sole location where the efficiency of transferring property improved overall Localities are also encouraged to adopt Average distance to frontier score for the efficiency of registering property (procedures, time and cost*) consolidated electronic revenue man- agement systems encompassing all Mangaung municipal accounts. Mangaung—among Johannesburg the four fastest locations to issue a rates Tshwane 2015 2018 Ekurhuleni clearance certificate—implemented such Nelson Mandela Bay a system, along with set turnaround Buffalo City times for departments to provide Cape Town timely information on unpaid municipal eThekwini accounts. Internal deadlines structure Msunduzi internal procedures and optimize time 54 56 58 60 62 64 66 68 efficiency, which is why eThekwini has adopted similar turnaround times. What Source: Doing Business database. is critical moving forward is to ensure Note: The figure illustrates the change in each location’s average distance to frontier score (DTF) for procedures, time and that time limits are enforced. cost to transfer property, between 2015 and 2018. The DTF score shows how far a location is from the best performance achieved by any economy on the registering property indicator. The DTF score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more information, see the chapter “About Doing Business and Doing Business in South Africa 2018” and the data notes. However, the process could be stream- *For the cost DTF score, this figure uses the same income per capita for both years. lined further if the practice of requiring REGISTERING PROPERTY 65 separate rates clearances were abolished Transparency is key because it helps eliminate altogether. Municipalities could explore the possibility of replacing rates clear- asymmetries in information between users and officials ance certificates with online payment in land administration and increases the efficiency of the confirmation. Property owners could then land market. print the confirmation and submit it with the application to transfer property at the brought into a centralized platform where efficiency of the land market.47 In South deeds office. This should be especially all property-related information would be Africa deeds offices and surveyor-gen- feasible for municipalities like Cape Town, available. This platform could serve as a eral’s offices communicate some details which has focused its efforts on cleaning one-stop shop for conveyancers, reduc- relevant to property. Fee schedules as up its property data and ensuring that all ing the number of interactions needed well as land ownership information and relevant information is up to date. to transfer property. In Latvia, by way of cadastral maps are available through example, the land registry and munici- their respective websites.48 Property reg- Automation alone is not sufficient, as palities are interconnected, which frees istration turnaround times are displayed conveyancers might experience delays entrepreneurs from having to provide tax in deeds offices on public boards but are due to system malfunction and backlogs. information in paper format and makes not always located in a prominent place, Msunduzi’s difficult transition from one property transfer faster. making this information difficult to access software system to another demon- in practice. Furthermore, the list of docu- strates that municipalities should equip Greater time efficiency could also be ments required to transfer property and themselves with software that meets achieved through stronger coordination land statistics are not publicly available. their specific needs, as well as adequate between deeds offices. The electronic IT support and trained staff, to enjoy deeds registration system is expected Authorities might consider making the full benefit of going electronic. As to allow conveyancers to lodge deeds this information readily accessible on a municipalities introduce new electronic electronically from anywhere in South user-friendly, consolidated website. One tools—such as Johannesburg’s e-appli- Africa. Consequently, deeds offices model is Singapore, which centralizes cation system—they should consider should consider the possibility of allocat- all land-related information for both the conducting a public awareness campaign ing applications for registration among registry and the cadastre.49 In economies to ensure that end-users know about themselves according to their respective where information on fees and documen- these resources. workloads. For instance, the Cape Town tary requirements is easily available, the Deeds Office has faced an important process of completing property transfers Improve coordination among backlog because of IT failure; an action tends to be more efficient.50 stakeholders and consider plan was adopted to address the prob- implementing a one-stop shop lem. Meanwhile, the Bloemfontein and Additionally, in South Africa clients can for property registration Pietermaritzburg46 Deeds Offices— file complaints directly with the registrar At the local level, agencies work in silos. which handle smaller workloads—had (at the land registry) or the surveyor- Each completes its part of the prop- the human and technical capacity to general (at the cadastre) for issues erty transfer process, but the agencies assist in eliminating backlogs in other arising from their interactions with the lack coordination and have a limited deeds offices. corresponding agencies. However, this understanding of the client’s complete means clients are essentially faced with experience. A first step toward greater Agencies should regularly meet with reporting their grievances to the same integration and efficiency would be the local conveyancers to understand their agency rather than to an independent creation of a common database gather- daily challenges and ensure that their body that has a specific mechanism for ing cadastral maps and ownership data; needs are met. In Mangaung the munici- managing complaints. Having a sepa- such unified databases already exist pality and the deeds office meet with rate complaint mechanism increases in 23 economies around the world.45 conveyancers on a semiannual basis to transparency, provides a higher level of Additionally, deeds offices and surveyor- receive feedback. impartiality and scrutiny in managing general’s offices are encouraged to con- complaints and promotes consistent vert historical files into fully electronic Reinforce transparency in the application of service standards. It also documents. land administration system allows users to be more forthcoming Transparency is key because it helps about possible abuses. Most important- All relevant stakeholders—deeds offices, eliminate asymmetries in informa- ly, separate and independent complaint surveyor-general’s offices, municipalities tion between users and officials in mechanisms enable governments to and conveyancers—could be gradually land administration and increases the monitor recurring issues and improve 66 DOING BUSINESS IN SOUTH AFRICA 2018 the overall land administration system.51 the Chief Surveyor-General is encouraged 9. When the transaction involves two firms, as described in the Doing Business case study for For example, in Malaysia clients can to expand coverage in rural areas. this indicator, the following list of documents go through the registry’s website to applies: certificates of incorporation, anonymously file complaints, which go Property registration should also be registration certificates, documents reflecting the company’s trade name, proof of authority straight to the director.52 increased in both urban and rural areas. for the person transacting on behalf of Georgia might serve as an example. It the company, certified copies of director’s Strengthen protections and achieved 100% registration of privately identification documents, copies of notice of registered office, documents reflecting resolution mechanisms for land- held land plots in Tbilisi in 2015. The effort business address, documents reflecting the related issues and disputes started in 2010, when Georgia introduced income tax number, the memorandum of Many governments back their property its Cadastre REG project. Over five years association, articles of association, registered documents reflecting listed registered registration system with a state guaran- the project systematically mapped directors, certificate to commence business, tee. South Africa is among 41 economies property rights throughout 12 pilot areas latest utility bill, proof that the company is not covered by Doing Business in which the across Georgia, including Tbilisi. insolvent and copies of the seller’s title deed. 10. Conveyancers conduct the check online via government does not do so. To abate http://www.cipc.co.za/. land disputes, South Africa should Worldwide, 37 economies have achieved 11. An electrical compliance certificate is required consider legislative options to establish full coverage—mapping and registration. for property transfers in all nine locations. 12. Contractual practice in Buffalo City, Cape a guarantee over property registration— This has enhanced the ease of doing Town, eThekwini, Msunduzi and Nelson such as title insurance—to compensate business and leveraged a stable source of Mandela Bay requires the transacting parties for losses resulting from erroneous infor- public revenue through complete cover- to obtain an entomologist’s certificate for property transfers. mation obtained from public agencies. age for taxation purposes.55 13. A plumbing certificate is required for property This would create greater confidence in transfers in Cape Town. the land tenure system. In England and 14. For more information, see the website of the South African Revenue Service at Wales users receive an indemnity in the http://www.sarsefiling.co.za/. event of losses incurred by a mistake in 15. For more details on this procedure, see Doing an official search or an official copy. Business in South Africa 2015. 16. The new owner will be able to obtain a proof of ownership as soon as his or her name is In the long term, South Africa should work NOTES captured by the data unit after execution, toward faster resolution of land-related numbering and embossment, as DeedsWeb— 1. World Bank. 1989. World Development Report the deeds office’s online database—will disputes. One way of decongesting automatically be updated then. 1989. New York: Oxford University Press. courts is to establish alternative dispute 2. World Bank. 2018. South Africa - Systematic 17. Section 14, City of Cape Town Water By-law, resolution mechanisms such as volun- country diagnostic: an incomplete transition 2018. - overcoming the legacy of exclusion in South 18. Section 118 of the Local Government tary mediation procedures. Moreover, Municipal Systems Act 32 of 2000 requires a Africa. Washington, DC: World Bank Group. judgments tend to be rendered faster in Available at http:/ /documents.worldbank.org rates clearance certificate to transfer property. economies where statistics on the num- /curated/en/815401525706928690/pdf 19. Sources: Ekurhuleni Municipality, eThekwini /WBG-South-Africa-Systematic-Country Municipality and Mangaung Municipality. ber of filed and resolved land disputes 20. The information presented in Doing Business in -Diagnostic-FINAL-for-board-SECPO are available to the public.53 These types -Edit-05032018.pdf. South Africa 2018 is current as of May 1, 2018. of statistics are not publicly available in 3. World Bank. 2018. South Africa - Systematic 21. Rates clearance certificate fees vary from country diagnostic: an incomplete transition ZAR 59 ($4.29) in Tshwane to ZAR 363 South Africa, where land-related lawsuits ($26.39) in Mangaung. Cape Town requires - overcoming the legacy of exclusion in South generally last two to three years. In 32 Africa. an additional compliance certificate (plumbing economies—including Côte d’Ivoire—it 4. Property information held in cadastres and certificate) worth ZAR 600 ($43.62). land registries is part of the land information 22. World Bank. 2014. Doing Business 2015: Going takes on average less than a year to Beyond Efficiency. “Registering property: available to governments. Land-related obtain a decision from the first-instance information also includes other geographic, Measuring the quality of land administration court. Globally, 111 economies outper- environmental and socioeconomic data systems.” Washington, DC: World Bank. that are useful for urban planning and 23. UN-Habitat. 2013. Tools to Support form South Africa in this regard. Transparency in Land Administration. Nairobi: development. 5. Johnson, Simon, John McMillan and UN-Habitat. Expand geographic coverage Christopher Woodruff. 2002. “Property Rights 24. Government Gazette of February 28, 2017 and Finance.” The American Economic Review (No. 40649, Notice No. R.175), available at Since 1994, most of the South African ter- http://www.deeds.gov.za/ITSODeedsWebB 92 (5): 1335-1356. ritory has been surveyed, but not all land 6. Section 16 of the Deeds Registries Act 47 of /deedsweb/LatestFees.pdf. plots are diagrammed. Ideally the property 1937 asserts that “ownership of land may be 25. For more information, see the website of the conveyed from one person to another only Office of the Chief Surveyor-General at registry and cadastre would cover all pri- http://csg.dla.gov.za/. by means of a deed of transfer executed or vately held land and make the information attested by the registrar.” 26. Information on fees is available at http:/ /csg readily available to clients.54 Although 7. Sections 15 and 18, Attorneys Act 53 of 1979. .dla.gov.za/fees.htm; information on time 8. Section 15, Deeds Registry Act 47 of 1937. limits is available at http:/ /csg.dla.gov.za urban areas are diagrammed, the Office of /func.htm. REGISTERING PROPERTY 67 27. Deininger, Klaus, Harris Selod and Anthony the SARS website at http:/ /www.sars.gov.za Burns. 2012. The Land Governance Assessment /Tax-Rates/Pages/Transfer-Duty.aspx. Framework: Identifying and Monitoring Good 40. Since June 1, 2018, the conveyancing fees Practice in the Land Sector. Washington, DC: recommended by the Law Society of South World Bank. Africa have increased further. The updated 28. For each location, Doing Business in South sliding scale is available at http://www Africa 2018 measures one urban area. .ghostdigest.com/articles/conveyancing-fees The proxy cities and their respective -june-2018/55519. municipalities are as follows: East London 41. Buffalo City and Mangaung use the (Buffalo City), Cape Town (Cape Town), RatesClearance website (http:/ / Germiston (Ekurhuleni), Durban (eThekwini), ratesclearance.com); Cape Town and Johannesburg (Johannesburg), Bloemfontein eThekwini use software systems called E4 and (Mangaung), Pietermaritzburg (Msunduzi), Korbitec. Port Elizabeth (Nelson Mandela Bay) and 42. For more information, see the website of the Pretoria (Tshwane). City of Johannesburg at http:/ /196.37.143.196 29. Before apartheid, the Natives Land Act 27 of /eclearance/. 1913 instituted a land tenure system where 43. The Ekurhuleni electronic application system the South African territory was divided is expected to launch in the summer or fall of according to racial demography. Under the 2018. apartheid regime, African populations were 44. Some conveyancers hire messengers to go to moved to rural lands, reserved for them the municipality counter on their behalf. under the Natives Land Act. These areas 45. The economies with a single database are were called homelands, also known as Antigua and Barbuda; Armenia; Belarus; Bantustans. Homelands were not mapped or Cyprus; Czech Republic; Djibouti; Finland; titled because their residents were considered Georgia; Ireland; Japan; Kosovo; Kyrgyz occupants, not owners. At the end of Republic; Lithuania; the former Yugoslav apartheid in 1994, homelands ceased to exist Republic of Macedonia; Malta; the and were reintegrated into the South African Netherlands; New Zealand; Romania; the provinces, forming nine provinces altogether. Russian Federation; Samoa; Taiwan, China; In 2010 the Chief Surveyor-General’s Office Turkey; and Uzbekistan. was commissioned to map the unmapped 46. The Bloemfontein Deeds Office covers homelands. To date, most of South African Mangaung, and the Pietermaritzburg Deeds land is surveyed but not diagrammed. This Office covers eThekwini and Msunduzi. means that all subdivided land parcels are not 47. World Bank. 2014. Doing Business 2015: Going yet captured by the cadastre. Beyond Efficiency. “Registering property: 30. World Bank. 2014. Doing Business 2015: Going Measuring the quality of land administration Beyond Efficiency. “Registering property: systems.” Measuring the quality of land administration 48. For more information, see the DeedsWeb systems.” database at http:/ /www.deeds.gov.za 31. Section 16, Deeds Registries Act 47 of 1937. /ITSODeedsWebB/deedsweb/welcome.jsp or 32. Articles 9 and 25, Constitution of the the website of the Office of the Chief Surveyor- Republic of South Africa; Articles 14 and 15, General at http:/ /csg.dla.gov.za/fees.htm. Matrimonial Property Act 88 of 1984. 49. For more information, see the website of the 33. For more details on the former rates clearance Singapore Land Authority at https:/ /www.sla certificate application system, see Doing .gov.sg/Services. Business in South Africa 2015. 50. World Bank. 2017. Doing Business 2018: 34. This was formerly called a rates and water Reforming to Create Jobs. “Registering Property: clearance certificate. Using information to curb corruption.” 35. For more information, see the website of Lexis Washington, DC: World Bank. RatesClearance at http:/ /ratesclearance.com. 51. World Bank. 2017. Doing Business 2018: 36. The application itself must still be made in Reforming to Create Jobs. “Registering Property: person in Tshwane. Using information to curb corruption.” 37. The status of all types of rates (property 52. For more information, see the website of the valuation, meter readings or estimates, Department of the Director General of Land potential rezonings or others) can be and Mines of Malaysia at http:/ /www.kptg. checked on one screen in the billing gov.my/en. system. Supervisors in charge of reviewing 53. World Bank. 2014. Doing Business 2015: Going applications no longer need to check several Beyond Efficiency. “Registering property: screens to have a complete picture of Measuring the quality of land administration payment status. systems.” 38. Since December 4, 2017, properties located in 54. UNECE (United Nations Economic Nelson Mandela Bay fall under the jurisdiction Commission for Europe). 2012. Policy of the King William’s Town Deeds Office, Framework for Sustainable Real Estate pursuant to Registrar’s Circular 6/2017 (Cape Markets: Principles and Guidance for the Town) and Registrar’s Circular 5/2017 (King Development of a Country’s Real Estate William’s Town). These files were previously Sector. Geneva: UNECE. under the jurisdiction of the Cape Town Deeds 55. Hanstad, Tim. 1998. “Designing Land Office. Registration Systems for Developing 39. The transfer duty for the Doing Business case Countries.” American University International study has increased by 48% since 2015. For Law Review 13 (3): 647-703. more information on transfer duty rates, see Enforcing Contracts MAIN FINDINGS ƒƒ Enforcing a contract continues to be easier in Mangaung and Msunduzi and more difficult in Johannesburg and Buffalo City. The duration of the trial and judgment phase and the cost of attorneys’ legal services are the main sources of variation across locations. ƒƒ The average duration of the trial phase (435.1 days) remains unchanged since 2015. Cutting delays at this phase is still South Africa’s biggest challenge to achieve levels of efficiency comparable to other populous, upper-middle-income economies like Malaysia, where it takes 270 days. ƒƒ Since 2015 Buffalo City has embarked on a promising reform path. The East London Magistrate Court cut by almost half the time to file a claim through enhanced monitoring and supervision of its staff, clearer division of tasks among clerks and effective collaboration with local attorneys. ƒƒ On the quality of judicial processes index, all nine locations score the same—7 of 18 possible points— mostly because they are subject to the same national regulations. There is still ample room to converge with international good practices, especially those related to better case management and court automation. ENFORCING CONTRACTS 69 A strong and efficient South and from growing small and medium-size and lengthy trials impose heavy costs on African judiciary plays a central companies.3 firms, undermine commercial trust and role in supporting the private diminish the public’s confidence in the sector investments that create the jobs Studies have shown that sound legal justice system.5 citizens need to come out of poverty.1 institutions and efficient courts promote Growing private investments in South entrepreneurship and business growth.4 Africa are essential to reach the national They provide firms and investors the HOW DOES CONTRACT goal of building an economy that provides confidence that legal disputes will be ENFORCEMENT WORK IN full employment by 2030. Eleven million resolved within a reasonable time, with SOUTH AFRICA? new jobs will be needed to meet that judicial decisions that are transparent target.2 Employment scenarios projected and enforceable. Good contract enforce- Under the South African Constitution, by the National Planning Commission ment stimulates companies to invest courts and their rules and procedures are suggest that new jobs will likely come and establish new business relations. governed nationally.6 The head of the judi- from firms investing in domestic markets Conversely, poor judicial performance ciary is the chief justice, who establishes WHAT DOES ENFORCING CONTRACTS MEASURE? Doing Business measures the time, cost and quality of judicial processes for resolving a commercial dispute through a local first-instance court. The case study assumes that a seller delivers custom-made goods to a buyer who refuses to pay, alleging that the goods are of inadequate quality. To enforce the sales agreement, the seller files a claim with a local court, which hears arguments on the merits of the case. An expert is appointed to provide an opinion on the quality of the goods in dispute, which distinguishes the case from simple debt enforcement. The court decides in favor of the seller. Doing Business also incorporates a quality of judicial processes index that measures whether economies have adopted a series of good practices in their court system in four areas: court structure and proceedings, case management, court automation and alternative dispute resolution. This index was introduced in 2015 and replaces the indicator on the number of procedures to enforce a contract (see figure). Enforcing contracts: measuring the efficiency and quality of contract enforcement Rankings are based on distance to frontier scores for three indicators Court structure Case Court Alternative and proceedings management automation dispute resolution Availability of Regulations setting time Ability to file Availability and a specialized initial complaint regulation of commercial court standards for key court events electronically arbitration Days to resolve Attorney, court and or division commercial sale dispute enforcement costs through the courts as % of claim value Availability of a Availability and small claims court Regulations on Ability to serve regulation of or simplified adjournments process voluntary procedure for and continuances electronically mediation or small claims conciliation 33.3% 33.3% Time Cost Availability of 33.3% Availability performance Ability to pay of pretrial measurement court fees Quality of judicial attachment mechanisms electronically processes index Criteria used to assign cases Use of pretrial Publication of to judges conference judgments Use of good practices promoting quality and efficiency Equity in Availability of an evidentiary weight electronic case of testimony management regardless of system witness' gender 70 DOING BUSINESS IN SOUTH AFRICA 2018 norms and standards applicable to judges While filing of claims and enforcement of judgments are and magistrates across the country and monitors performance against these relatively efficient processes, overcoming delays during the standards. The Department of Justice,7 trial and judgment phase remains the main challenge. for its part, oversees court administra- tion; it promotes public access to the Resolving a commercial dispute across service of process, trial and judgment court system and allocates resources to the nine locations measured takes on and enforcement of judgment. While ensure courts can deliver their services.8 average 546.7 days and costs 33.1% of filing of claims and enforcement of judg- the claim value. This is slightly faster than ments are relatively efficient processes, Courts are organized in two tiers. The the average for OECD high-income econ- overcoming delays during the trial and top tier, the superior courts, includes the omies (577.8 days) but slower than in judgment phase remains the main chal- Constitutional Court, the Supreme Court New Zealand (216 days) or Rwanda (230 lenge. Contract enforcement continues of Appeal and the High Court. These days). The cost is on par with Mexico’s, to be easier in Mangaung and Msunduzi courts can establish their own proceed- but double that of China and the Russian and more difficult in Johannesburg and ings. Magistrates’ courts make up the Federation. On the quality of judicial pro- Buffalo City (table 6.1). The duration of second tier. Unlike the higher courts, cesses index, South Africa’s performance the trial and judgment phase and the cost the jurisdiction and procedures of mag- of 7 out of 18 possible points places it of attorneys’ legal services are the main istrates’ courts are bound by statutory between the average for Sub-Saharan sources of variation across locations. rules. Litigants can file breach of contract Africa (6.5 points) and East Asia and the claims at either the High Court or a Pacific (8 points) (figure 6.1). The total time to resolve a commercial magistrates’ court. However, because it dispute and have the judgment enforced is more affordable to ligate simple cases How the process compares ranges from over 15 months in Msunduzi in the lower courts,9 litigants would still Enforcing contracts measures the time to 22 months in Buffalo City. How quickly prefer district magistrates’ courts for the and cost throughout the three main courts resolve cases depends on their assumed Doing Business case.10 phases of a court proceeding—filing and resources and caseloads and how well FIGURE 6.1  On average, South Africa enforces contracts faster than OECD high-income economies but trails on cost and the quality of judicial processes QUALITY OF JUDICIAL PROCESSES Time Cost Index (days) (% of claim value) (0–18) 0 0 18 Singapore 200 (global best) Iceland (global best) 10 17 Australia, 250 China (Shangai) Rwanda (global best) 16 20 BRIC United Kingdom Mexico 350 OECD high income 15 Australia Rwanda 25 14 400 Australia 13 Malaysia Chile 30 450 Mangaung Malaysia, BRIC United Kingdom 12 Namibia Msunduzi South Africa range Msunduzi, Nelson Mandela Bay OECD Kenya 500 Mangaung (9 locations) South Africa average, Tshwane high income 11 35 Chile Mexico Johannesburg Mexico Ekurhuleni eThekwini,Tshwane Namibia eThekwini Namibia 10 550 Malaysia East Asia & Cape Town 40 Cape Town, Ekurhuleni Chile, Kenya Pacific South Africa average Buffalo City 9 OECD 600 Kenya East Asia & Johannesburg Pacific 8 high income 45 Nelson Mandela Bay All 9 South African 650 United Kingdom locations 7 Buffalo City East Asia & Pacific 50 700 6 BRIC Rwanda 1 760 85 0 Source: Doing Business database. Note: The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, Russia, India and China. ENFORCING CONTRACTS 71 TABLE 6.1  Enforcing contracts in South Africa—where is it easier? 2018 2015 Distance to Distance to Quality of judicial Rank frontier score frontier score Time Cost processes index Location (1–9) (0–100) (0–100) (days) (% of claim value) (0–18) OECD high income average 66.76 66.55 577.8 21.5% 11 BRIC average 64.29 62.54 752.3 21.4% 12 South Africa average 55.60 55.49 546.7 33.1% 7 East Asia & Pacific average 53.09 52.55 565.7 47.3% 7.9 Mangaung (Bloemfontein) 1 59.01 59.01 473 29.4% 7 Msunduzi (Pietermaritzburg) 2 58.78 58.78 469 30.3% 7 Tshwane (Pretoria) 3 56.14 56.14 527 33.1% 7 eThekwini (Durban) 4 55.74 55.74 521 34.6% 7 Ekurhuleni (Germiston) 5 55.58 55.58 513 35.6% 7 Nelson Mandela Bay (Port Elizabeth) 6 54.85 54.85 611 30.4% 7 Cape Town (Cape Town) 7 54.71 54.71 545 35.6% 7 Johannesburg (Johannesburg) 8 54.10 54.10 600 33.2% 7 Buffalo City (East London) 9 51.48 50.52 661 35.8% 7 Source: Doing Business database. Note: Rankings are based on the average distance to frontier score (DTF) for the time and cost associated with enforcing a contract as well as for the quality of judicial processes index. The DTF score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). The DTF score from the 2015 report includes all data revisions and methodological changes implemented since then. For more details, see the chapter “About Doing Business and Doing Business in South Africa 2018.” The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy- level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, the Russian Federation, India and China. they manage them. For instance, in 2017 only after pretrial proceedings. After the claim value, respectively. Attorney fees the Pietermaritzburg Magistrate Court pretrial hearing the wait for trial ranges represent the largest share of the cost received 2,200 more cases than its from three to five months in Mangaung of enforcing a contract (on average 68% counterpart in East London, yet contract and Msunduzi to nine months in other of the total cost). Court rules provide enforcement in Msunduzi is much faster. jurisdictions. The time for completing tariffs for the attorneys’ legal services.12 At the court in Pietermaritzburg, three the trial stage varies depending on fac- Attorneys and their clients negotiate fees magistrates hear trials; at the court in tors such as attorneys’ diligence, courts adhering to these tariffs or agree on an Buffalo City, only two.11 congestion and availability of magistrates hourly rate considering the complexity of to preside over trials. According to the claim, the attorney’s experience and Across South Africa the filing stage takes attorneys, common causes of delay at the time needed to prepare and litigate between 30 and 40 days. The duration this stage are court backlogs, frequency the case. Courts also use the tariffs to depends on how long it takes the court of adjournments and waiting periods calculate court-awarded attorney fees.13 to issue the summons and the sheriffs to between hearings—from one to four However, attorneys claim that there can serve process and return notice of service months. be a substantial shortfall between the to the claimant’s attorney. The sheriff’s courts’ award and the actual legal costs.14 service normally takes between 7 and 14 It still takes 79.1 days to enforce a judg- days, but attorneys can pay an additional ment, on average. The enforcement stage There are no court fees for filing a suit. fee to expedite it. ranges from two months in Buffalo City to Sheriffs’ fees are regulated through a nearly three months in most of the other national tariff and applied evenly across As in 2015, the trial period still takes on locations. This corresponds to how long locations.15 The average expert witness average 435.1 days. It ranges from about it takes sheriffs to inventory, attach and fee and cost of service of process by a year in Msunduzi and Mangaung to sell the debtor’s assets then organize and sheriffs add up to 7.6% of the claim value. over 18 months in Buffalo City (figure conduct a public sale of the property. Across locations, enforcement fees— 6.2). After the parties close their plead- including attachment, removal, storage, ings and respond to the notice of dis- Enforcing a contract is cheaper in advertisement and organization of the covery, they can apply for a pretrial date. Mangaung and more expensive in public sale—equal 3.0% of the claim Generally, a trial date will be allocated Buffalo City—29.4% and 35.8% of the value, on average.16 72 DOING BUSINESS IN SOUTH AFRICA 2018 FIGURE 6.2  The length of the trial and judgment phase remains unchanged since 2015 and explains the variation among locations Singapore (global best) 6 118 40 Msunduzi 33 353 83 Filing and service period Mangaung 30 360 83 Trial and judgment period Ekurhuleni 30 400 83 Enforcement period eThekwini 33 408 80 Tshwane 30 414 83 Cape Town 31 438 76 South Africa average 32 435 79 East Asia & Pacific 48 322 196 OECD high income 34 418 126 Johannesburg 30 490 80 Nelson Mandela Bay 35 496 80 Buffalo City 40 557 64 BRIC 45 489 219 0 100 200 300 400 500 600 700 800 Time (days) Source: Doing Business database. Note: The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, the Russian Federation, India and China. In this figure, all averages are rounded to the nearest whole number. Going beyond efficiency—the than half the points as the top-performing specialized courts in South Africa,21 but quality of judicial processes index economies in the index, South Africa has a dedicated commercial court for civil Efficiency and quality go hand in hand. ample room to converge with interna- matters is not among them (0 points). Good judicial quality promotes greater tional good practices—especially those Commercial litigation happens at the civil efficiency. Data from economies around related to better case management and divisions of the courts, with magistrates the world show that efficient dispute res- court automation (figure 6.3). adjudicating civil and commercial matters. olution is usually paired with sound insti- Additionally, case assignment is based tutions, effective case management and The court structure and proceedings index on objective criteria but not automated in court automation tools.17 In 2015 Doing (scored from 0 to 5 points) looks at the the competent court (a score of 0.5 out of Business introduced the quality of judicial existence of dedicated courts or special- 1). Lastly, pretrial attachment is available processes index18 to measure whether ized court divisions for commercial cases to plaintiffs only in extraordinary circum- economies have adopted a series of good and small claims. While both matter for stances and is not typically granted by the practices in their court system in four case allocation and contribute to manag- courts in general commercial matters22 (a areas: court structure and proceedings, ing case backlogs at courts of first instance, score of 0 points).23 case management, court automation and they serve different purposes. Commercial alternative dispute resolution. The index courts can translate into efficiency gains The case management index refers to is scored on a scale from 0 to 18.19 because adjudicators have specialized principles that aim to improve case flow knowledge of commercial cases and and reduce court backlogs. It includes All nine locations measured score 7 of can dispose of cases faster. Small claims provisions that enhance transparency and 18 possible points on this index. This courts promote greater access to justice. accountability from judges and parties for is mostly because they are subject to Each location measured has a small claims complying with the legal standards. South the same national regulations. Lagging court where citizens can resolve simple Africa has adopted some recognized case 4 points behind the average for OECD disputes at no cost without an attorney management principles (scoring 2 out high-income economies and with fewer (a score of 1.5 points).20 There are various of 6 possible points on this index). For example, it established legal time limits Efficient dispute resolution is usually paired with sound for at least three key court events, with the deadlines respected in more than institutions, effective case management and court 50% of cases (a score of 1 point).24 It automation tools. also makes pretrial conferences available ENFORCING CONTRACTS 73 FIGURE 6.3  South Africa has ample room for improving the quality of its judicial processes, especially with regard to case management and automation Court structure Case management Court automation Alternative dispute resolution and proceedings (0-6 points) (0-4 points) (0-3 points) (-1-5 points) Small claims court or fast-track procedure Consolidated law for commercial arbitration Specialized commercial court or division Enforcement of valid arbitration clauses Electronic CMS features for attorneys Legal time standards for key events Electronic publication of judgments Electronic CMS features for judges Regulation of voluntary mediation Limitations on arbitration matters Financial incentives for mediation Electronic payment of court fees Randomized case assignment Legal limits on adjournments Voluntary mediation Performance reports Pretrial attachment Pretrial conference Electronic service Electronic filing Quality of judicial processes index (0–18 points) Australia 15.5 Singapore 15.0 All 9 locations 7.0 in South Africa Full Partial Source: Doing Business database. Note: CMS = case management system. Australia is the global best performer on the Quality of judicial processes index and Singapore is the global best performer on the Enforcing contracts indicator. to narrow down issues and make trials no electronic case filing, and service of pro- 0 points). Since it was established in more efficient (a score of 1 point).25 cess must be done in person by the court 2014, the court-annexed mediation However, there are no rules limiting the sheriff. The rules allow the parties to receive program has continued to expand. number of adjournments per case (a notifications by e-mail, but only following Currently there are mediation services score of 0 points); hearings or trials can effective service of process. There are no and centers available at the local courts be adjourned at parties’ request or by fees payable to the court. Most judgments in four of the country’s provinces.31 the court.26 The Department of Justice are not published. Only decisions from the More recently, in October 2017, South publishes annual performance reports High Court provincial divisions and the Africa’s president sanctioned the to inform the public on the results of its Supreme Court of Appeal are published International Arbitration Act, adopt- various programs, which include provid- (0.5 points). Automation, however, is mak- ing the Model Law on International ing administrative support to the courts ing its way into the courts. The judiciary has Commercial Arbitration of the United and court facilities.27 However, neither plans to roll out an e-filing pilot project for Nations Commission on International these reports nor those published by the the superior courts.29 Trade Law (UNCITRAL). Office of the Chief Justice include data on individual court performance (a score Domestic commercial disputes can be of 0 points). Courts do not publish such settled through arbitration or voluntary WHAT HAS CHANGED? kinds of reports either.28 In terms of case mediation (2.5 out of 3 points on this management systems, in October 2017 index). All relevant disputes can be sub- Since 2015 only one in nine locations the Department of Justice introduced ject to arbitration (a score of 0.5), and improved—Buffalo City, for case filing. a new integrated case management arbitration clauses are usually enforced Registering a claim at the East London system for civil courts. The rollout is still by the courts (0.5). Both types of alter- Magistrate Court and serving process ongoing, and the system has yet to fully native dispute resolution mechanisms on the defendant used to be a daunting replace manual case tracking (a score of are available (0.5 points for each) and process lasting two and a half months. 0 out of 2 possible points). are governed by comprehensive regula- Attorneys complained that there were tion (another 0.5 points).30 There are no frequent delays in the process of issuing The level of automation at the courts is low financial incentives for parties to attend summonses and that documents were (0.5 out of 4 points on this index). There is mediation or conciliation (a score of misplaced at the court. Local officials 74 DOING BUSINESS IN SOUTH AFRICA 2018 The South African judiciary has made case flow meetings presided over by a magistrate. The aim is to avoid adjournments and management a priority. It is putting emphasis on unnecessary delays by ensuring that empowering judges to direct more pretrial processes to cases are properly prepared before they ensure that all cases are duly prepared for trial. are set down for trial. These types of initiatives—aimed at better case man- have since embarked on a promising on defendants—was almost halved, to agement—are not unique to Buffalo City path of reform, and service delivery 40 days (figure 6.4). This brings Buffalo (box 6.1). has improved. The court enhanced City more in line with the other locations, monitoring and supervision to ensure where the average filing time is just over compliance with time standards for all its a month. WHAT CAN BE IMPROVED? services—including the issuance of sum- monses; it also reorganized its internal In the medium term, the trial phase may Study magistrates’ court workflow with clearer division of tasks also become more efficient at the East caseloads to identify and among the court’s clerks and established London court. An additional magistrate eliminate causes of trial better and more frequent collaboration is now sitting to hear trials, reinforcing delay and consider limiting with the local attorneys.32 The court now the court’s capacity to dispose of civil the frequency and causes of issues summonses more efficiently, and cases. Also, the acting senior magistrate adjournments misplaced files are a thing of the past. As of the East London Magistrate Court and The average duration of the trial phase at a result, the average time—for attorneys representatives from the local attorneys the district courts (14.5 months)—from to prepare summonses, the court to association are collaborating to put service of process until expiration of issue them and sheriffs to serve process guidelines in place for mandatory pretrial the appeal period—remains unchanged since 2015. This time frame is some- what comparable to the average in FIGURE 6.4  Better procedures, enhanced supervision and court-attorney collaboration helped cut the time to file a claim in Buffalo City by nearly half OECD high-income economies (about 14 months). However, results show Time to enforce a contract (days) that even in other populous, upper- 557 middle-income economies, faster trial time is achievable; in Malaysia the trial stage takes nine months. Delays in the trial phase are South Africa’s biggest challenge. Across the country, attor- neys identify the backlog in the courts and the frequency of adjournments as common causes of delay in this phase. Weak case management and the absence of legal rules limiting the number of adjournments or requiring their justification may lead courts to grant adjournments to manage their Monitoring and supervision caseload or to adjourn cases due to lack Division of tasks of preparation. Collaboration with local Magistrates’ court rules do not establish attorneys limits on the number of adjournments 75 64 per case, nor do they reserve them for -35 days extraordinary or exceptional circum- South Africa average (32.4 days) 40 days stances. Cases may thus be adjourned by parties’ consensus or by the courts, Filing and service Trial and judgment Enforcement of judgment per request or at their own discretion. If 2015 2018 the court is processing a large volume of applications or hearings, there may be Source: Doing Business database. significant delay in resuming adjourned ENFORCING CONTRACTS 75 BOX 6.1 The judiciary in South Africa is enhancing case flow management and encouraging the use of pretrial conferences to improve judicial quality and efficiency In February 2014 the chief justice of South Africa issued a general directive with the norms and standards of performance applicable to all the courts and their judicial officers. The standards are aimed at improving the courts’ delivery of service and establishing guid- ing criteria for judicial case flow management—including early and regular use of pretrial conferences.a Pretrial conferences are valuable tools for the courts to clear backlogs and expedite resolution of cases. During the pretrial confer- ence, the judge works with the parties to narrow down the issues in dispute, address evidentiary questions and discuss, among other things, the possibility of settlement.b As of 2017, 96 economies measured by Doing Business, including South Africa, have made pretrial conferences available to foster better, more efficient case flow in the court system.c Yet across South African jurisdictions, pretrial conferences happen in varied ways. They are mandatory at the high courts—though parties conduct the conference out of court and subsequently file minutes detailing the issues discussed in preparation for trial, as provided by the rules. The judge can then determine whether a further conference is required in his or her chambers.d At the Gauteng Division of the High Court, cases involving expert testimony must now be certified as trial-ready through a “certification hearing” conducted by the court. At the lower courts, new civil practice directives issued in December 2017 by the Regional Court Presidents’ Forum made pretrial conferences mandatory for all contested matters brought before the regional courts.e District courts can establish practice guidelines to conduct pretrial proceedings. For both lower courts, whether at the regional or district level, magistrates can order parties to attend a pretrial conference if they deem it necessary to streamline the case and narrow down the issues for trial.f To comply with the chief justice’s directive, courts at all levels have also established their own case flow management protocols. For example, in December 2017 the KwaZulu-Natal Division of the High Court implemented the “Rule 37 Trial Readiness Questionnaire.”g This is a form that the parties must submit to the court summarizing how they attempted to narrow down the issues and prepare the case for trial. These inputs allow the judge to certify the case’s readiness for trial and estimate how long the trial will last. In February 2015 the civil division of the Johannesburg Magistrate Court published updated guidelines with forms to conduct mandatory “certifi- cation hearings,” including a pretrial conference to formulate issues, before the parties can enroll their case for trial.h The East London Magistrate Court will soon adopt its own pretrial protocol and pretrial conference questionnaire. a. “Norms and Standards for the Performance of Judicial Functions,” issued by Chief Justice Mogoeng Mogoeng on February 28, 2014, as published by Government Gazette 37390 GN 147. b. Gramckow, Heike, Omniah Ebeid, Erica Bosio and Jorge Luis Silva Mendez. 2016. Good Practice for Courts: Helpful Elements for Good Court Performance and the World Bank’s Quality of Judicial Process Indicators. Washington, DC: World Bank. c. Doing Business database. d. Rule 37 of the Uniform Rules of Court. Rules Regulating the Conduct of the Proceedings of the Several Provincial and Local Divisions of the High Court of South Africa, available at http://www.justice.gov.za/legislation/rules/UniformRulesCourt[26jun2009].pdf. e. Sections 2.3 to 2.10 of the Civil Practice Directives for the Regional Courts in South Africa, 2017 Fourth Revision, issued by the Regional Court Presidents’ Forum. f. Rules 22 and 25 of the Rules Regulating the Conduct of the Proceedings of the Magistrates’ Courts of South Africa, No. R. 740 (August 23, 2010) and Section 54 of the Magistrates’ Court Act No 32 of 1944. g. The questionnaire is available at http://www.lawlibrary.co.za/notice/highcourts/kzn_pretrial_questionnaire_2017_12.pdf. h. The guidelines are available at http://www.justice.gov.za/mc/mcjhb/mcjhb_prac_trial.html. cases. Countries that impose legal limits Assess judicial capacity and European Commission for the Efficiency on adjournments have mostly focused resources needed to enhance of Justice (CEPEJ).36 It is putting empha- on reserving them for unforeseen or case management and make it sis on empowering judges to direct more exceptional circumstances. Australia, effective, especially in lower pretrial processes to ensure that all cases Singapore, the United States and another courts are duly prepared for trial. A Judicial Case 50 economies globally have done this; Flow Management Committee has even 20% of them have also set a maximum Efficient case management systems been established, and there have been number of adjournments per case.33 reduce delays and case backlogs. They reported successes of case management Justified adjournments should also can also make legal services more afford- pilot programs implemented at the High encompass the establishment in advance able, as lawyers spend less time in court Court since 2012.37 In the medium term, of a reasonably immediate date to rein- and judges exercise better control over the administration and operation of the state the process.34 In Latvia, for example, dilatory practices. The South African judi- magistrates’ courts—now under the the capital’s central court may not post- ciary has made case flow management umbrella of the Department of Justice— pone a hearing without first setting a new a priority, in line with guiding principles will transition to the Office of the Chief hearing date.35 of case management established by the Justice.38 This transition entails applying 76 DOING BUSINESS IN SOUTH AFRICA 2018 It is important to assess lower courts’ need of training or NOTES resources that enable them to succeed at implementing 1. World Bank calculations indicate that each job case flow management directives. created in South Africa lifts about one person out of poverty. World Bank. 2017. South Africa Economic Update: Private Investment for Jobs. case flow management principles in specialized judges within the existing Washington, DC: World Bank. the magistrates’ courts. As part of this courts to deal exclusively with com- 2. World Bank. 2017. South Africa Economic process, it is important to assess whether mercial cases. In the past 10 years, 22 Update: Private Investment for Jobs. 3. National Planning Commission. National lower courts need additional train- economies have reformed their contract Development Plan 2030: Our future – make it ing or resources (computerized tools, enforcement by setting up commer- work. guidelines, support staff) to be able to cial courts or specialized commercial 4. Lanau, Sergi, Gianluca Esposito and Sebastiaan Pompe. 2014. Judicial System succeed at implementing the case flow divisions within existing courts. To Reform in Italy—A Key to Growth. IMF management directives.39 For instance, date, more than half of the economies Working Paper No. 14/32, February 2014. the new integrated case management benchmarked by Doing Business have 5. OECD. 2013. “What makes civil justice effective?” OECD Economics Department Policy system deployed in October 2017 aids commercial courts or divisions, includ- Notes, No. 18, June 2013. the courts with collecting statistics on ing Australia, Malaysia, Singapore, the 6. Section 171, Constitution of South Africa, 1996. court performance. But the system is not United Kingdom and the United States. 7. In 2014 the Department of Justice and Constitutional Development merged with yet fully operational to allow tracking the These are all top-ranked economies on the Department of Correctional Services flow of cases and the number of cases the ease of enforcing contracts and are to become the Department of Justice and backlogged. Court staff also need to international reference points for good Correctional Services. 8. Department of Justice of South Africa, be trained in using the system. In addi- judicial practices. Strategic Plan 2017-2020, available at tion, because of the heavy caseload and http:/ /www.justice.gov.za/MTSF/mtsf.htm. magistrates’ lack of specialization on civil Courts first analyze their respective 9. Advocates generally appear before the High Court. Because of their expertise and the fact commercial matters, they may not have caseload to determine the total share that they deal with clients through attorneys, the time or preparation to make effective of commercial cases in the docket their legal fees may be considerably higher use of pretrial conferences.40 and whether these types of cases are than the ones charged by attorneys. 10. The lower courts are subdivided into regional backlogged. The outputs of such an and district magistrates’ courts. Since 2014 For example, in 2001 Pakistani authorities analysis may justify the creation of a district and regional courts have, respectively, saw dramatic improvements in reducing specialized commercial court or division. a maximum monetary threshold of ZAR 200,000 ($14,541) and ZAR 400,000 court backlogs and case processing times As a general principle, specialized courts ($29,081). Doing Business considers the after the implementation of a case man- tend to improve efficiency and promote competent court to be the local court with agement project in six districts. Pakistani consistency in the application of the law. jurisdiction over commercial cases worth 200% income per capita (ZAR 150,750, or judges visited courts in Singapore and This is because judges become experts $10,960). attended training workshops every three on commercial matters and can dispose 11. The number of civil cases filed in 2017 were months in Islamabad for a period of 16 of cases faster. Nigeria (Lagos) and Côte 13,499 in Msunduzi and 11,296 in Buffalo City. The information was provided by officers months. As in South Africa, Pakistani d’Ivoire (Abidjan) achieved significant of the Pietermaritzburg and East London courts established committees—which time reductions at their local court of first Magistrate Courts. included local attorneys—to identify the instance after the creation of specialized 12. Rules Board for Courts of Law Act (107/1985): Amendment of the Rules of SCA, High Court key obstacles legal practitioners face in commercial courts.42 However, stud- and Magistrates Courts of South Africa, as the judicial system and determine how ies conducted in Sub-Saharan African published in Government Gazette 41142 of best to address them. The project suc- economies with specialized courts show September 29, 2017. 13. The attorney of the successful plaintiff ceeded in increasing the courts’ efficiency, that investments in these courts must prepares and submits a bill of legal costs to improving judicial practices and changing be sustainable and non-detrimental to the court. The court’s taxation master reviews the public’s perception of the judiciary.41 the functioning of the regular courts to the bill and awards recoverable costs based on the applicable scale, normally on the “party to maintain the overall quality of the judicial party” scale, which is the lowest one. Consider introducing specialized system.43 Locations should thus identify 14. A study from 2010 indicates that the difference commercial courts or commercial the largest sources of delay, for example between court awards and actual legal costs of litigation can be up to 50%. Bradstock Sara, sections in locations where criminal cases or commercial cases, and Graham Huntley and Peter Taylor. 2010. “At needed channel their resources toward those. what cost? A Lovells multi jurisdictional guide South African locations with large Such interventions could translate into to litigation costs.” Lovells LLC. 15. A list of sheriffs’ fees is available at http:// caseloads and lengthy trials could overall efficiency gains at first-instance www.sheriffs.org.za/wp-content/uploads consider introducing specialized com- courts and promote speedier resolution of /2017/07/NewSheriffsTariffsPart2of2 mercial courts, commercial divisions or all cases, including commercial matters. MagistratesCourt-1.pdf. ENFORCING CONTRACTS 77 16. For more details on the costs recorded by of the following to score on this item: time to Good Practice for Courts: Helpful Elements for Doing Business, consult the data notes section disposition report, clearance rate report, age of Good Court Performance and the World Bank’s of this report. pending cases report and single case progress Quality of Judicial Process Indicators. Washington, 17. World Bank. 2016. Doing Business 2016: report. Further details are available at http:/ / DC: World Bank. Measuring Regulatory Quality and Efficiency. www.doingbusiness.org/Methodology 41. Chemin, Matthieu. 2009. “The impact of the Washington, DC: World Bank. /Enforcing-Contracts. judiciary on entrepreneurship: Evaluation of 18. The indicator of procedural complexity 29. Office of the Chief Justice of the Republic of Pakistan’s “Access to Justice Programme,” presented in Doing Business in South Africa 2015 South Africa. Annual Performance Plan for Journal of Public Economics 93 (1-2) 114–125. was replaced by a qualitative index as a result 2018/19, available at http:/ /judiciary.org.za 42. World Bank. 2016. Doing Business 2016: of the changes in methodology introduced /index.php/documents/annual-performance Measuring Regulatory Quality and Efficiency. by Doing Business in 2015. Most of the index -plans. 43. Walsh, Barry. 2010. “In Search of Success: components refer to the competent courts. 30. The Arbitration Act, 1965 and Chapter 2 Case Studies in Justice Sector Development in 19. For further information, consult the data notes of the Rules Regulating the Conduct of the Sub-Saharan Africa.” Washington, DC: World section of this report. Proceedings of the Magistrates’ Courts of Bank. Available at 20. Small claims courts in South Africa were South Africa, as published in Government http://documents.worldbank.org/curated/en established by the Small Claims Courts Act Gazette No. R 183 of March 18, 2014. /291991468009961030/In-search-of (Act 61 of 1984). By Government Notice R.185 31. The four provinces with mediation centers are -success-case-studies-in-justice-sector of April 2014, the monetary jurisdiction was Gauteng, Limpopo, Mpumalanga and North -development-in-Sub-Saharan-Africa. amended for small claims courts to entertain West. civil cases of less than ZAR 15,000 ($1,090). 32. In February 2014 the Office of the Chief See http:/ /www.justice.gov.za/scc/scc.htm. Justice issued Directive No 147 with norms According to the Department of Justice of and standards of performance applicable to South Africa, there are initiatives to increase judicial officers in the country. One of these the monetary jurisdiction of the small claims standards mandates the courts to establish courts to up to ZAR 25,000 ($1,818). case management forums or committees 21. Competition Appeal Court, Electoral Court, to oversee the implementation of improved Labour Court, Labour Appeal Court, Land case flow management. Local committees Claims Court and Specialized Crimes Courts. established by the courts meet periodically 22. Magistrates serve the lower courts. The with various stakeholders, including district magistrates’ courts, as part of the representatives from attorneys associations. lower courts, are the competent courts for the 33. Doing Business database. purposes of the Doing Business case study. 34. Laws, Edward. 2016. “Addressing case 23. According to Rule 56 of the Rules Regulating delays caused by multiple adjournments.” the Conduct of the Proceedings of the Governance and Social Development Resource Magistrates’ Courts, a plaintiff can file an Centre. Helpdesk Research Report. application before the court to obtain an 35. World Bank. 2018. Doing Business in the attachment order to secure payment of a European Union 2018: Croatia, the Czech claim. Attorneys comment that in general Republic, Portugal and Slovakia. Washington, commercial cases, the mere fear of dissipation DC: World Bank. of assets from defendants will not move the 36. The CEPEJ guidelines are at https:/ /rm.coe.int court to grant such application. Disputes over /commission-europeenne-pour-l-efficacite lease agreements are typical cases where the -de-la-justice-cepej-cepej-guid/1680788300. courts admit pretrial attachment to secure 37. “Progress on judicial case-flow management.” payment of pending rent. De Rebus, May 2014 :10 [2014] DEREBUS 65, 24. Time limits were established for notice of available at http:/ /www.saflii.org/za/journals intention to defend (Rule 13 of the Rules /DEREBUS/2014/65.html. Regulating the Conduct of the Proceedings of 38. Office of the Chief Justice of the Republic of the Magistrates’ Courts), notice of trial (Rule South Africa. Annual Performance Plan for 22) and discovery of documents (Rule 23). 2018/19. 25. See Section 54 of the Magistrates’ Court 39. The case management project piloted at the Act No. 32 of 1944 and Rules 22 and 25 High Court consists of two phases: The first of the Rules Regulating the Conduct of the corresponds to the courts’ registrars. They Proceedings of the Magistrates’ Courts of oversee the monitoring and tracking of cases to South Africa No. R 740 (August 23, 2010). ensure compliance with the rules from the filing 26. Rule 31 of the Rules Regulating the Conduct of of an application until the close of pleadings. the Proceedings of the Magistrates’ Courts of The second phase deals with case management South Africa. by the judge president of the court or the judge 27. The judicial functions of the magistrates’ courts designated from the close of pleadings onwards. are under the purview of the Office of the This information was provided by officials of the Chief Justice. Court services reported by the Bloemfontein Division of the High Court during a Department of Justice refer to, among others, visit to the court. the quasi-judicial functions performed by the 40. Magistrates’ courts are considered “creatures courts, such as default judgments and taxation of statute,” meaning that they must follow of legal costs. See the Department of Justice’s their procedures strictly according to the Annual Report 2016/2017, available at http:/ / written applicable rules. World Bank experts www.justice.gov.za/reportfiles/report_list.html. identify lack of adequate judicial training and 28. Doing Business considers four types of reports judges’ narrow view that their work is limited available for the competent courts. In the to applying the law as detrimental factors case of South Africa the competent courts to an effective implementation of pretrial are the district magistrates’ courts. The conferences. Gramckow, Heike, Omniah Ebeid, competent courts should produce at least two Erica Bosio and Jorge Luis Silva Mendez. 2016. Trading across Borders MAIN FINDINGS ƒƒ Long port handling times and high border compliance costs are the main obstacles for exporters in South Africa. ƒƒ South Africa’s largest and most congested port is Durban, while Port Elizabeth shows the best performance in port handling among the four ports assessed in this report. ƒƒ Completing customs procedures for exporting and importing is efficient and fast in South Africa, compared globally. ƒƒ Although the time to comply with all documentary requirements for exporters in South Africa is lower than the average for Sub-Saharan Africa, it is higher than for OECD high-income economies and BRIC economies. ƒƒ Customs and port authority initiatives have contributed to South Africa’s movement toward electronic transaction systems, but a single window for trade might further facilitate exports and imports. TRADING ACROSS BORDERS 79 T he southernmost point on its recent years. They grew at an average Doing Business in South Africa 2018 continent, South Africa is a prime annual rate of 2.5% between 2010 and adopts Doing Business’s new approach to geostrategic location for trade. 2016. This is considerably lower than the measuring trade processes and applies it Not only is it situated on major North- average export growth of middle-income to the following four ports: Cape Town, South and South-South international economies (4.2%).4 Reviving South Durban, Ngqura and Port Elizabeth (box shipping routes, but its ports also offer Africa’s export growth rates is critical 7.1). It measures the ease of trading sea access to neighboring landlocked to boost economic growth.5 The govern- across borders based on an import and countries, making it a gateway to many ment of South Africa aims to increase export case study for each of the four parts of Africa and an important player its capacity for exporting diversified ports. in international maritime transportation.1 and value-added goods and services to global markets; for this, efficient ports The export case study assumes that each Trade is also a key element for the South are key. port exports its product of compara- African economy, representing over 60% tive advantage (largest export value)7 of the country’s GDP in 2016.2 The vast Research shows that reducing transit from Johannesburg to its natural export majority of the country’s imported and times and the unit cost of transport partner (the economy that is the largest exported goods move by sea.3 South for imports and exports can have a purchaser of the product).8 In the import Africa’s trade performance and global significant impact on a country’s trade case study, it is assumed that each port competitiveness are thus key for boosting flows. A recent report indicates that a imports a standardized shipment of 15 economic growth and creating jobs. 25% improvement in port performance metric tons of containerized auto parts can increase a country’s GDP by 2%. It (HS 8708, under the Harmonized System Despite their large growth potential, further identifies ports as facilitators of classification code) from its natural South Africa’s exports of goods and trade and integrators in the logistics sup- import partner to Johannesburg (table 7.1 services have not risen significantly in ply chain in Africa.6 and figure 7.1). HOW DOES MARITIME WHAT DOES TRADING ACROSS BORDERS MEASURE? TRADE WORK IN SOUTH In 2015 Doing Business introduced AFRICA? a new approach to measuring Trading across borders: measuring the trade processes. These changes efficiency of exporting and importing South Africa’s seaborne commerce aim to enhance the economic across borders depends on a myriad of players that have and policy relevance of indicators, Rankings are based on distance to worked toward improving trade pro- improve the consistency and rep- frontier scores for eight indicators cesses over the last decade. Two of the licability of the data and clarify the Cost for documentary main players are Transnet, a state-owned Time for documentary context in which the data should compliance and border compliance and border enterprise founded in 1990, and the compliance when compliance when be interpreted, including impor- exporting the product exporting the product South African Revenue Service (SARS), tant caveats to keep in mind. The of comparative of comparative which was established as an autono- advantage advantage updated methodology accounts mous agency through the South African for good practices in trade facili- Revenue Service Act of 1997 (box 7.2). tation such as the use of customs 25% 25% The National Ports Act, the primary piece Time Cost unions and trade agreements. to export to export of legislation regulating ports in South 25% 25% Africa, went into effect on November 26, Doing Business measures the time Time Cost to import to import 2006.9 The customs legislative frame- and cost (excluding tariffs) asso- work is established in the Customs and ciated with the logistical process Excise Act, 1964. Time for documentary Cost for documentary of exporting and importing goods. compliance and border compliance and border It assesses three sets of proce- compliance when compliance when SARS customs authorities have been importing auto parts importing auto parts dures—documentary compliance, working in recent years to update, border compliance and domestic simplify and modernize customs proce- Note: The time and cost for domestic transport and dures. Spurred by the need to keep pace transport—within the overall pro- the number of documents to export and import are cess of exporting or importing a measured but do not count for the rankings. with changes in international trade and shipment of goods (see figure). meet the demands of an increasingly globalized world, South Africa passed 80 DOING BUSINESS IN SOUTH AFRICA 2018 BOX 7.1 What are the four ports’ main features? The South African port system comprises both multipurpose ports and specialized bulk ports.a All four ports in the case study are multipurpose ports, while Ngqura was developed predominantly for transshipment cargo. The main differences among ports in- clude size, depth, capacity, infrastruc- Ports ZIMBABWE ture, proximity to markets and the Mineral bulk MOZAMBIQUE Makwarela Break bulk volumes or type of cargo or commodi- BOTSWANA Giyani Agricultural bulk Polokwane ties passing through them. Tariffs are Roll-on/roll-o Lebowakgomo Containers largely standardized, creating mini- National Capital KwaMhlanga mal competition and providing no Cities PRETORIA Mbombela KaMatsamo financial incentive for traders to use Province Boundaries Mahikeng Soweto Johannesburg ESWATINI International Boundaries one port over another.b Durban is the largest port in the NAMIBIA Phuthaditjhaba Ulundi country and the region. In 2017/18 Kimberley Bloemfontein its two piers handled some 2.8 mil- LESOTHO Durban lion twenty-foot equivalent units (TEUs)—nearly 60% of the four ports combined. The port benefits from its Umtata proximity to Johannesburg and bet- ter road connections to neighboring IBRD 43906 | AUGUST 2018 This map was produced by the Saldanha Zwelitsha countries. Cartography Unit of the World Bank Group. The boundaries, colors, denominations and any Ngqura other information shown on this map do not imply, on the part of Cape Town Port Elizabeth At Cape Town port, agricultural cargo the World Bank Group, any judgment on the legal status of any territory, or any endorsement (edible fruit and nuts; peel of citrus or acceptance of such boundaries. fruit or melons) dominates exports Source: Transnet National Ports Authority (TNPA). to the Netherlands (24%), the United Kingdom (19%) and the United Arab Emirates (6%).c As the westernmost of the ports measured, Cape Town’s main challenge is strong winds, especially during the summer. Loading and unloading equipment automatically stops if the wind reaches a certain strength, causing delays. The port of Ngqura, the deepest container terminal in Southern Africa, began operating in 2009 and is the newest commer- cial port. Developed to serve as a transshipment hub, it attracts larger vessels and has grown quickly. The port handled nearly 500,000 transshipments in the past year, 46% of the total handled in all four ports combined. Port Elizabeth, located midway between Durban and Cape Town ports, is equipped with a manganese facility and a car terminal. However, with the creation of the Ngqura port only 20 kilometers away, its container volumes have declined by 20% over the past three years, especially for transshipments. a. Multipurpose ports are those that handle a wide variety of cargo (containerized and non-containerized). Specialized bulk ports are ports that specialize in handling cargo that is unpacked or carried in unitized form. b. Centre for Competition, Regulation and Economic Development. 2014. “Review of regulation in the Ports Sector.” Available at http://www.tips.org.za /files/ccred-edd-recbp_regulation_in_the_ports_sector_-_farr_levin.pdf. c. South African Revenue Service data on trade flows for the most recent four-year period were used to identify Cape Town’s main trading partners—the economies to which it exports the largest value (price times quantity) of HS 08 (edible fruit and nuts; peel of citrus fruit or melons). legislation four years ago to replace its the Revised Kyoto Convention and the Throughout the country, customs clear- outdated customs legislative frame- World Customs Organization’s SAFE ance is done electronically. Clearing work. However, that legislation—the Framework of Standards to secure agents upload export and import dec- Customs Control Act, 2014, Customs and facilitate global trade. It will also larations to the SARS electronic data Duty Act, 2014 and Customs and Excise accommodate the rapid growth in the interchange (EDI). SARS’ operating Amendment Act, 2014—has yet to take use of information technology and system and the clearing agent’s system effect. The new customs legislation is ensure the efficiency, transparency and are directly connected through EDI. SARS intended to ensure compliance with predictability of customs procedures receives the customs declaration (SAD international requirements, including for trade.10 500), reviews it and sends a message TRADING ACROSS BORDERS 81 TABLE 7.1  Port case study assumptions* Cape Town Durban Ngqura Port Elizabeth Product HS 08 – Edible fruit and nuts; HS 87 – Vehicles other HS 84 – Nuclear reactors, HS 84 – Nuclear reactors, peel of citrus fruit or melons than railway or tramway boilers, machinery and boilers, machinery and rolling-stock, and parts and mechanical appliances; parts mechanical appliances; parts Export accessories thereof thereof thereof Trade partner Netherlands United States United States Germany Product HS 8708 – Parts and accessories of motor vehicles Import Trade partner Germany Source: Doing Business database and South African Revenue Service (SARS). Note: The export products and trading partner for Durban are those used for South Africa in the annual global Doing Business assessment. To identify the trading partner and export product for South Africa, Doing Business collects data on trade flows for the most recent four-year period from the United Nations Commodity Trade Statistics Database (UN Comtrade). The product of comparative advantage for South Africa is HS 87 (vehicles other than railway or tramway rolling stock, and parts and accessories thereof). SARS data on trade flows for the most recent four-year period were used to identify the trading partners and export products for the other ports. *According to the Doing Business methodology, each economy exports the product of its comparative advantage to its natural export partner. Similarly, each economy imports a standardized shipment of 15 metric tons of containerized auto parts (HS 8708) from its natural import partner. documentation may lead to loss of cargo. FIGURE 7.1  The process of exporting and importing goods in South Africa SARS allows exporters of these goods to submit supporting documents up to 14 HS 87 Vehicles days after the vessel’s departure from Johannesburg, South Africa port. Prior to the vessel’s departure, the Perishable Products Export Control Domestic transport Durban port EXPORTING Board (PPECB) carries out product qual- Border compliance New York City, United States ity inspections on regulated perishable Documentary compliance products destined for export under the Agricultural Products Standards Act. It HS 8708 Auto parts also performs a second inspection during container loading to ensure compliance Johannesburg, South Africa with cold chain protocols under the Domestic transport Durban port Perishable Products Export Control Act. IMPORTING Border compliance Berlin, Germany Once the PPECB confirms that the ship- Documentary compliance ment complies with export standards and requirements as well as with cold chain management protocols for perishable Note: South Africa is represented by Durban in the Doing Business global ranking. goods, it will issue an export certificate. In addition, the Department of Agriculture, through the EDI system, asking the agent loads all relevant information into the Forestry and Fisheries issues a phyto- to answer additional queries or provide TPT terminal operating system and the sanitary certificate to confirm that the further supporting documentation, or shipment can be moved to the terminal shipment meets the importing country’s simply informing the agent that the gate. requirements for plant products.11 cargo will be released by the customs authorities. While this clearing process is com- In the case of imports into South Africa, mon for most South African exports, a preclearance procedure allows clearing Among the documents required for it is different for agricultural products. agents to clear customs before the vessel export and import are the customs dec- These goods are typically perishable, arrives in port. The preclearance process laration, bill of lading, cargo dues order, and a delay in obtaining all required can begin as soon as an agent receives certificate of origin, commercial invoice, packing list and SOLAS certificate (Safety Throughout the country, customs clearance is done of Life at Sea). Once all documents have electronically. SARS’ operating system and the clearing been processed with the respective South African government agencies, chambers agent’s system are directly connected through the of commerce and shipping line, the trader electronic data interchange. 82 DOING BUSINESS IN SOUTH AFRICA 2018 BOX 7.2 Who are the main players in South African maritime trade? • Transnet, a state-owned freight transport and handling company, controls South Africa’s ports, rails and pipeline systems. The company has two operating divisions that deal with ports. Transnet National Ports Authority (TNPA) manages services and facilities in South Africa’s eight major seaports.a Transnet Port Terminals (TPT) handles operations, cargo and traffic at 16 port terminals. • The SARS Customs Administration enforces customs laws, levies and collects duties, classifies tariffs and investigates customs infractions at the South African border. • The International Trade Administration Commission of South Africa (ITAC) is responsible for customs tariff investigations, trade remedies and enforcement of import and export control measures in accordance with domestic laws and international agreements. • The Ports Regulator of South Africa (PRSA) is responsible for the economic regulation of the country’s port system. • Clearing and freight forwarding agencies, shipping lines and carriers are important nongovernmental stakeholders in South African maritime trade. Although not legally required, using a clearing agent or customs broker is common practice in South Africa. These professionals facilitate trade by preparing and processing documents for the trader and booking shipments. a. The eight major seaports are Cape Town, Durban, East London, Mossel Bay, Ngqura, Port Elizabeth, Richards Bay and Saldanha. notification from the shipping line that is common around the world, customs by introducing a centralized terminal the cargo is on board the vessel and on interventions on imports in South Africa operating system, the Navis SPARCS its way. are higher than on exports. N4, to consolidate supervision of port operations and fee payments. TPT now Initiatives for facilitating trade In 2017 SARS launched the Customs manages all its marine terminals from in South Africa Preferred Trader Programme, granting one integrated operating system with a Various government initiatives have accreditation to 28 customs clients. central database in Durban, tracking the moved South Africa toward paperless While still in its initial stages, this initia- movement of cargo in real time. Transnet transaction systems designed to make tive aims to facilitate the relationship has also introduced a truck booking trade processes more efficient. With its between SARS customs authorities and system in Durban, which aims to reduce introduction of the EDI system, SARS clients, reduce physical and documentary traffic on the road leading to the Durban instituted electronic communication checks, prioritize requests for tariff and Container Terminal. Durban port plans to with traders, customs clearing agents valuation determinations and implement have a compulsory truck booking system and shipping lines. Customs receives the nonintrusive inspection techniques when in place by April 2019. Additionally, majority of declarations electronically goods are stopped or held for inspection. South Africa has invested in terminal and enables traders to submit any sup- Each client is assigned a customs rela- infrastructure, including container han- porting documents by the same means. tionship manager, whose role is to help dling and gate automation to enhance The customs authorities request support- address clients’ queries and resolve com- port efficiency. ing documentation for approximately 5% pliance issues. Despite the improvements of exports and less than 15% of imports. implemented by SARS, there is still room How the process compares This low rate of intervention is a result of for the different players in South African Despite South Africa’s initiatives to facili- SARS’ implementation of a risk engine trade to coordinate their activities and tate trade, challenges persist. Compared in its software that determines the level streamline processes in order to avoid globally, maritime trade remains of risk in any shipment, indicating which repeated requests for information and relatively cumbersome, time-consuming shipments should be inspected and inspections. and costly. Border compliance13—which allowing most traders to get their goods measures the time and cost of fulfill- cleared more quickly. It is part of SARS’ Transnet Port Terminals (TPT) has strived ing customs requirements, manda- customs modernization initiative, which to improve efficiency and transparency tory inspections and port and terminal is moving from the traditional “interven- tion for intervention’s sake” toward an Compared globally, maritime trade in South Africa remains “intervention by exception” approach, or intervention based on identified risk.12 As relatively cumbersome, time-consuming and costly. TRADING ACROSS BORDERS 83 handling of cargo—takes 94 hours and for exports takes on average 5 hours in China).14 Border compliance takes 1.5 costs $666 on average for exports across OECD high-income economies trading times longer in South Africa and docu- the four South African ports measured. by sea, in South Africa it takes 15 times mentary compliance takes nearly 3 times This lags considerably behind the 31-hour longer (75 hours) on average. In the case longer. South Africa’s border compliance and $325 average in OECD high-income of imports, both the time and cost for bor- costs for exports are only slightly above economies trading by sea (table 7.2). der compliance are about 80% higher in the BRIC average, while its documen- South Africa than in OECD high-income tary compliance costs for exports are less Documentary compliance captures the economies trading by sea. Documentary than half. Regarding the data on imports, time and cost associated with the docu- compliance in South Africa costs slightly South Africa performs better than the mentary requirements of all government more than the OECD average and takes BRIC economies for all trading across agencies involved in the logistical process three times longer. borders indicators. of exporting and importing goods. It includes the time and cost for obtaining, Border compliance time and documen- Border compliance time preparing, processing, presenting and tary compliance time for exports by sea Across the 190 economies covered by submitting documents that are required from South Africa are also higher than Doing Business, maritime transportation for each shipment or more than once a the average for the BRIC economies is the most common means of exporting year. While documentary compliance (Brazil, the Russian Federation, India and in 115 economies and importing in 109 TABLE 7.2  Time and cost for border compliance and documentary compliance in South Africa’s four ports Export Import Border compliance Documentary compliance Border compliance Documentary compliance Distance to Time Cost Time Cost Time Cost Time Cost frontier score (0–100) (hours) (US$) (hours) (US$) (hours) (US$) (hours) (US$) OECD high income 93.92 13 150 2 35 9 112 4 26 OECD high income (by sea) 84.37 31 325 5 65 34 376 12 64 East Asia & Pacific 69.97 56 388 68 112 70 431 66 111 East Asia & Pacific (by sea) 69.69 60 428 60 111 77 462 53 112 South Africa average (by sea) 65.07 94 666 75 60 65 676 36 73 BRIC 64.36 63 623 24 124 115 711 54 141 BRIC (by sea) 62.66 63 623 24 124 140 753 58 138 Sub-Saharan Africa 52.56 100 592 88 215 136 687 103 300 Sub-Saharan Africa (by sea) 46.54 121 790 104 266 159 880 105 312 Spain 100.00 0 0 1 0 0 0 1 0 United Kingdom 93.76 24 280 4 25 3 0 2 0 Malaysia 82.75 45 321 10 45 69 321 10 60 Mexico 82.09 20 400 8 60 44 450 18 100 Chile 80.56 60 290 24 50 54 290 36 50 Rwanda 72.44 97 183 42 110 86 282 48 121 Australia 70.65 36 749 7 264 39 525 4 100 Port Elizabeth 69.25 80 451 68 55 54 676 36 73 Ngqura 68.93 84 451 68 55 54 676 36 73 Kenya 67.63 21 143 19 191 180 833 60 115 Cape Town 62.47 118 503 96 73 66 676 36 73 Namibia 61.47 120 745 90 348 6 145 3 63 Durban 59.64 92 1257 68 55 87 676 36 73 Brazil 59.78 49 959 12 226 63 970 48 107 Ghana 52.32 108 490 89 155 89 553 76 474 Source: Doing Business database. Note: The distance to frontier score (DTF) is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). The ranking of economies on the ease of trading across borders is determined by sorting the DTF scores for this category. These scores are the simple average of the DTF scores for border compliance and documentary compliance. The time and cost for domestic transport do not affect the ranking on the ease of trading across borders. For more details, see the chapter “About Doing Business and Doing Business in South Africa 2018.” The OECD averages are based on economy-level data for the 33 OECD high-income economies, 13 of which export by sea and 8 of which import by sea. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific, 22 of which export and import by sea. The BRIC averages are based on economy-level data for Brazil, Russia, India and China, all which export by sea and of which Brazil, India and China also import by sea. The averages for Sub-Saharan Africa are based on economy-level data for the 48 economies in the region, 29 of which export by sea and 29 of which import by sea. 84 DOING BUSINESS IN SOUTH AFRICA 2018 economies. In 45 of the 115 economies among EU member economies, could The time to complete border compli- exporting by sea, border compliance reduce overall delays and promote more ance for exports across the four South can be achieved in 48 hours or less. regional trade.17 African ports ranges from 80 hours in These include some of the largest Port Elizabeth to 118 hours in Cape Town container ports, including Shanghai An analysis of outcomes shows that bor- (figure 7.2). Completing this process (China), Singapore, Incheon (Republic of der compliance time is mostly dependent for imports takes between 54 hours in Korea), Jebel Ali (United Arab Emirates), on the efficiency of regulations and their Port Elizabeth and Ngqura and 87 hours Hamburg (Germany) and Sydney effective implementation by the agencies in Durban. This is high compared with (Australia). As noted above, the average involved. Efficient border compliance OECD high-income economies trading time to comply with these border proce- procedures can generally be found across by sea—where the average border com- dures across the four South African ports economies, irrespective of geography, pliance time to export is 31 hours and is almost three times the average for the the port location, import or export prod- to import, 34 hours—but low compared high-income OECD economies that trade uct and type of trading partner (within with economies in Sub-Saharan Africa by sea and 50% longer than the average a customs union or not). For example, trading by sea, where the average border for the BRIC economies.15 in Finland, Germany and the United compliance time to export is 121 hours Kingdom—which, like Port Elizabeth and and to import, 159 (table 7.2). Customs unions facilitate trade among Ngqura in South Africa, export goods member economies by streamlining classified as HS 84 (nuclear reactors, Higher border compliance times in South border compliance. On average, border boilers, machinery and mechanical appli- Africa than in other economies, espe- compliance takes 50 more hours for ances; parts thereof) to countries outside cially for exports, stem from inefficiencies trade outside an economy’s customs their customs union—border compliance in port handling. Across the four South union. Moreover, if the data for land and requirements can be completed in 24 to African ports measured, the total aver- sea transport are disaggregated, border 36 hours. In South Africa, by contrast, age time a shipment remains at the port, compliance for the former takes signifi- it takes 80 hours from Port Elizabeth beginning with its arrival at the queue cantly longer between economies trading and 84 hours from Ngqura. Both Brazil to enter the port and ending with its outside a customs union (59 hours) than and Guyana, which export agricultural departure from the port, is close to 40% between those in a union (14 hours). For products by sea to trading partners that higher than the average for all economies exports by sea, belonging to a customs are not within the same customs union, that trade by sea. And that handling union also reduces border compliance outperform Cape Town; the process is time is more than twice as long as the time, but to a lesser degree (72 versus 82 almost three days faster in Brazil and two overall average for trading across borders hours). days faster in Guyana. (by land and sea) in all 190 economies Regional cooperation enhances efficiency for economies, especially those trading FIGURE 7.2  The largest variations in border compliance times are related to port and by land. In Sub-Saharan Africa, 39 econo- terminal handling efficiency mies—including South Africa—belong Border compliance time (hours) to six different customs unions.16 Across Sub-Saharan Africa it takes 103 hours on Ngqura 4 80 84 average when exporting to an economy Port Elizabeth 4 76 80 Export outside a country’s customs union and Cape Town 4 30 84 118 40 hours when the trading partners Durban 4 88 92 belong to the same union. In contrast, border compliance takes 20 hours for Ngqura 6 48 54 European Union (EU) member countries exporting to non-EU economies and Port Elizabeth 6 48 54 Import 3 hours in the case of two EU trading Cape Town 6 60 66 partners. Although South Africa belongs Durban 6 81 87 to the Southern African Customs Union (SACU), only a small part of the country’s Clearance and inspections required by customs authorities trade is with other SACU members; its Clearance and inspections required by agencies other than customs main trading partners include China, the Port or border handling United States and Germany. Enhanced cooperation among SACU members, as Source: Doing Business database. TRADING ACROSS BORDERS 85 measured by Doing Business. In Cape Significant variations in port handling times across ports Town, where agricultural products are the are also recorded for imports, even when the import port’s export of comparative advantage, an average of 30 hours is added on to product is the same. This is due to differences in the the border compliance process for an volume of containers handled by each port, the road and inspection required by the Perishable sea congestion, and the ports’ operating models. Products Export Control Board. In the three other ports, which export manu- (36 minutes) or Port Elizabeth (22 min- exports across South Africa’s four ports facturing products, a physical inspection utes).18 Port Elizabeth employs a straddle is 19% higher ($104 more) than for all by agencies other than customs (such as carrier system, which eliminates waiting economies exporting by sea and over the International Trade Administration times for handling equipment and allows twice the cost for OECD high-income Commission of South Africa or the consignees to pick up containers as soon economies that trade by sea. The main National Regulator for Compulsory as they are unloaded. In contrast, Ngqura factor behind this gap are the higher costs Specifications) is not required for more and Pier 1 in Durban use a rubber-tired South Africa’s traders pay to comply with than 20% of shipments. In the case of gantry crane system, which enhances customs clearance procedures, including imports, border compliance in South the terminal’s volume capacity but slows customs broker fees. African ports takes on average less than down cargo pickup. half the time as in the BRIC economies Across the ports measured, variations in that import by sea, primarily due to South Border compliance cost cost are mainly driven by the differences Africa’s preclearance processing. The country’s export and import border in port handling fees, which in turn vary compliance costs are higher than the depending on the export product and The time exporters and importers spend global average and high compared with the type of cargo used (such as break completing customs clearances in South OECD high-income economies. The bulk, dry bulk, liquid bulk or containers) Africa is especially low. Globally export- difference in cost is narrower when (figure 7.3). In Ngqura and Port Elizabeth ers spend 23 hours completing customs compared only with other economies exporting a 15-metric-ton shipment of procedures and importers spend 37 that export by sea. Compared with BRIC goods classified as HS 84 (nuclear reac- hours; in South Africa the average time economies trading by sea, South Africa’s tors, boilers, machinery and mechanical is 4 hours for exports and 6 hours for border compliance cost is just above the appliances; parts thereof) costs on aver- imports. In contrast, the average time BRIC average for exports and just below age $451. Meanwhile, in Cape Town the for BRIC economies that trade by sea the BRIC average for imports. Still, the border compliance cost for exporting is 16 hours for exports and 55 hours for average cost for border compliance for agricultural goods classified as HS 08 imports. SARS’ modernization of its cus- toms operations has significantly reduced the time required for this process. FIGURE 7.3  The largest variations in border compliance costs are related to port and terminal handling charges Significant variations in port handling Border compliance cost (US$) times across ports are also recorded for Ngqura 200 251 451 imports, even when the import product is the same. This is due to differences in Port Elizabeth 200 251 451 Export the volume of containers handled by each Cape Town 141 52 310 503 port, the road and sea congestion, and Durban 200 1,057 1,257 the ports’ operating models. Among the four ports benchmarked, Durban, which Ngqura 258 418 676 handles the highest volume of containers, Port Elizabeth 258 418 676 suffers most from port congestion. Both Import ship turnaround time and anchorage Cape Town 258 418 676 waiting time in Durban are over twice Durban 258 418 676 the average of the other three ports. Although Durban and Ngqura have an Clearance and inspections required by customs authorities automatic entry system for trucks, the Clearance and inspections required by agencies other than customs average truck turnaround time is higher in Port or border handling Durban (from 35 minutes at Pier 1 to 72 at Pier 2) than in Ngqura and Cape Town Source: Doing Business database. 86 DOING BUSINESS IN SOUTH AFRICA 2018 (edible fruit and nuts; peel of citrus fruit The benchmarked South African ports are slower on or melons) averages $503. The border average—in terms of both border and documentary compliance cost is highest in Durban, costing on average $1,257—because HS compliance—than other economies that have the same 87 exports (vehicles other than railway product of comparative advantage. or tramway rolling stock, and parts and accessories thereof) in South Africa have OECD high-income economies and BRIC expensive when it comes to documen- higher cargo dues and terminal handling economies. This is principally due to the tary compliance for exports and more charges for a shipment of 15 metric tons. requirement for them to provide a hard expensive for border compliance. Durban But the cost for border compliance for copy of certain documents—such as the is more expensive for border compliance, imports is the same across all ports, since certificate of origin, the PPECB export while Cape Town is less expensive for the Doing Business methodology assumes permit and the phytosanitary certifi- both these sets of procedures. Exporting that the same goods are imported (auto cate—and the delays in obtaining the bill 15 metric tons of fruit from Cape Town parts, HS 8708). of lading. costs $503, compared with $1,034 in Grenada, $585 in Guinea-Bissau and To promote South African exports, port Documentary compliance takes South $490 in Ghana. handling fees are lower for exports than for African importers the same amount of imports. These costs include cargo dues time across the four ports, on average Domestic transport time and cost levied by Transnet Ports Authority, termi- 36 hours. Although this is faster than the Port Elizabeth has the shortest transport nal handling charges imposed by Transnet average for economies in Sub-Saharan time (in terms of kilometers per hour) Port Terminals (standard across ports) Africa and BRIC economies, documen- and is the least expensive destination and other port service fees charged by the tary compliance time for exporters and (as measured in U.S. dollars per kilome- shipping lines. While the same terminal importers in South Africa is high com- ter) for a shipment from a warehouse handling charges apply to exporting and pared with OECD high-income econo- in Johannesburg. Cape Town has the importing a 20-foot container, cargo dues mies (figure 7.4). longest transport time due to heavier are three times higher for imports than for traffic volumes, while Durban is the most exports.19 Cargo dues are charged to the Documentary compliance cost expensive because of higher road tolls. users (exporters, importers and shipping Lower costs for exports and imports can The times and costs also include those lines) to cover port infrastructure costs. improve an economy’s international trade for loading and unloading the shipment Port handling costs for imports among transactions and business competitive- at the warehouse. South African ports are 34% steeper than ness. In South Africa document costs for OECD high-income economies that are substantially lower than the average import by sea. for economies in Sub-Saharan Africa and WHAT CAN BE IMPROVED? BRIC economies and high compared to Documentary compliance time OECD high-income economies (figure Further reduce and streamline Traders in South Africa spend 75 hours 7.4). However, the cost is on a par with documentary requirements and on average to obtain and prepare all OECD high-income economies that increase the use of electronic documents (physical and electronic) for export and import by sea. SARS does not transaction systems exports. The average time to complete charge for a customs declaration, and the All agencies involved in the supply chain this documentary compliance is the same automation of documents (through the of goods being exported or imported in Durban, Port Elizabeth and Ngqura, 68 EDI and Navis systems) has resulted in a should move toward paperless transac- hours. In Cape Town, where the top export reduction in costs for documents across tion systems and reduce hard copy is an agricultural product, documentary the supply chain. requirements. Streamlining documentary compliance takes more than a day longer requirements makes supply chains more (96 hours). The required PPECB export Overall performance with same efficient and reduces the time the ship- permit and a phytosanitary certificate for export product ment waits at the port. agricultural products aim to ensure that The benchmarked South African ports the product meets health and food safety are slower on average—in terms of both According to the World Trade requirements. Those two documents are border and documentary compliance— Organization’s February 2017 Trade in addition to the documents required in than other economies that have the same Facilitation Agreement (TFA), member all the other ports. Traders spend more product of comparative advantage (figure countries should move toward the time in South Africa complying with all 7.5). In terms of cost, the situation var- reduction of hard copy requirements documentary requirements than in both ies. Ngqura and Port Elizabeth are less by accepting, for example, a paper or TRADING ACROSS BORDERS 87 FIGURE 7.4  Documentary compliance costs nearly the same in South Africa as in OECD high-income economies but takes more time Time to export Time to import Cost to export Cost to import (hours) (hours) (US$) (US$) Documentary compliance Documentary compliance Documentary compliance Documentary compliance 25 economies 0 29 economies 0 19 economies 0 30 economies 0 (global best)* (global best)** (global best)*** (global best)**** OECD high income United Kingdom 20 20 10 Namibia, OECD high income 10 United Kingdom United Kingdom OECD high income Australia OECD high income 40 40 Australia 20 Malaysia 20 Malaysia Mexico Mexico Chile Chile 60 3 ports 60 Malaysia Malaysia Mexico South Africa average Kenya 30 30 Namibia 4 ports 80 Cape Town 80 Chile, BRIC Chile 4 ports 100 100 40 40 Rwanda, Australia, Mexico Rwanda East Asia & Pacific East Asia & Pacific 120 120 BRIC Kenya 50 Rwanda 50 Rwanda 140 140 BRIC BRIC 60 60 160 160 Kenya East Asia & Pacific Kenya East Asia & Pacific 70 3 ports 70 200 200 South Africa South Africa 260 260 80 average 80 Australia range (4 ports) 280 280 90 90 Namibia 340 340 Cape Town Namibia 100 100 360 360 Source: Doing Business database. Note: The OECD averages are based on economy-level data for the 33 OECD high-income economies. The East Asia & Pacific averages are based on economy-level data for the 25 economies of East Asia and the Pacific. The BRIC averages are based on economy-level data for Brazil, Russia, India and China. *Top performers, time to export: Austria; Belgium; Canada; Croatia; the Czech Republic; Denmark; Estonia; France; Germany; Greece; Hong Kong SAR, China; Hungary; Ireland; Italy; Republic of Korea; Luxembourg; Netherlands; Poland; Portugal; Romania; San Marino; the Slovak Republic; Slovenia; Spain; and Sweden. ** Top performers, time to import: Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Republic of Korea, Latvia, Lithuania, Luxembourg, Malta, Netherlands, New Zealand, Poland, Portugal, Romania, the Slovak Republic, Slovenia, Spain and Sweden. *** Top performers, cost to export: Austria, Belgium, Croatia, Czech Republic, Denmark, Estonia, France, Hungary, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, San Marino, the Slovak Republic, Slovenia and Spain. ****Top performers, cost to import: Austria, Belarus, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Kazakhstan, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, the Slovak Republic, Slovenia, Spain, Sweden and the United Kingdom. electronic copy of a document of which Similarly, a paper copy of the certificate a digital system that consolidates all the government agency holds the origi- of origin is required by the local chamber documents required for foreign trade in nal.20 SARS and Transnet have moved of commerce and SARS. The documents a single place, streamlining procedures toward electronic transaction systems that take the longest to obtain are the bill and eliminating the need for hard copies. over the years. For example, Transnet of lading, the phytosanitary certificate During that same period Paraguay also expanded the use of automation and an and the certificate of origin. reduced the time required for border and integrated operating system to reduce documentary compliance by introducing paperwork and track cargo in real time. Traders in South Africa take 75 hours to a single window for exporting (Ventanilla SARS’ introduction of the single admin- complete documentary compliance for Única de Exportación). Export customs istrative document (SAD) in 2006, the exports, more than a third longer than the declarations and the certificate of origin electronic customs clearance system global average of 55 hours. South Africa can be obtained online through the single and a risk-based inspection system could take further action to reduce and window, lowering the time for documen- have made clearance easier and more streamline the information required of tary compliance. Georgia has also made convenient for importers, exporters and traders by automatically linking all the export and import documentary compli- cross-border traders. Yet South Africa relevant stakeholders. In Brazil documen- ance faster. In 2015/16 it introduced an still has many outdated, paper-based tary compliance to export an agricultural advanced electronic document submis- procedures, which are costly and more product to China takes just 12 hours. In sion option that reduced the total time for susceptible to fraud. An exporter of 2016/17 Brazil lowered the total time documentary compliance to two hours. agricultural products is required to have to comply with documentary require- a stamped phytosanitary certificate. ments by implementing SISCOMEX, 88 DOING BUSINESS IN SOUTH AFRICA 2018 FIGURE 7.5  On border compliance and documentary compliance times, South Africa Compulsory Specifications and others) underperforms other economies exporting the same goods could be coordinated and performed at the same time. Expanding automation Average of economies and risk-based case selection to other exporting HS 84 74.08 agencies would enhance coordination Ngqura 62.96 HS 84 and improve trade facilitation. This would Port Elizabeth 63.59 be especially relevant for the export of agricultural goods. At present, the auto- Turkey (HS 87)* 82.77 HS 87 mated risk engine with set parameters Durban 47.34 used for case selection is implemented Average of economies only by customs authorities. exporting HS 08 48.57 HS 08 Cape Town 51.12 Introduce an electronic single 0 100 window for trade Distance to frontier score (0–100) South Africa might consider introduc- Border compliance time (DTF) Border compliance cost (DTF) ing the single window concept to link Documentary compliance time (DTF) Documentary compliance cost (DTF) all relevant government departments electronically. Electronic platforms are Source: Doing Business database. already in wide use in trade; SARS and Note: The distance to frontier score (DTF) is normalized to range from 0 to 100, with 100 representing the frontier of Transnet exchange information through best practices (the higher the score, the better). For more details, see the chapter “About Doing Business and Doing Business in South Africa 2018.” The economies in Doing Business that export goods classified as HS 84 (nuclear the EDI system. However, the introduc- reactors, boilers, machinery and mechanical appliances; parts thereof) by sea are Republic of Congo, Finland, Germany, Japan, Thailand and the United Kingdom. The economies that export goods classified as HS 08 (edible fruit tion of an electronic single window and nuts; peel of citrus fruit or melons) by sea are Belize, Ecuador, Ghana, Grenada, Guinea-Bissau, Iraq, St. Lucia would allow everyone involved in South and the Syrian Arab Republic. *The only other economy, in addition to South Africa, that exports goods classified as HS 87 (vehicles other than African trade to connect directly, avoid railway or tramway rolling stock, and parts and accessories thereof) by sea is Turkey. duplications, standardize processes and significantly increase efficiency. This Increase coordination of these agencies were more integrated and happened in Korea, where an electronic different agencies with a view to coordinated, container inspections could single window brought together 69 gov- streamlining procedures be carried out simultaneously. This could ernment agencies as well as private Coordination among the agencies involved in turn speed up the export and import sector operators involved in international in export and import processes is essential process and lower the cost. trade,21 significantly reducing border com- to trade facilitation. This is recognized in pliance time for exports and imports and the TFA, which states: “Each Member shall SARS has already created working groups document requirements. A successful ensure that its authorities and agencies that bring together key stakeholders in implementation of the electronic single responsible for border controls and proce- the value chain (such as other govern- window requires collaboration across dures dealing with the importation, expor- ment entities and clearing and forwarding organizations. In Korea a task force was tation, and transit of goods cooperate with companies). The groups meet monthly to formed that involved various import- and one another and coordinate their activities exchange information, discuss trends and export-related government agencies.22 in order to facilitate trade.” In South Africa challenges, and advance port and system there is a lack of coordination between integration. However, various government In fact, several economies have proved stakeholders involved in the maritime agencies are still not linked electronically that single window systems produce trade value chain—especially government and continue to act independently. positive economic outcomes and departments. This yields redundancies increase trade. Singapore’s TradeNet, and inefficiencies. For example, different The process could be more streamlined the world’s first national single window, government agencies end up inspecting and faster if inspections by all govern- was launched in January 1989 and is the same consignment several times, ment agencies (SARS, the South African considered a global good practice. By at various stages of the logistics chain. Police Service, the National Regulator for 2006 TradeNet was handling more than Although physical inspections are not required in more than 20% of shipments The introduction of an electronic single window would of the case study products, when cargo is allow everyone involved in South African maritime trade stopped by the automated risk engine for inspection this adds an average of three to connect directly, avoid duplications, standardize days to the border compliance process. If processes and significantly increase efficiency. TRADING ACROSS BORDERS 89 9 million trade declarations per year with region. Trade volumes are much higher Further expanding or integrating customs over 90% of them processed within 10 among the ASEAN economies (25% of unions in Africa and forming partnerships minutes; by 2016 that figure was up to their total trade) and among those of through trade agreements can strengthen 99%.23 Owing to this success, numer- the EU (40%).28 Landlocked developing regional integration, contribute to the ous countries have followed Singapore’s countries face the double challenge of growth of South Africa’s ports and facilitate model. Eleven economies in Sub-Saharan access to seaports and development.29 trade within and beyond the continent.32 Africa have implemented a single win- Seven of 15 countries in Southern Africa Many countries have benefitted from doing dow. Ghana, the first in the region to do are landlocked, and there are many small, this, resulting in increased regional trade this, launched its single window in 2002, fragmented markets. It is thus crucial and improved performance on the trading using a phased approach to implementa- for SADC economies to develop a single across borders indicator due to the gains tion in line with international good prac- integrated regional market. in efficiency from reducing the number of tices. According to the Ghana Revenue checkpoints for cargo moving across bor- Authority’s Customs Division, the imple- South Africa, the most developed ders. For example, in 2011 Burundi reduced mentation of the single window system economy in the region, has a com- the time to trade across borders by enhanc- has significantly increased government manding geostrategic location, and ing its use of electronic data interchange revenue and improved the productivity of a significant amount of trade passes systems, introducing a more efficient port operations.24 through its economy from the region. It system for monitoring goods going through could particularly benefit from deeper transit countries and improving border The single window concept can also work regional integration and play a leading coordination with neighboring transit coun- on a regional level. In Asia the ASEAN role in this effort.30 South Africa could tries. Uganda has made trading across bor- Single Window aims to facilitate trade and identify the documents it uses to trade ders easier by connecting customs stations improve compliance by allowing agencies with other SADC countries, determine electronically, linking banks to customs to exchange cargo clearance data among those required by law, eliminate those (for payment of duties) and enhancing members of the Association of Southeast not legally required and harmonize cooperation at the Kenya–Uganda border Asian Nations.25 These economies are at documents where possible. It would through joint inspections. In Europe border different stages of developing the single be relevant to review the framework for cooperation between Norway, Sweden and window platform. Brunei Darussalam, customs and border agency regulations Finland has saved time and costs both for Indonesia, Malaysia, Philippines and (regional and national) and adapt it to the the authorities and for traders crossing the Thailand have had such a platform TFA and other best practices. border.33 in place since January 2018,26 while Cambodia, the Lao People’s Democratic Regional agreements converting a two- Upgrade trade logistics Republic, Myanmar and Vietnam are at stop border crossing point into a one-stop infrastructure an earlier stage of development.27 In Africa border are essential. SADC economies Ports in South Africa have varying levels the Trans-Kalahari Single Window is an have worked toward border coopera- of congestion, operational efficiency and ongoing initiative to automate customs tion. In 2011 Malawi improved customs infrastructure development. Compared processes and exchanges between the clearance procedures and transport links globally, handling speeds are low across customs authorities of Botswana, Namibia between Blantyre and the port of Beira the four ports. Durban, the most con- and South Africa. This project will first in Mozambique. In 2009 Zambia eased gested port in South Africa, handles require the harmonization of international trade by implementing a one-stop border nearly 2.8 million containers34—the larg- trade procedures among these countries. post with Zimbabwe, launching web- est volume in Sub-Saharan Africa—and a based submission of customs declara- rising volume of containers through this Promote regional integration tions and introducing scanning machines port risks causing further slowdown. through the effective at border posts. Under the WCO-SACU implementation of border Connect Project (a joint initiative of the Increasing port capacity through invest- cooperation agreements World Customs Organization and the ment in infrastructure and equipment Increasing intraregional trade within Southern African Customs Union), South could improve operational performance the Southern African Development Africa and Eswatini have undertaken and efficiency.35 A high-speed rail link Community (SADC) is key to unleashing pilot programs and tests for establish- between Johannesburg and Durban the region’s economic potential. Since ing customs system interconnectivity could ease congestion on the road. the SADC established a free trade area in and data exchange. A similar pilot with Infrastructure investments resulted in sig- 2008, intraregional trade has increased Mozambique has been concluded and is nificant improvements in trade logistics only modestly. Intraregional trade awaiting full implementation under the performance in 11 economies in 2016/17. represents 10% of trade in the SADC one-stop border post at Ressano Garcia.31 As part of its National Development Plan 90 DOING BUSINESS IN SOUTH AFRICA 2018 2013-2017, Angola improved handling business city of the exporting economy and about South Africa’s status at https:/ /www travels to a warehouse in the largest business .tfadatabase.org/members/south-africa. South time and reduced border compliance city of the importing economy. Johannesburg Africa ratified the TFA on November 30, 2017. time by upgrading the port of Luanda.36 is the largest business city in South Africa. 21. Private sector participants included traders, India reduced import border compliance 9. For more about the legal framework for ports, customs brokers, customs services, shipping see the Transnet National Ports Authority lines, logistics firms, freight forwarders, time in Mumbai by improving port infra- website at insurance firms, trade-related associations structure at Nhava Sheva. Singapore, for http:/ /www.transnetnationalportsauthority and banks. For more details on the Korean its part, made exporting and importing .net/Legal,%20Risk%20and%20Compliance experience, see https:/ /www.uncitral.org /NationalPortAct/Pages/Port-Legal /pdf/english/colloquia/EC/SHIM_Sang_Bee easier by improving infrastructure and -Framework.aspx. _brief3Korean_case.pdf. electronic equipment at the port. 10. For more about customs legislation, see the 22. Yang, So Young. 2011. “Case Study on Single SARS website at http:/ /www.sars Window Implementation.” Available at https:/ / .gov.za/ClientSegments/Customs-Excise www.wto.org/english/tratop_e/tradfa_e /AboutCustoms/Pages/New-Customs /case_studies_e/single_window_kor_e.doc. -Legislation-update.aspx. 23. See the Singapore Customs Introduction 11. Directorate International Trade, Department Guide for Newly Registered Traders at of Agriculture, Forestry and Fisheries. January https:/ /www.customs.gov.sg/-/media/cus/ NOTES 2014. Step-by-step export manual for exporters of files/business/resources/eguide-for-newly South African processed fruits, vegetables and nuts. -registered-traders-updated-as-of-19-apr 1. South Africa’s landlocked neighboring 12. Widdowson, David. 2007. “The Changing Role -2016.pdf. countries include Botswana, Lesotho, Eswatini, of Customs: Evolution or Revolution?” World 24. EBO-Ghana. 2018. “Paperless Port Boosts Zambia and Zimbabwe. Customs Journal 1 (1): 31-37. Available at Half-Year Import Revenue.” Available at 2. World Bank Group. World Integrated Trade http:/ /customscentre.com/wp-content http:/ /www.eurboghana.eu/2018/08/10 Solution. See South Africa profile at https:/ / /uploads/2012/09/the_changing_role_of /paperless-port-boosts-half-year-import wits.worldbank.org/countryprofile/en/country _customs_evolution_or_revolution.pdf. -revenue/. /ZAF/startyear/2012/endyear/2016/indicator 13. Border compliance captures the time and 25. The ASEAN members states are Brunei /NE-TRD-GNFS-ZS. cost associated with compliance with a) Darussalam, Cambodia, Indonesia, Lao PDR, 3. Mineral products (25.11%), precious metals the economy’s customs regulations; b) Malaysia, Myanmar, Philippines, Singapore, (16.57%), vehicles aircraft vessels (11.89%) inspections required by agencies other than Thailand and Vietnam. and iron and steel (11.86%) represented a customs that are mandatory in order for the 26. Chia, Yan Min. 2016. “Asean Single Window total of 65.4% of South Africa’s exports in shipment to cross the economy’s border; and - a digital platform to simplify customs 2017. South Africa’s main export trading c) the time and cost for handling that takes clearance.” The Business Times. Available at partners in 2017 were China, the United place at its port. If customs clearance or https:/ /www.businesstimes.com.sg/asean States, Germany, Japan and India. SARS Trade inspections take place at the port at the same -business/asean-single-window-a-digital Statistics, available at http://tools.sars.gov time, the time estimate for border compliance -platform-to-simplify-customs-clearance. .za/tradestatsportal/. The Department of takes this simultaneity into account. 27. See the ASEAN Single Window Trade Transport’s Maritime Branch states that in 14. All four BRIC economies export by sea but Facilitation website at http:/ /asw.asean.org terms of volume, more than 96% of South only Brazil, India and China import by sea. /component/content/category/13-static Africa’s imports and exports are shipped 15. The calculation is based on Doing Business -pages. by sea. See the Maritime Branch’s website data. The OECD high-income economies 28. OECD. 2017. OECD Economic Surveys: South at http:/ /www.transport.gov.za/web/ that trade by sea are Australia, Chile, Finland, Africa 2017. department-of-transport/maritime. Germany, Greece, Iceland, Ireland, Israel, 29. Arvis, J.F., et al. 2011. Connecting Landlocked 4. Economies such as Ghana and Kenya grew at Japan, Latvia, New Zealand, Republic of Korea Developing Countries to Markets: Trade Corridors an average rate of 13.8% and 4.4%, respectively, and the United Kingdom. in the 21st Century. Washington, DC: World during the same period, according to the World 16. These are the Common Market for Eastern & Bank. Available at http:/ /documents Bank’s World Development Indicators. Annual Southern Africa (COMESA), the West African .worldbank.org/curated/en/489041468154790373 growth rate of exports of goods and services Economic and Monetary Union (UEMOA, by /pdf/608060PUB0Conn10Box358332B01P is based on constant local currency. Exports of its French acronym), the Southern African UBLIC1.pdf. goods and services represent the value of all Customs Union (SACU), the Economic and 30. OECD. 2017. OECD Economic Surveys: South goods and other market services provided to the Monetary Community of Central Africa Africa 2017. rest of the world. (CEMAC), the East African Community 31. Interview with SARS representatives. May 16, 5. Comprehensive Maritime Transport Policy (EAC) and the Economic Community of West 2018. Pretoria, South Africa. (CMTP) for South Africa, available at http:/ / African States (ECOWAS). 32. OECD. 2017. OECD Economic Surveys: South www.transport.gov.za/documents/11623 17. OECD. 2017. OECD Economic Surveys: South Africa 2017. /44313/MaritimeTransportPolicyMay2017 Africa 2017. Paris: OECD Publishing. Available 33. Communication from Norway on Border FINAL.pdf/4fc1b8b8-37d3-4ad0-8862 at http:/ /dx.doi.org/10.1787/eco_surveys-zaf- Agency Cooperation, available at http:/ / -313a6637104c. 2017-en. tfig.unece.org/contents/case-studies.htm. 6. PricewaterhouseCoopers. April 2018. 18. Data provided by Transnet National Ports 34. Data provided by Transnet National Ports “Strengthening Africa’s gateways to trade: An Authority. Authority. analysis of port development in sub-Saharan 19. According to TNPA Tariff Book 2018-19, the 35. Gidago, Usman. 2015. “Consequences of Port Africa.” cargo dues for importing a 20-foot container Congestion on Logistics and Supply Chain in 7. Specific products are excluded: precious in local currency are ZAR 2,146.78 and African Ports.” Developing Country Studies 5(6): metal and gems, mineral fuels, oil products, for exporting a 20-foot container in local 160-168, available at https:/ /pdfs live animals, residues and waste of foods and currency are ZAR 636.03. Based on TPT Tariff .semanticscholar.org/ba11/5e33e5123e5a645 products, as well as pharmaceuticals. In these Book 2018-19, terminal handling charges for e359a265ede2b53c503a8.pdf. cases, the second largest product category is importing and exporting a 20-foot container in 36. World Bank. Doing Business: Trading across considered as needed. local currency are ZAR 1801. Borders: Good Practices. Available at http:/ / 8. For each of the 190 economies covered by 20. See the WTO Agreement on Trade Facilitation www.doingbusiness.org/data/exploretopics Doing Business, it is assumed that a shipment at https:/ /www.wto.org/english/docs_e /trading-across-borders/good-practices. is located in a warehouse in the largest /legal_e/tfa-nov14_e.htm and information DATA NOTES 91 Data Notes T he indicators presented and ana- other economies used for comparison are public officials and other professionals lyzed in Doing Business in South based on the indicators in Doing Business routinely administering or advising on Africa 2018 measure business 2018: Reforming to Create Jobs, the 15th in legal and regulatory requirements. These regulation and the protection of property a series of annual reports published by experts had several rounds of interaction rights as well as their effect on business- the World Bank Group. with the project team, involving confer- es, especially small and medium-size ence calls, written correspondence and domestic firms. First, the indicators docu- visits by the team. The data from ques- ment the complexity of regulation, such METHODOLOGY tionnaires were subjected to numerous as the number of procedures to obtain rounds of verification, leading to revi- construction approvals or to register a The data for Doing Business in South Africa sions or expansions of the information transfer of commercial property. Second, 2018 were collected in a standardized collected. they gauge the time and cost to achieve way. To start, the team customized the a regulatory goal or comply with regula- Doing Business questionnaires for the The Doing Business methodology offers tion, such as the time and cost to enforce specific study in South Africa. The ques- several advantages. It is transparent, a contract. Third, they measure the extent tionnaires use a simple business case to using factual information about what of legal protections, for example, the pro- ensure comparability across locations laws and regulations say and allowing tections of property rights. and economies and over time—with multiple interactions with local respon- assumptions about the legal form of the dents to clarify potential misinterpreta- This report presents Doing Business business, its size, its location and the tions of questions. Having representative indicators for nine urban areas and four nature of its operations. Questionnaires samples of respondents is not an issue; maritime ports in South Africa. The were administered to local experts, Doing Business is not a statistical survey, data for all sets of indicators in Doing including lawyers, conveyancers, busi- and the texts of the relevant laws and Business in South Africa 2018 are current ness consultants, architects, engineers, regulations are collected and answers as of May 1, 2018. The data for the 189 clearing agents and freight forwarders, checked for accuracy. The methodology Economy characteristics Gross national income per capita Doing Business in South Africa 2018 relies on 2016 income per capita data as published in the World Bank’s World Development Indicators 2017. Income is calculated using the Atlas method (in current U.S. dollars). For cost indicators expressed as a per- centage of income per capita, 2016 gross national income (GNI) per capita in current U.S. dollars is used as the denominator. South Africa’s income per capita for 2016 is $5,480 (ZAR 75,375). Region and income group Doing Business uses the World Bank regional and income group classifications, available at http://data.worldbank.org/about/ country-and-lending-groups. Regional averages presented in figures and tables in Doing Business in South Africa 2018 include economies from all income groups (low, lower middle, upper middle and high income). Exchange rate The exchange rate for the U.S. dollar used in this report is: $1 = 13.7 South African rand (ZAR) 92 DOING BUSINESS IN SOUTH AFRICA 2018 is inexpensive and easily replicable, so FIGURE 8.1  Dealing with construction data can be collected in a large sample of DEALING WITH permits: efficiency and quality of building locations and economies. Because stan- CONSTRUCTION PERMITS regulation dard assumptions are used in the data Rankings are based on distance to collection, comparisons and benchmarks Doing Business records all procedures frontier scores for four indicators are valid across locations. Finally, the data required for a business in the construc- Days to comply Cost to comply not only highlight the extent of specific tion industry to build a warehouse along with formalities with formalities, regulatory obstacles to business but also with the time and cost to complete each to build a as % of warehouse warehouse value identify their source and point to what procedure. In addition, Doing Business could be improved. compiles the building quality control index, evaluating the quality of building 25% 25% regulations, the strength of quality control Time Cost LIMITS TO WHAT IS and safety mechanisms, liability and insur- 25% 25% Procedures Building MEASURED ance regimes, and professional certifica- quality control tion requirements. Information is collected index The Doing Business methodology has four through a questionnaire administered to Steps to comply Quality of building limitations that should be considered experts in construction licensing, includ- with formalities; regulation and its when interpreting the data. First, the data ing architects, civil engineers, construction completed when implementation final document is often focus on a specific business form— lawyers, construction firms, utility service received generally a limited liability company providers and public officials who deal with (or its legal equivalent) of a specified building regulations, including approvals, size—and may not be representative of permit issuance and inspections. ƒƒ Obtaining all necessary clearances, the regulation on other businesses (for licenses, permits and certificates. example, sole proprietorships). Second, The ranking of locations on the ease of ƒƒ Submitting all required notifications transactions described in a standardized dealing with construction permits is deter- for the start and end of construction case scenario refer to a specific set of mined by sorting their distance to frontier and for inspections. issues and may not represent the full scores for dealing with construction per- ƒƒ Requesting and receiving all neces- set of issues that a business encounters. mits. These scores are the simple average sary inspections (unless completed Third, the measures of time involve of the distance to frontier scores for each by a private, third-party inspector). an element of judgment by the expert of the component indicators (figure 8.1). respondents. When sources indicate Doing Business also records procedures different estimates, the time indicators EFFICIENCY OF for obtaining connections for water and reported in Doing Business represent the CONSTRUCTION PERMITTING sewerage. Procedures necessary to regis- median values of several responses given Doing Business divides the process of ter the warehouse so that it can be used under the assumptions of the standard- building a warehouse into distinct pro- as collateral or transferred to another ized case. cedures in the questionnaire and solicits entity are also counted. data for calculating the time and cost to Finally, the methodology assumes that a complete each procedure (figure 8.2). To make the data comparable across business has full information on what is These procedures include but are not locations, several assumptions about the required and does not waste time when limited to: construction company, the warehouse completing procedures. In practice, com- ƒƒ Obtaining all plans and surveys project and the utility connections are pleting a procedure may take longer if the required by the architect and the engi- used. business lacks information or is unable neer to start the design of the building to follow up promptly. Alternatively, plans (for example, topographical Assumptions about the the business may choose to disregard surveys, location maps or soil tests). construction company some burdensome procedures. For both ƒƒ Obtaining and submitting to the The construction company (BuildCo): reasons the time delays reported in Doing authorities all relevant project-specif- ƒƒ Is a limited liability company (or its Business would differ from the recollec- ic documents (for example, building legal equivalent). tion of entrepreneurs reported in the plans, site maps and certificates of ƒƒ Operates in the selected city. World Bank Enterprise Surveys or other urbanism). ƒƒ Is 100% domestically and privately firm-level surveys. ƒƒ Hiring external third-party supervi- owned. sors, engineers or inspectors (if ƒƒ Has five owners, none of whom is a necessary). legal entity. DATA NOTES 93 FIGURE 8.2  What are the time, cost and number of procedures to comply with external agencies, these are counted formalities to build a warehouse? as procedures. ƒƒ Will include all technical equipment Cost (% of warehouse value) required to be fully operational. ƒƒ Will take 30 weeks to construct Completed (excluding all delays due to adminis- warehouse trative and regulatory requirements). Number of Assumptions about the utility procedures connections The water and sewerage connections: A business in the ƒƒ Will be 150 meters (492 feet) from construction industry Time the existing water source and sewer Preconstruction Construction Postconstruction (days) tap. If there is no water delivery infra- and utilities structure in the location, a borehole will be dug. If there is no sewerage infrastructure, a septic tank in the ƒƒ Is fully licensed and insured to carry of approximately 1,300.6 square smallest size available will be installed out construction projects, such as meters (14,000 square feet). Each or built. building warehouses. floor will be 3 meters (9 feet, 10 ƒƒ Will not require water for fire protec- ƒƒ Has 60 builders and other employees, inches) high. tion reasons; a fire extinguishing all of them nationals with the techni- ƒƒ Will have road access and be located system (dry system) will be used cal expertise and professional experi- in the peri urban area of the selected instead. If a wet fire protection system ence necessary to obtain construction city (that is, on the fringes of the city is required by law, it is assumed that permits and approvals. but still within its official limits). the water demand specified below ƒƒ Has a licensed architect and a ƒƒ Will not be located in a special eco- also covers the water needed for fire licensed engineer, both registered nomic or industrial zone. protection. with the local association of architects ƒƒ Will be located on a land plot of ƒƒ Will have an average water use of or engineers. BuildCo is not assumed approximately 929 square meters 662 liters (175 gallons) a day and an to have any other employees who are (10,000 square feet) that is 100% average wastewater flow of 568 liters technical or licensed experts, such as owned by BuildCo and is accurately (150 gallons) a day. Will have a peak geological or topographical experts. registered in the cadastre and land water use of 1,325 liters (350 gallons) ƒƒ Has paid all taxes and taken out registry where freehold titles exist. a day and a peak wastewater flow of all necessary insurance applicable However, when the land is owned 1,136 liters (300 gallons) a day. to its general business activity (for by the government and leased by ƒƒ Will have a constant level of water example, accident insurance for con- BuildCo, it is assumed that BuildCo demand and wastewater flow struction workers and third-person will register the land in the cadastre throughout the year. liability insurance). or land registry or both, whichever is ƒƒ Will be 1 inch in diameter for the water ƒƒ Owns the land on which the ware- applicable, at the completion of the connection and 4 inches in diameter house will be built and will sell the warehouse. for the sewerage connection. warehouse upon its completion. ƒƒ Is valued at 50 times income per capita. Procedures Assumptions about the ƒƒ Will be a new construction (there was A procedure is any interaction of the warehouse no previous construction on the land), company’s employees or managers, or The warehouse: with no trees, natural water sources, any party acting on behalf of the com- ƒƒ Will be used for general storage natural reserves or historical monu- pany, with external parties, including activities, such as storage of books or ments of any kind on the plot. government agencies, notaries, the land stationery. The warehouse will not be ƒƒ Will have complete architectural and registry, the cadastre, utility companies used for any goods requiring special technical plans prepared by a licensed and public inspectors—and the hiring of conditions, such as food, chemicals or architect and a licensed engineer. If external private inspectors and techni- pharmaceuticals. preparation of the plans requires such cal experts where needed. Interactions ƒƒ Will have two stories, both above steps as obtaining further documen- between company employees, such as ground, with a total constructed area tation or getting prior approvals from development of the warehouse plans and 94 DOING BUSINESS IN SOUTH AFRICA 2018 inspections conducted by employees, assumed that the minimum time required control before construction, quality con- are not counted as procedures. However, for each procedure is one day, except for trol during construction, quality control interactions with external parties that procedures that can be fully completed after construction, liability and insurance are required for the architect to prepare online, for which the time required is regimes, and professional certifications the plans and drawings (such as obtain- recorded as half a day. Although proce- indices (table 8.2). The indicator is based ing topographic or geological surveys), dures may take place simultaneously, on the same case study assumptions as or to have such documents approved they cannot start on the same day (that the measures of efficiency. or stamped by external parties, are is, simultaneous procedures start on con- counted as procedures. Procedures that secutive days), again with the exception Quality of building regulations the company undergoes to connect the of procedures that can be fully completed index warehouse to water and sewerage are online. If a procedure can be accelerated The quality of building regulations index included. All procedures that are legally legally for an additional cost and the accel- has two components: required, or that are done in practice by erated procedure is used by the majority of ƒƒ Whether building regulations are eas- the majority of companies, to build a companies, the fastest procedure is cho- ily accessible. A score of 1 is assigned warehouse are counted, even if they may sen. It is assumed that BuildCo does not if building regulations (including the be avoided in exceptional cases. This waste time and commits to completing building code) or regulations dealing includes obtaining technical conditions each remaining procedure without delay. with construction permits are avail- for electricity or clearance of the electrical The time that BuildCo spends on gather- able on a website that is updated as plans only if they are required to obtain a ing information is not taken into account. new regulations are passed; 0.5 if the building permit (table 8.1). It is assumed that BuildCo is aware of all building regulations are available free building requirements and their sequence of charge (or for a nominal fee) at the Time from the beginning. relevant permit-issuing authority; 0 if Time is recorded in calendar days. The the building regulations must be pur- measure captures the median duration Cost chased or if they are not made easily that local experts indicate is necessary Cost is recorded as a percentage of the accessible anywhere. to complete a procedure in practice. It is warehouse value (assumed to be 50 ƒƒ Whether the requirements for obtain- times income per capita). Only official ing a building permit are clearly costs are recorded. All the fees associated specified. A score of 1 is assigned if TABLE 8.1  What do the indicators on with completing the procedures to legally the building regulations (including the efficiency of construction permitting build a warehouse are recorded, including the building code) or any accessible measure? those associated with obtaining land use website, brochure or pamphlet clearly Procedures to legally build a warehouse approvals and preconstruction design specifies the list of required docu- (number) clearances; receiving inspections before, ments to submit, the fees to be paid Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and during and after construction; obtain- and all required preapprovals of the certificates ing utility connections; and registering drawings or plans (for example, elec- Submitting all required notifications and receiving the warehouse property. Nonrecurring trical, water and sewerage, or envi- all necessary inspections taxes required for the completion of the ronmental clearances) by the relevant Obtaining utility connections for water and warehouse project are also recorded. agencies; 0 if none of these sources sewerage Sales taxes (such as value added tax) specify any of these requirements or if Registering the warehouse after its completion or capital gains taxes are not recorded. these sources specify fewer than the (if required for use as collateral or for transfer of the warehouse) Nor are deposits that must be paid up three requirements mentioned here. Time required to complete each procedure front and are later refunded. The building (calendar days) code, information from local experts, and The index ranges from 0 to 2, with Does not include time spent gathering specific regulations and fee schedules are higher values indicating clearer and information used as sources for costs. If several local more transparent building regulations. Each procedure starts on a separate day— partners provide different estimates, the In New Zealand, for example, all relevant though procedures that can be fully completed online are an exception to this rule median reported value is used. legislation can be found on an official Procedure considered completed once final government website (a score of 1). The document is received BUILDING QUALITY CONTROL legislation specifies the list of required No prior contact with officials The building quality control index documents to submit, the fees to be paid, Cost required to complete each procedure complements the measure of efficiency. and all required preapprovals of the draw- (% of warehouse value) It is based on six other indices—the ings or plans by the relevant agencies (a Official costs only, no bribes quality of building regulations, quality score of 1). Adding these numbers gives DATA NOTES 95 TABLE 8.2  What do the indicators on the building regulations. A score of building or if a government agency building quality control measure? 1 is assigned if the national associa- is legally mandated only to conduct tion of architects or engineers (or its technical inspections at different Quality of building regulations index (0–2) equivalent) must review the building stages during the construction. A Accessibility of building regulations (0–1) plans, if an independent firm or expert score of 0 is assigned if a government Clarity of requirements for obtaining a building who is a licensed architect or engineer agency is legally mandated to con- permit (0–1) must review the plans, if the architect duct unscheduled inspections or if no Quality control before construction index (0–1) or engineer who prepared the plans technical inspections are mandated must submit an attestation to the by law. Whether licensed or technical experts approve building plans (0–1) permit-issuing authority stating that ƒƒ Whether inspections during con- Quality control during construction index the plans are in compliance with the struction are implemented in practice. (0–3) building regulations or if a licensed A score of 1 is assigned if the legally Types of inspections legally mandated during architect or engineer is part of the mandated inspections during con- construction (0–2) committee or team that approves the struction always occur in practice; 0 Implementation of legally mandated inspections plans at the relevant permit-issuing if the legally mandated inspections do in practice (0–1) authority; 0 if no licensed architect or not occur in practice, if the inspections Quality control after construction index (0–3) engineer is involved in the review of occur most of the time but not always the plans to ensure their compliance or if inspections are not mandated by Final inspection legally mandated after construction (0–2) with the building regulations. law regardless of whether or not they Implementation of legally mandated final commonly occur in practice. inspection in practice (0–1) The index ranges from 0 to 1, with higher Liability and insurance regimes index (0–2) values indicating better quality control The index ranges from 0 to 3, with higher Parties held legally liable for structural flaws after in the review of the building plans. In values indicating better quality control building occupancy (0–1) Rwanda, for example, the City Hall in during the construction process. In Parties legally mandated to obtain insurance to Kigali must review the building permit Antigua and Barbuda, for example, the cover structural flaws after building occupancy or application, including the plans and draw- Development Control Authority is legally insurance commonly obtained in practice (0–1) ings, and both a licensed architect and a mandated to conduct phased inspections Professional certifications index (0–4) licensed engineer are part of the team under the Physical Planning Act of 2003 Qualification requirements for individual who that reviews the plans and drawings. (a score of 1). However, the Development approves building plans (0–2) Rwanda therefore receives a score of 1 Control Authority rarely conducts these Qualification requirements for individual who supervises construction or conducts inspections on the quality control before construction inspections in practice (a score of 0). (0–2) index. Adding these numbers gives Antigua and Building quality control index (0–15) Barbuda a score of 1 on the quality control Sum of the quality of building regulations, quality Quality control during during construction index. control before construction, quality control during construction index construction, quality control after construction, The quality control during construction Quality control after liability and insurance regimes, and professional certifications indices index has two components: construction index ƒƒ Whether inspections are mandated The quality control after construction by law during the construction pro- index has two components: New Zealand a score of 2 on the quality cess. A score of 2 is assigned if an ƒƒ Whether a final inspection is man- of building regulations index. in-house supervising engineer (that dated by law in order to verify that is, an employee of the building com- the building was built in accordance Quality control before pany), an external supervising engi- with the approved plans and existing construction index neer or a government agency is legally building regulations. A score of 2 is The quality control before construction mandated to conduct risk-based assigned if an in-house supervising index has one component: inspections. A score of 1 is assigned engineer (that is, an employee of ƒƒ Whether by law a licensed architect if an in-house supervising engineer the building company), an external or licensed engineer is part of the (that is, an employee of the building supervising engineer or an external committee or team that reviews and company), an external supervising inspections firm is legally mandated approves building permit applications engineer or an external inspections to verify that the building has been and whether that person has the firm is legally mandated to conduct built in accordance with the approved authority to refuse an application if technical inspections at different plans and existing building regulations the plans are not in compliance with stages during the construction of the or if a government agency is legally 96 DOING BUSINESS IN SOUTH AFRICA 2018 mandated to conduct a final inspec- conducted technical inspections, or The index ranges from 0 to 2, with higher tion upon completion of the building; the construction company; 0.5 if only values indicating more stringent latent 0 if no final inspection is mandated one of the parties is held legally liable defect liability and insurance regimes. by law after construction and no third for structural flaws or problems in the In Madagascar, for example, under party is required to verify that the building once it is in use; 0 if no party article 1792 of the Civil Code both the building has been built in accordance is held legally liable for structural flaws architect who designed the plans and the with the approved plans and existing or problems in the building once it is construction company are held legally building regulations. in use, if the project owner or investor liable for latent defects for a period of 10 ƒƒ Whether the final inspection is imple- is the only party held liable, if liability years after the completion of the building mented in practice. A score of 1 is is determined in court or if liability is (a score of 1). However, there is no legal assigned if the legally mandated final stipulated in a contract. requirement for any party to obtain a inspection after construction always ƒƒ Whether any parties involved in decennial liability insurance policy to occurs in practice or if a supervis- the construction process are legally cover structural defects, nor do most par- ing engineer or firm attests that the required to obtain a latent defect ties obtain such insurance in practice (a building has been built in accordance liability—or decennial (10-year) liabil- score of 0). Adding these numbers gives with the approved plans and existing ity—insurance policy to cover possible Madagascar a score of 1 on the liability building regulations; 0 if the legally structural flaws or problems in the and insurance regimes index. mandated final inspection does not building once it is in use. A score of 1 occur in practice, if the legally man- is assigned if the architect or engineer Professional certifications index dated final inspection occurs most who designed the plans for the build- The professional certifications index has of the time but not always or if a final ing, the professional or agency that two components: inspection is not mandated by law conducted the technical inspections, ƒƒ The qualification requirements for regardless of whether or not it com- the construction company, or the the professional responsible for monly occurs in practice. project owner or investor is required by verifying that the architectural plans law to obtain either a decennial liabil- or drawings are in compliance with The index ranges from 0 to 3, with ity insurance policy or a latent defect the building regulations. A score of 2 higher values indicating better quality liability insurance policy to cover is assigned if this professional must control after the construction process. possible structural flaws or problems have a minimum number of years of In Haiti, for example, the Municipality in the building once it is in use or if a practical experience, must have a uni- of Port-au-Prince is legally mandated decennial liability insurance policy or a versity degree (a minimum of a bach- to conduct a final inspection under the latent defect liability insurance policy elor’s) in architecture or engineering national Building Code of 2012 (a score is commonly obtained in practice by and must also either be a registered of 2). However, most of the time the final the majority of any of these parties member of the national order (asso- inspection does not occur in practice (a even if not required by law. A score of ciation) of architects or engineers or score of 0). Adding these numbers gives 0 is assigned if no party is required by pass a qualification exam. A score of Haiti a score of 2 on the quality control law to obtain either a decennial liabil- 1 is assigned if the professional must after construction index. ity insurance policy or a latent defect have a university degree (a minimum liability insurance policy and such of a bachelor’s) in architecture or Liability and insurance regimes insurance is not commonly obtained engineering and must also either index in practice by any party, if the require- have a minimum number of years of The liability and insurance regimes index ment to obtain an insurance policy is practical experience or be a registered has two components: stipulated in a contract, if any party member of the national order (asso- ƒƒ Whether any parties involved in the must obtain a professional insurance ciation) of architects or engineers or construction process are held legally or all-risk insurance policy to cover the pass a qualification exam. A score of liable for latent defects such as struc- safety of workers or any other defects 0 is assigned if the professional must tural flaws or problems in the building during construction but not a decen- meet only one of the requirements, if once it is in use. A score of 1 is assigned nial liability insurance or latent defect the professional must meet two of the if at least two of the following parties liability insurance policy that would requirements but neither of the two is are held legally liable for structural cover defects after the building is in to have a university degree, or if the flaws or problems in the building once use, or if any party is required to pay professional is subject to no qualifica- it is in use: the architect or engineer for any damages caused on their own tion requirements. who designed the plans for the build- without having to obtain an insurance ƒƒ The qualification requirements for ing, the professional or agency that policy. the professional who conducts the DATA NOTES 97 technical inspections during construc- construction, quality control during con- new electronic permitting system by a tion. A score of 2 is assigned if the struction, quality control after construc- municipality reduces time in such a way regulation mandates that the profes- tion, liability and insurance regimes, and that the overall gap between the past sional must have a minimum number professional certifications indices. The distance to frontier score and the current of years of practical experience, must index ranges from 0 to 15, with higher score decreases by 2% or more, such a have a university degree (a minimum values indicating better quality control change is classified as a positive reform. of a bachelor’s) in engineering and and safety mechanisms in the construc- On the contrary, minor fee updates or must also either be a registered mem- tion regulatory system. other smaller changes in the indicators ber of the national order of engineers that have an aggregate impact of less or pass a qualification exam. A score REFORMS than 2% on the gap are not classified as of 1 is assigned if the regulation man- The dealing with construction permits a reform, even though their impact is still dates that the professional must have indicator set for Doing Business in South reflected in the updated indicator set. a university degree (a minimum of a Africa 2018 tracks changes related to the bachelor’s) in engineering and must efficiency and quality of construction The data details on dealing with construc- also either have a minimum number permitting systems since the previ- tion permits can be found at http://www of years of practical experience or be ous study in 2015. Depending on their .doingbusiness.org. a registered member of the national impact on the data, some changes will order (association) of engineers or be classified as reforms. There are two architects or pass a qualification exam. types of reforms: those that facilitate GETTING ELECTRICITY A score of 0 is assigned if the regulation dealing with construction permits and mandates that the professional must those that make it more difficult. The Doing Business records all procedures meet only one of the requirements, if dealing with construction permits required for a business to obtain a they mandate that the professional indicator set uses one criterion to rec- permanent electricity connection and must meet two of the requirements ognize a reform. The aggregate gap on supply for a standardized warehouse but neither of the two is to have a the distance to frontier of the indicator (figure 8.3). These procedures include university degree, or if no national or is used to assess the impact of data applications and contracts with electric- state regulation determines the profes- changes across years. Any data update ity utilities, all necessary inspections and sional’s qualification requirements. that leads to a change of 2% or more clearances from the distribution utility on the distance to frontier gap between and other agencies, and the external and The index ranges from 0 to 4, with higher the current and the previous study is final connection works. The question- values indicating greater professional classified as a reform (for more details naire divides the process of getting certification requirements. on the distance to the frontier score, see an electricity connection into distinct the chapter on “About Doing Business procedures and solicits data for calculat- In Albania, for example, the professional and Doing Business in South Africa 2018”). ing the time and cost to complete each conducting technical inspections during For example, if the implementation of a procedure. construction must have a minimum num- ber of years of experience as well as a rel- FIGURE 8.3  Doing Business measures the connection process at the level of evant university degree and must also be distribution utilities a registered architect or engineer (a score of 2). However, the professional respon- sible for verifying that the architectural plans or drawings are in compliance with building regulations must only have a minimum number of years of experience and a university degree in architecture or Generation Transmission engineering (a score of 1). Adding these numbers gives Albania a score of 3 on the professional certifications index. Distribution u New connections Building quality control index u Network operation and maintenance u Metering and billing The building quality control index is the sum of the scores on the quality of build- Customer ing regulations, quality control before 98 DOING BUSINESS IN SOUTH AFRICA 2018 In addition, Doing Business compiles the Assumptions about the FIGURE 8.4  Getting electricity: reliability of supply and transparency of warehouse efficiency, reliability and transparency tariffs index (included in the aggregate The warehouse: distance to frontier score and the ranking ƒƒ Is owned by a local entrepreneur. Rankings are based on distance to on the ease of doing business) and mea- ƒƒ Is located in the selected city. frontier scores for four indicators sures the price of electricity (omitted from ƒƒ Is located in an area where similar Days to obtain Cost to obtain a these aggregate measures). The reliability warehouses are typically located. In an electricity connection, as % of connection income per capita of supply and transparency of tariffs index this area a new electricity connection encompasses quantitative data on the is not eligible for a special investment duration and frequency of power outages promotion regime (offering special 25% 25% as well as qualitative information on the subsidization or faster service, for Time Cost mechanisms put in place by the utility for example). 25% 25% Procedures Reliability monitoring power outages and restoring ƒƒ Is located in an area with no physical of supply and transparency power supply, the reporting relationship constraints. For example, the property of tariffs between the utility and the regulator for is not near a railway. Steps to file a connection Power outages power outages, the transparency and ƒƒ Is a new construction and is being application, prepare and regulatory accessibility of tariffs and whether the connected to electricity for the first a design, complete mechanisms in works, obtain approvals, place to monitor utility faces a financial deterrent aimed at time. go through inspections, and reduce them; limiting outages (such as a requirement to ƒƒ Has two stories, both above install a meter and transparency of sign a supply tariffs compensate customers or pay fines when ground, with a total surface area of contract outages exceed a certain cap). approximately 1,300.6 square meters (14,000 square feet). The plot of Note: The price of electricity is measured but does The ranking of locations on the ease of land on which it is built is 929 square not count for the rankings. getting electricity is determined by sort- meters (10,000 square feet). ing their distance to frontier scores for ƒƒ Is used for the storage of goods. has already been completed up to and getting electricity. These scores are the including the customer’s service panel simple average of the distance to frontier Assumptions about the or switchboard and the meter base. scores for all the component indicators electricity connection except the price of electricity (figure 8.4). The electricity connection: Assumptions about the monthly ƒƒ Is a permanent one. consumption for March Data on reliability of supply are collected ƒƒ Is a three-phase, four-wire Y connec- ƒƒ The warehouse operates 30 days a from the electricity distribution utilities tion with a subscribed capacity of 140 month from 9:00 a.m. to 5:00 p.m. (8 or regulators, depending on the specific kilovolt-amperes (kVA) with a power hours a day), with equipment utilized technical nature of the data. The rest of factor of 1, when 1 kVA = 1 kilowatt at 80% of capacity on average, and the data, including data on the transpar- (kW). there are no electricity cuts (assumed ency of tariffs and the procedures for ƒƒ Has a length of 150 meters. The con- for reasons of simplicity). obtaining an electricity connection, are nection is to either the low-voltage ƒƒ The monthly energy consumption is collected from all market players—the or the medium-voltage distribution 26,880 kilowatt-hours (kWh); hourly electricity distribution utility, electric- network and is either overhead or consumption is 112 kWh. ity regulatory agencies and independent underground, whichever is more com- ƒƒ If multiple electricity suppliers exist, professionals such as electrical engineers, mon in the area where the warehouse the warehouse is served by the electrical contractors and construction is located. cheapest supplier. companies. The electricity distribution ƒƒ Requires works that involve the ƒƒ Tariffs effective in March of the cur- utility consulted is the one serving the crossing of a 10-meter-wide road (by rent year are used for calculation of area (or areas) where warehouses are excavation or overhead lines) but are the price of electricity for the ware- located. If there is a choice of distribu- all carried out on public land. There is house. Although March has 31 days, tion utilities, the one serving the largest no crossing of other owners’ private for calculation purposes only 30 days number of customers is selected. property because the warehouse has are used. access to a road. To make the data comparable across ƒƒ Includes only negligible length in the Procedures locations, several assumptions about the customer’s private domain. A procedure is defined as any interaction warehouse, the electricity connection ƒƒ Does not require work to install the of the company’s employees or its main and the monthly consumption are used. internal wiring of the warehouse. This electrician or electrical engineer (that is, DATA NOTES 99 the one who may have done the internal Cost TABLE 8.3 What do the getting wiring) with external parties, such as the Cost is recorded as a percentage of the electricity indicators measure? electricity distribution utility, electric- economy’s income per capita. Costs are Procedures to obtain an electricity ity supply utilities, government agencies, recorded exclusive of value added tax. connection (number) electrical contractors and electrical firms. All the fees and costs associated with Submitting all relevant documents and obtaining Interactions between company employees completing the procedures to connect all necessary clearances and permits and steps related to the internal electrical a warehouse to electricity are recorded, Completing all required notifications and wiring, such as the design and execution of including those related to obtaining receiving all necessary inspections the internal electrical installation plans, are clearances from government agencies, Obtaining external installation works and possibly purchasing material for these works not counted as procedures. Procedures that applying for the connection, receiving must be completed with the same utility inspections of both the site and the inter- Concluding any necessary supply contract and obtaining final supply but with different departments are counted nal wiring, purchasing material, getting Time required to complete each procedure as separate procedures (table 8.3). the actual connection works and paying (calendar days) a security deposit. Information from local Is at least one calendar day The company’s employees are assumed experts and specific regulations and fee Each procedure starts on a separate day to complete all procedures themselves schedules are used as sources for costs. unless the use of a third party is man- If several local partners provide different Does not include time spent gathering information dated (for example, if only an electrician estimates, the median reported value is Reflects the time spent in practice, with little follow-up and no prior contact with officials registered with the utility is allowed to used. In all cases the cost excludes bribes. Cost required to complete each procedure submit an application). If the company (% of income per capita) can, but is not required to, request the Security deposit Official costs only, no bribes services of professionals (such as a Utilities may require security deposits as Value added tax excluded private firm rather than the utility for a guarantee against the possible failure of the external works), these procedures customers to pay their consumption bills. Reliability of supply and transparency of tariffs index (0–8) are recorded if they are commonly done. For this reason, the security deposit for a Duration and frequency of power outages The procedures counted include only new customer is most often calculated the most likely cases (for example, more as a function of the customer’s estimated Tools to monitor power outages than 50% of the time the utility has the consumption. Tools to restore power supply material) and those followed in practice Regulatory monitoring of utilities’ performance for connecting a warehouse to electricity. Doing Business does not record the full Financial deterrents aimed at limiting outages amount of the security deposit. If the Transparency and accessibility of tariffs Time deposit is based on the customer’s Price of electricity (cents per kilowatt-hour) Time is recorded in calendar days. The actual consumption, this basis is the one Price based on monthly bill for commercial measure captures the median duration assumed in the case study. Rather than warehouse in case study that the electricity utility and experts indi- the full amount of the security deposit, Note: While Doing Business measures the price cate is necessary in practice, rather than Doing Business records the present value of electricity, it does not include these data when calculating the distance to frontier score for getting required by law, to complete a procedure of the losses in interest earnings expe- electricity or the ranking on the ease of getting with minimum follow-up and no extra rienced by the customer because the electricity. payments. It is assumed that the mini- utility holds the security deposit over a mum time required for each procedure is prolonged period, in most cases until the In some economies the security deposit one day. Although procedures may take end of the contract (assumed to be after can be put up in the form of a bond: the place simultaneously, they cannot start five years). In cases where the security company can obtain from a bank or an on the same day (that is, simultaneous deposit is used to cover the first monthly insurance company a guarantee issued procedures start on consecutive days). consumption bills, it is not recorded. To on the assets it holds with that financial It is assumed that the company does not calculate the present value of the lost institution. In contrast to the scenario waste time and commits to completing interest earnings, the end-2016 lending in which the customer pays the deposit each remaining procedure without delay. rates from the International Monetary in cash to the utility, in this scenario the The time that the company spends on Fund’s International Financial Statistics are company does not lose ownership con- gathering information is not taken into used. In cases where the security deposit trol over the full amount and can continue account. It is assumed that the com- is returned with interest, the difference using it. In return the company will pay pany is aware of all electricity connection between the lending rate and the interest the bank a commission for obtaining requirements and their sequence from paid by the utility is used to calculate the the bond. The commission charged may the beginning. present value. vary depending on the credit standing of 100 DOING BUSINESS IN SOUTH AFRICA 2018 the company. The best possible credit customer and the average number of resources for service restoration, standing and thus the lowest possible outages per customer) and the SAIDI such as field crews or maintenance commission are assumed. Where a bond value is below a threshold of 100 hours personnel. can be put up, the value recorded for the and the SAIFI value below a threshold of ƒƒ Whether a regulator—that is, an deposit is the annual commission times 100 outages. entity separate from the utility— the five years assumed to be the length monitors the utility’s performance of the contract. If both options exist, the Because the focus is on measuring the on reliability of supply. A score of 1 cheaper alternative is recorded. reliability of the electricity supply, a is assigned if the regulator performs location is not eligible to obtain a score periodic or real-time reviews; 0 if it In Hong Kong SAR, China, a customer if outages are too frequent or long-lasting does not monitor power outages and requesting a 140-kVA electricity con- for the electricity supply to be considered does not require the utility to report nection in March 2017 would have had reliable—that is, if the SAIDI or SAIFI on reliability of supply. to put up a security deposit of 63,600 value exceeds the determined threshold. ƒƒ Whether financial deterrents exist to Hong Kong dollars (about $7,850) in A location is also not eligible to obtain a limit outages. A score of 1 is assigned cash or check, and the deposit would score if data on power outages are not if the utility compensates customers have been returned only at the end of collected or are collected only partially when outages exceed a certain cap, the contract. The customer could instead (for example, if data on planned outages if the utility is fined by the regulator have invested this money at the prevail- or load shedding are not included in the when outages exceed a certain cap or ing lending rate of 5.0%. Over the five calculation of SAIDI and SAIFI) and if if both these conditions are met; 0 if years of the contract, this would imply the minimum outage time considered for no compensation mechanism of any a present value of lost interest earnings calculation of SAIDI and SAIFI is more kind is available. of 13,760 Hong Kong dollars ($1,700). In than five minutes. ƒƒ Whether electricity tariffs are trans- contrast, if the customer chose to settle parent and easily available. A score the deposit with a bank guarantee at an For all locations that meet the criteria as of 1 is assigned if effective tariffs are annual rate of 1.5%, the amount lost over determined by Doing Business, a score on available online and customers are the five years would be just 4,770 Hong the reliability of supply and transparency notified of a change in tariff a full bill- Kong dollars ($590). of tariffs index is calculated on the basis ing cycle (that is, one month) ahead of the following six components: of time; 0 if not. Reliability of supply and ƒƒ What the SAIDI and SAIFI values are. transparency of tariffs index If SAIDI and SAIFI are 12 (equivalent The index ranges from 0 to 8, with Doing Business uses the system average to an outage of one hour each month) higher values indicating greater reli- interruption duration index (SAIDI) or below, a score of 1 is assigned. If ability of electricity supply and greater and the system average interruption SAIDI and SAIFI are 4 (equivalent transparency of tariffs. In the United frequency index (SAIFI) to measure the to an outage of one hour each quar- Kingdom, for example, the distribution duration and frequency of power outages ter) or below, 1 additional point is utility company UK Power Networks in each of the selected locations. SAIDI is assigned. Finally, if SAIDI and SAIFI uses SAIDI and SAIFI metrics to monitor the average total duration of outages over are 1 (equivalent to an outage of one and collect data on power outages. In the course of a year for each customer hour per year) or below, 1 more point 2016 the average total duration of power served, while SAIFI is the average num- is assigned. outages in London was 0.326 hours per ber of service interruptions experienced ƒƒ What tools are used by the distribu- customer and the average number of by a customer in a year. Annual data tion utility to monitor power out- outages experienced by a customer (covering the calendar year) are collected ages. A score of 1 is assigned if the was 0.166. Both SAIDI and SAIFI are from distribution utility companies and utility uses automated tools, such below the threshold and indicate that national regulators on SAIDI and SAIFI. as the supervisory control and data there was less than one outage a year Both SAIDI and SAIFI estimates should acquisition (SCADA) system; 0 if it per customer, for a total duration of less include planned and unplanned outages relies solely on calls from customers than one hour. Therefore, the economy as well as load shedding. and records and monitors outages not only meets the eligibility criteria manually. for obtaining a score on the index; it A location is eligible to obtain a score on ƒƒ What tools are used by the distribu- also receives a score of 3 on the first the reliability of supply and transparency tion utility to restore power supply. A component of the index. The utility uses of tariffs index if the utility collects data score of 1 is assigned if the utility uses the automatic GE PowerOn Control on electricity outages (measuring the automated tools, such as the SCADA System to identify faults in the network average total duration of outages per system; 0 if it relies solely on manual (a score of 1) and to restore electricity DATA NOTES 101 service (a score of 1). The Office of Gas score for getting electricity or the ranking Second, to be considered a reform, and Electricity Markets, an independent on the ease of getting electricity. The data changes in the data must be tied to national regulatory authority, actively are available on the Doing Business website an initiative led by the utility or by the reviews the utility’s performance in pro- (http://www.doingbusiness.org) and are government—and not an exogenous viding reliable electricity service (a score based on standardized assumptions to event. For example, if outages increase of 1) and requires the utility to compen- ensure comparability across economies. considerably from one year to the next sate customers if outages last longer due to inclement weather, this cannot than a maximum period defined by the The price of electricity is measured in be considered a reform that makes doing regulator (a score of 1). Customers are U.S. cents per kilowatt-hour. On the basis business harder. Similarly, if the cost of notified of a change in tariffs ahead of the assumptions about monthly con- electricity-related materials (such as of the next billing cycle and can easily sumption, a monthly bill for a commer- cabling or transformers) decreases due check effective tariffs online (a score of cial warehouse in each of the selected to a currency appreciation, this cannot 1). Adding these numbers gives the locations in South Africa is computed be considered a reform that makes doing United Kingdom a total score of 8 on the for the month of March. As noted, the business easier. However, if a utility reliability of supply and transparency of warehouse uses electricity 30 days a establishes a one-stop shop to streamline tariffs index. month, from 9:00 a.m. to 5:00 p.m., so the connection process or if it installs an different tariff schedules may apply if a automated system to improve monitor- On the other hand, several economies time-of-use tariff is available. ing of power outages and restoration of receive a score of 0 on this index. The rea- electricity services, these actions would son may be that outages occur more than REFORMS be considered reforms that made doing once a month and none of the mecha- The indicator set on getting electricity business easier. nisms and tools measured by the index tracks changes related to the efficiency are in place. A location may also receive a of the connection process, as well as the The data details on getting electricity can be score of 0 if either the SAIDI or SAIFI value reliability of power supply and transpar- found at http://www.doingbusiness.org. The (or both) exceeds the threshold of 100 or ency of tariffs. Depending on the impact initial methodology was developed by Carolin if not, all outages were considered when on the data, certain changes are classified Geginat and Rita Ramalho (“Electricity calculating the indices. In Suriname, for as reforms. Reforms are divided into two Connections and Firm Performance in 183 example, the utility does not include load types: those that make it easier to do Countries,” Global Indicators Group, World shedding in the calculation of SAIDI and business and those changes that make it Bank Group, Washington, DC, 2015) and is SAIFI. Thus, based on the criteria estab- more difficult to do business. The getting adopted here with minor changes. lished, Suriname cannot receive a score electricity indicator set uses two criteria on the index even though the utility uses to recognize a reform. automated systems for monitoring out- REGISTERING PROPERTY ages and restoring power supply and there First, the aggregate gap on the overall dis- is transparency around electricity tariffs. tance to frontier of the indicator set is used Doing Business records the full sequence to assess the impact of data changes. Any of procedures necessary for a business If economy location issued no electricity data update that leads to a change of 2% (the buyer) to purchase a property from connections between January 2015 and or more on the distance to frontier gap is another business (the seller) and to trans- May 1, 2018, or if electricity was not classified as a reform (for more details on fer the property title to the buyer’s name provided during that period, the economy the distance to frontier, see the chapter on so that the buyer can use the property for receives a “no practice” mark on the “About Doing Business and Doing Business expanding its business, use the property procedures, time and cost indicators. in South Africa 2018”). For example, if the as collateral in taking new loans or, if nec- In addition, a “no practice” economy implementation of a new single window essary, sell the property to another busi- receives a score of 0 on the reliability of at the utility reduces the time to process ness. It also measures the time and cost supply and transparency of tariffs index new connection requests in a way that the to complete each of these procedures. even if, for example, there is regulatory overall gap decreases by 2% or more, such In addition, Doing Business measures the oversight of utilities on power interrup- a change is classified as a reform. On the quality of the land administration system tions, for example. other hand, minor fee updates from the in each economy or location. The qual- utility or other small changes that have ity of land administration index has five Price of electricity an aggregate impact of less than 2% on dimensions: reliability of infrastructure, Doing Business measures the price of the gap are not classified as a reform, but transparency of information, geographic electricity but does not include these data their impact is still reflected in the most coverage, land dispute resolution and when calculating the distance to frontier updated indicators for this topic. equal access to property rights. 102 DOING BUSINESS IN SOUTH AFRICA 2018 The ranking of locations on the ease of FIGURE 8.6 What are the time, cost and number of procedures required to transfer registering property is determined by property between two local companies? sorting their distance to frontier scores Cost for registering property. These scores (% of property value) are the simple average of the distance to Buyer can use frontier scores for each of the component the property, resell it or indicators (figure 8.5). use it as collateral Number of procedures EFFICIENCY OF TRANSFERRING Land & two-story warehouse PROPERTY Seller with property As recorded by Doing Business, the pro- registered and no cess of transferring property starts with title disputes Time obtaining the necessary documents, such Preregistration Registration Postregistration (days) as a copy of the seller’s title if necessary, and conducting due diligence if required. The transaction is considered complete parties to the transaction, the property land and building will be transferred in when it is opposable to third parties and and the procedures are used. its entirety. when the buyer can use the property, use ƒƒ Will not be subject to renovations it as collateral for a bank loan or resell it Assumptions about the parties or additional building following the (figure 8.6). Every procedure required by The parties (buyer and seller): purchase. law or necessary in practice is included, ƒƒ Are limited liability companies (or the ƒƒ Has no trees, natural water sources, whether it is the responsibility of the sell- legal equivalent). natural reserves or historical monu- er or the buyer or must be completed by a ƒƒ Are located in the periurban area of ments of any kind. third party on their behalf. Local property the selected city. ƒƒ Will not be used for special purposes, lawyers or conveyancers, notaries and ƒƒ Are 100% domestically and privately and no special permits, such as for property registries provide information owned. residential use, industrial plants, on procedures as well as the time and ƒƒ Have 50 employees each, all of whom waste storage or certain types of agri- cost to complete each of them. are nationals. cultural activities, are required. ƒƒ Perform general commercial activities. ƒƒ Has no occupants, and no other party To make the data comparable across holds a legal interest in it. locations, several assumptions about the Assumptions about the property The property: Procedures ƒƒ Has a value of 50 times income per A procedure is defined as any interaction FIGURE 8.5  Registering property: capita. The sale price equals the value. of the buyer or the seller, their agents (if efficiency and quality of land ƒƒ Is fully owned by the seller. an agent is legally or in practice required) administration system ƒƒ Has no mortgages attached and has or the property with external parties, Rankings are based on distance to been under the same ownership for including government agencies, inspec- frontier scores for four indicators the past 10 years. tors, notaries and lawyers. Interactions Days to transfer Cost to transfer ƒƒ Is registered in the land registry or between company officers and employ- property between two property, as % of local companies property value cadastre, or both, and is free of title ees are not considered. All procedures disputes. that are legally or in practice required for ƒƒ Is located in a periurban commercial registering property are recorded, even 25% 25% zone, and no rezoning is required. if they may be avoided in exceptional Time Cost ƒƒ Consists of land and a building. The cases (table 8.4). It is assumed that the 25% 25% Procedures Quality land area is 557.4 square meters buyer follows the fastest legal option of land administration (6,000 square feet). A two-story available and used by the majority of index warehouse of 929 square meters property owners. Although the buyer Steps to transfer Reliability, (10,000 square feet) is located on the may use lawyers or other professionals property so that it transparency and land. The warehouse is 10 years old, is where necessary in the registration pro- can be sold or used coverage of land as collateral administration system; in good condition and complies with cess, it is assumed that the buyer does protection against land disputes; equal access all safety standards, building codes not employ an outside facilitator in the to property rights and other legal requirements. It has registration process unless legally or in no heating system. The property of practice required to do so. DATA NOTES 103 TABLE 8.4  What do the indicators on Time spent on gathering information is database for recording boundar- the efficiency of transferring property not considered. If time estimates differ ies, checking plans and providing measure? among sources, the median reported cadastral information. A score of 1 is value is used. assigned if yes; 0 if no. Procedures to legally transfer title on immovable property (number) ƒƒ How the land ownership registry and Preregistration procedures (for example, checking Cost mapping agency are linked. A score of for liens, notarizing sales agreement, paying Cost is recorded as a percentage of the 1 is assigned if land ownership infor- property transfer taxes) property value, assumed to be equivalent mation and maps are kept in a single Registration procedures in the selected city to 50 times income per capita. Only offi- database or in linked databases; 0 if Postregistration procedures (for example, filing cial costs required by law are recorded, there is no connection between the title with municipality) including fees, transfer taxes, stamp different databases. Time required to complete each procedure (calendar days) duties and any other payment to the ƒƒ How immovable property is identi- property registry, notaries, public agen- fied. A score of 1 is assigned if there is Does not include time spent gathering information cies or lawyers. Other taxes, such as a unique number to identify property Each procedure starts on a separate day— capital gains tax or value added tax, are for the majority of land plots; 0 if there though procedures that can be fully completed excluded from the cost measure. Both are multiple identifiers. online are an exception to this rule costs borne by the buyer and those borne Procedure considered completed once final by the seller are included. If cost esti- The index ranges from 0 to 8, with higher document is received mates differ among sources, the median values indicating a higher quality of No prior contact with officials reported value is used. infrastructure for ensuring the reliabil- Cost required to complete each procedure ity of information on property titles and (% of property value) QUALITY OF LAND boundaries. In Turkey, for example, the Official costs only (such as administrative fees, duties and taxes) ADMINISTRATION land registry offices in Istanbul maintain Value added tax, capital gains tax and illicit The quality of land administration index titles in a fully digital format (a score of payments are excluded is composed of five other indices: the 2) and have a fully electronic database reliability of infrastructure, transparency to check for encumbrances (a score of Time of information, geographic coverage, land 1). The Cadastral Directorate offices in dispute resolution and equal access to Istanbul have digital maps (a score of Time is recorded in calendar days. The property rights indices (table 8.5). Data 2), and the Geographical Information measure captures the median dura- are collected for each of the selected Directorate has a public portal allowing tion that property lawyers, notaries or locations. users to check the plans and cadastral registry officials indicate is necessary information on parcels along with satel- to complete a procedure. It is assumed Reliability of infrastructure lite images (a score of 1). Databases that the minimum time required for each index about land ownership and maps are procedure is one day, except for proce- The reliability of infrastructure index has linked through the TAKBIS system, an dures that can be fully completed online, six components: integrated information system for the for which the time required is recorded ƒƒ How land titles are kept at the registry land registry offices and cadastral offices as half a day. Although procedures may of the selected location. A score of 2 (a score of 1). Finally, there is a unique take place simultaneously, they cannot is assigned if the majority of land titles identifying number for properties (a start on the same day, again with the are fully digital; 1 if the majority are score of 1). Adding these numbers gives exception of procedures that can be scanned; 0 if the majority are kept in Turkey a score of 8 on the reliability of fully completed online. It is assumed paper format. infrastructure index. that the buyer does not waste time and ƒƒ Whether there is an electronic data- commits to completing each remaining base for checking for encumbrances. Transparency of information procedure without delay. If a procedure A score of 1 is assigned if yes; 0 if no. index can be accelerated for an additional cost, ƒƒ How maps of land plots are kept at The transparency of information index the fastest legal procedure available and the mapping agency of the selected has 10 components: used by the majority of property owners location. A score of 2 is assigned if ƒƒ Whether information on land owner- is chosen. If procedures can be under- the majority of maps are fully digital; ship is made publicly available. A taken simultaneously, it is assumed that 1 if the majority are scanned; 0 if the score of 1 is assigned if information they are. It is assumed that the parties majority are kept in paper format. on land ownership is accessible by involved are aware of all requirements ƒƒ Whether there is a geographic anyone; 0 if access is restricted. and their sequence from the beginning. information system—an electronic 104 DOING BUSINESS IN SOUTH AFRICA 2018 TABLE 8.5  What do the indicators on the quality of land administration measure? assigned if maps are accessible by anyone; 0 if access is restricted. Reliability of infrastructure index (0–8) ƒƒ Whether the fee schedule for access- Type of system for archiving information on land ownership (0–2) ing maps is made publicly available. Availability of electronic database to check for encumbrances (0–1) A score of 0.5 is assigned if the fee Type of system for archiving maps (0–2) schedule is accessible online or on a Availability of geographic information system (0–1) public board, free of charge; 0 if it is not made available to the public or if it Link between property ownership registry and mapping system (0–2) can be obtained only in person. Transparency of information index (0–6) ƒƒ Whether the mapping agency com- Accessibility of information on land ownership (0–1) mits to delivering an updated map Accessibility of maps of land plots (0–0.5) within a specific time frame. A score Publication of fee schedules, lists of registration documents, service standards (0–2.5) of 0.5 is assigned if the service stan- Availability of a specific and separate mechanism for complaints (0–1.5) dard is accessible online or on a public board; 0 if it is not made available to Publication of statistics about the number of property transactions (0–0.5) the public or if it can be obtained only Geographic coverage index (0–8) in person. Coverage of land registry at the level of the selected location and the economy (0–4) ƒƒ Whether there is a specific and sepa- Coverage of mapping agency at the level of the selected location and the economy (0–4) rate mechanism for filing complaints Land dispute resolution index (0–8) about a problem that occurred at Legal framework for immovable property registration (0–2) the mapping agency. A score of Mechanisms to prevent and resolve land disputes (0–6) 0.5 is assigned if there is a specific and separate mechanism for filing a Equal access to property rights index (-2–0) complaint; 0 if there is only a general Unequal ownership rights to property between unmarried men and women mechanism or no mechanism. Unequal ownership rights to property between married men and women Quality of land administration index (0–30) The index ranges from 0 to 6, with higher Sum of the reliability of infrastructure, transparency of information, geographic coverage, land dispute values indicating greater transparency in resolution and equal access to property rights indices the land administration system. In the Netherlands, for example, anyone who ƒƒ Whether the list of documents or on a public board; 0 if it is not made pays a fee can consult the land owner- required for completing any type of available to the public or if it can be ship database (a score of 1). Information property transaction is made publicly obtained only in person. can be obtained at the office, by mail available. A score of 0.5 is assigned ƒƒ Whether there is a specific and sepa- or online using the Kadaster website if the list of documents is accessible rate mechanism for filing complaints (http://www.kadaster.nl). Anyone can online or on a public board; 0 if it is about a problem that occurred at also get information online about the not made available to the public or if it the agency in charge of immovable list of documents to submit for prop- can be obtained only in person. property registration. A score of 1 erty registration (a score of 0.5), the ƒƒ Whether the fee schedule for is assigned if there is a specific and fee schedule for registration (a score of completing any type of property separate mechanism for filing a 0.5) and the service standards (a score transaction is made publicly available. complaint; 0 if there is only a general of 0.5). And anyone facing a problem A score of 0.5 is assigned if the fee mechanism or no mechanism. at the land registry can file a complaint schedule is accessible online or on a ƒƒ Whether there are publicly available or report an error by filling in a specific public board, free of charge; 0 if it is official statistics tracking the number form online (a score of 1). In addition, not made available to the public or if it of transactions at the immovable the Kadaster makes statistics about can be obtained only in person. property registration agency. A score land transactions available to the public, ƒƒ Whether the agency in charge of of 0.5 is assigned if statistics are pub- reporting a total of 214,793 property immovable property registration lished about property transfers in the transfers in Amsterdam in 2016 (a score commits to delivering a legally selected location in the past calendar of 0.5). Moreover, anyone who pays a binding document that proves prop- year; 0 if no such statistics are made fee can consult online cadastral maps erty ownership within a specific time publicly available. (a score of 0.5). It is also possible to frame. A score of 0.5 is assigned if the ƒƒ Whether maps of land plots are made get public access to the fee schedule service standard is accessible online publicly available. A score of 0.5 is for map consultation (a score of 0.5), DATA NOTES 105 the service standards for delivery of an of dispute resolution mechanisms. The three years; 0 if it takes more than updated plan (a score of 0.5) and a spe- index has eight components: three years. cific mechanism for filing a complaint ƒƒ Whether the law requires that all ƒƒ Whether there are publicly available about a map (a score of 0.5). Adding property sale transactions be reg- statistics on the number of land these numbers gives the Netherlands a istered at the immovable property disputes in the first instance. A score score of 6 on the transparency of infor- registry to make them opposable to of 0.5 is assigned if statistics are mation index. third parties. A score of 1.5 is assigned published about land disputes in the if yes; 0 if no. economy in the past calendar year; 0 Geographic coverage index ƒƒ Whether the formal system of if no such statistics are made publicly The geographic coverage index has four immovable property registration is available. components: subject to a guarantee. A score of 0.5 ƒƒ How complete the coverage of the is assigned if either a state or a private The index ranges from 0 to 8, with land registry is at the level of the guarantee over immovable property higher values indicating greater protec- selected location. A score of 2 is registration is required by law; 0 if no tion against land disputes. In Lithuania, assigned if all privately held land plots such guarantee is required. for example, according to the Civil in the location are formally registered ƒƒ Whether there is a specific compen- Code and the Law on the Real Property at the land registry; 0 if not. sation mechanism to cover for losses Register, property transactions must be ƒƒ How complete the coverage of the incurred by parties who engaged in registered at the land registry to make land registry is at the level of the good faith in a property transaction them opposable to third parties (a score economy. A score of 2 is assigned based on erroneous information of 1.5). The property transfer system is if all privately held land plots in the certified by the immovable property guaranteed by the state (a score of 0.5) economy are formally registered at registry. A score of 0.5 is assigned if and has a compensation mechanism the land registry; 0 if not. yes; 0 if no. to cover for losses incurred by parties ƒƒ How complete the coverage of the ƒƒ Whether the legal system requires who engaged in good faith in a property mapping agency is at the level of verification of the legal validity of the transaction based on an error by the reg- the selected location. A score of 2 is documents necessary for a property istry (a score of 0.5). A notary verifies assigned if all privately held land plots transaction. A score of 0.5 is assigned the legal validity of the documents in in the location are mapped; 0 if not. if there is a review of legal validity, a property transaction (a score of 0.5) ƒƒ How complete the coverage of the either by the registrar or by a profes- and the identity of the parties (a score of mapping agency is at the level of the sional (such as a notary or lawyer); 0 0.5), in accordance with the Law on the economy. A score of 2 is assigned if there is no review. Notary Office (Law I-2882). Lithuania if all privately held land plots in the ƒƒ Whether the legal system requires has a national database to verify the economy are mapped; 0 if not. verification of the identity of the par- accuracy of identity documents (a score ties to a property transaction. A score of 1). In a land dispute between two The index ranges from 0 to 8, with high- of 0.5 is assigned if there is verifica- Lithuanian companies over the tenure er values indicating greater geographic tion of identity, either by the registrar rights of a property worth $770,000, coverage in land ownership registration or by a professional (such as a notary the Vilnius District Court gives a deci- and cadastral mapping. In the Republic or lawyer); 0 if there is no verification. sion in less than one year (a score of 3). of Korea, for example, all privately held ƒƒ Whether there is a national database Finally, statistics about land disputes are land plots are formally registered at the to verify the accuracy of identity collected and published; there were a land registry in Seoul (a score of 2) and documents. A score of 1 is assigned if total of 549 land disputes in the country in the economy as a whole (a score of such a national database is available; in 2016 (a score of 0.5). Adding these 2). In addition, all privately held land 0 if not. numbers gives Lithuania a score of 8 on plots are mapped in Seoul (a score of 2) ƒƒ How much time it takes to obtain a the land dispute resolution index. and in the economy as a whole (a score decision from a court of first instance of 2). Adding these numbers gives Korea (without appeal) in a standard land Equal access to property rights a score of 8 on the geographic coverage dispute between two local businesses index index. over tenure rights worth 50 times The equal access to property rights index income per capita and located in has two components: Land dispute resolution index the selected location. A score of 3 is ƒƒ Whether unmarried men and unmar- The land dispute resolution index assess- assigned if it takes less than one year; ried women have equal ownership es the legal framework for immovable 2 if it takes between one and two rights to property. A score of −1 property registration and the accessibility years; 1 if it takes between two and is assigned if there are unequal 106 DOING BUSINESS IN SOUTH AFRICA 2018 ownership rights to property; 0 if property rights indices. The index ranges their impact is still reflected in the there is equality. from 0 to 30, with higher values indicat- updated indicator set. ƒƒ Whether married men and married ing better quality of the land administra- women have equal ownership rights tion system. The overall score on the quality of land to property. A score of −1 is assigned administration index is another criterion. if there are unequal ownership rights If between 2015 and 2018 it became Any change of 1 point or more on the to property; 0 if there is equality. impossible for private parties to register overall quality score is acknowledged as property transfers in a certain location, a reform. For instance, the completion Ownership rights cover the ability to that location will receive a “no practice” of the geographic coverage of the land manage, control, administer, access, mark on the indicators of efficiency registry of the business city (2 points) is encumber, receive, dispose of and (procedures, time and cost). In this case, classified as a reform. transfer property. Each restriction is the location with “no practice” will also considered if there is a differential receive a score of 0 on the quality of The data details on registering property can treatment for men and women in the land administration index even if its legal be found at http://www.doingbusiness.org. law considering the default marital framework includes provisions related to property regime. For customary land land administration. systems, equality is assumed unless ENFORCING CONTRACTS there is a general legal provision stating REFORMS a differential treatment. The registering property indicator set Doing Business measures the time and for Doing Business in South Africa 2018 cost for resolving a commercial dispute The index ranges from −2 to 0, with tracks changes related to the efficiency through a local first-instance court and higher values indicating greater inclu- and quality of land administration also compiles the quality of judicial pro- siveness of property rights. In Mali, for systems since the previous study in cesses index, evaluating whether each example, unmarried men and unmarried 2015. Depending on their impact on economy or location has adopted a series women have equal ownership rights to the data, some changes will be classi- of good practices that promote quality property (a score of 0). Similarly, mar- fied as reforms. There are two types of and efficiency in the court system. The ried men and married women can use reforms: those that facilitate registering data are collected through study of the their property in the same way (a score a transfer of property and those that codes of civil procedure and other court of 0). Adding these numbers gives Mali make it more difficult. The registering regulations as well as questionnaires a score of 0 on the equal access to property indicator set uses one criteri- completed by local litigation lawyers and property rights index—which indicates on to recognize a reform. The aggregate judges. The ranking of locations on the equal property rights between men and gap on the distance to frontier of the ease of enforcing contracts is determined women. Conversely, in Tonga, accord- indicator is used to assess the impact by sorting their distance to frontier scores ing to the Land Act [Cap 132], sections of data changes across years. Any data for enforcing contracts. These scores are 7, 45 and 82, unmarried men and update that leads to a change of 2% or the simple average of the distance to unmarried women do not have equal more on the distance to frontier gap frontier scores for each of the component ownership rights to property (a score between the current and the previous indicators (figure 8.7). of −1), and married men and married study is classified as a reform (for more women are not permitted to use their details on the distance to the frontier EFFICIENCY OF RESOLVING A property in the same way (a score of score, see the chapter on “About Doing COMMERCIAL DISPUTE −1). Adding these numbers gives Tonga Business and Doing Business in South The data on time and cost are built by a score of −2 on the equal access to Africa 2018”). For example, if the imple- following the step-by-step evolution of property rights index—which indicates mentation of a new electronic prop- a commercial sale dispute (figure 8.8; unequal property rights between men erty registration system reduces time in table 8.6). The data are collected for a and women. such a way that the overall gap between specific court for each location covered, the past distance to the frontier score under the assumptions about the case Quality of land administration and the current score decreases by 2% described below. The court is the one with index or more, such a change is classified as a jurisdiction over disputes worth 200% The quality of land administration index positive reform. On the contrary, minor of income per capita or $5,000, which- is the sum of the scores on the reli- fee updates or other smaller changes in ever is greater. Whenever more than ability of infrastructure, transparency of the indicators that have an aggregate one court has original jurisdiction over information, geographic coverage, land impact of less than 2% on the gap are a case comparable to the standardized dispute resolution and equal access to not classified as a reform, even though case study, the data are collected based DATA NOTES 107 FIGURE 8.7  Enforcing contracts: on the court that would be used by liti- so. In this case the judge does not efficiency and quality of commercial gants in the majority of cases. The name allow opposing expert testimony. dispute resolution of the relevant court in each economy is ƒƒ Following the expert opinion, the published on the Doing Business website judge decides that the goods deliv- Rankings are based on distance to at http://www.doingbusiness.org/data ered by Seller were of adequate frontier scores for three indicators /exploretopics/enforcing-contracts. quality and that Buyer must pay the Days to resolve Attorney, court and contract price. The judge thus renders commercial sale dispute enforcement costs as through the courts % of claim value Assumptions about the case a final judgment that is 100% in favor ƒƒ The value of the claim is equal to of Seller. 200% of the economy’s income per ƒƒ Buyer does not appeal the judgment. 33.3% 33.3% capita or $5,000, whichever is greater. Seller decides to start enforcing Time Cost ƒƒ The dispute concerns a lawful the judgment as soon as the time 33.3% transaction between two businesses allocated by law for appeal lapses. Quality of judicial processes (Seller and Buyer), both located in the Seller takes all required steps for index selected city. Pursuant to a contract prompt enforcement of the judgment. between the businesses, Seller sells The money is successfully collected Use of good practices promoting some custom-made furniture to through a public sale of Buyer’s mov- quality and efficiency Buyer worth 200% of the economy’s able assets (for example, office equip- income per capita or $5,000, which- ment and vehicles). It is assumed ever is greater. After Seller delivers that Buyer has no money in its bank the goods to Buyer, Buyer refuses to account, making it impossible for the FIGURE 8.8  What are the time and cost pay the contract price, alleging that judgment to be enforced through a to resolve a commercial dispute through the goods are not of adequate qual- seizure of Buyer’s account. a local first-instance court? ity. Because they were custom-made, Seller is unable to sell them to anyone Time Court else. Time is recorded in calendar days, ƒƒ Seller (the plaintiff) sues Buyer (the counted from the moment Seller decides Time defendant) to recover the amount to file the lawsuit in court until payment. Cost under the sales agreement. The This includes both the days when actions dispute is brought before the court take place and the waiting periods in located in the selected location with between. The average duration of the Company A Company B jurisdiction over commercial cases following three stages of dispute resolu- (seller & Commercial (buyer & dispute plaintiff) defendant) worth 200% of income per capita or tion is recorded: (i) filing and service; (ii) Filing & Trial & Enforcement $5,000, whichever is greater. trial and judgment; and (iii) enforcement. service judgment ƒƒ At the outset of the dispute, Seller Time is recorded considering the case decides to attach Buyer’s movable study assumptions detailed above and assets (for example, office equipment only as applicable to the competent court. and vehicles) because Seller fears that Time is recorded in practice, regardless of Buyer may hide its assets or otherwise time limits set by law if such time limits TABLE 8.6  What do the indicators on become insolvent. are not respected in the majority of cases. the efficiency of resolving a commercial ƒƒ The claim is disputed on the merits dispute measure? because of Buyer’s allegation that the The filing and service phase includes the quality of the goods was not adequate. following: Time required to enforce a contract through the courts (calendar days) Because the court cannot decide the ƒƒ The time for Seller to try to obtain Time to file and serve the case case on the basis of documentary payment out of court through a non- evidence or legal title alone, an expert litigious demand letter, including the Time for trial and to obtain the judgment opinion is given on the quality of the time to prepare the letter and the Time to enforce the judgment goods. If it is standard practice in the deadline provided to Buyer to comply. Cost required to enforce a contract through the courts (% of claim) economy for each party to call its own ƒƒ The time necessary for a local lawyer expert witness, the parties each call to write the initial complaint and gath- Average attorney fees one expert witness. If it is standard er all supporting documents needed Court costs practice for the judge to appoint an for filing, including authenticating or Enforcement costs independent expert, the judge does notarizing them if required. 108 DOING BUSINESS IN SOUTH AFRICA 2018 ƒƒ The time necessary to file the com- ƒƒ The time it takes for Seller (winning TABLE 8.7  What do the indicators plaint at the court. party) to fully recover the value of the on the quality of judicial processes ƒƒ The time necessary for Buyer (defen- claim once the auction is successfully measure? dant) to be served, including the completed. Court structure and proceedings index (-1–5) processing time at the court and the Availability of specialized commercial court, waiting periods between unsuccessful Cost division or section (0–1.5) attempts to serve Buyer, if more than Cost is recorded as a percentage of the Availability of small claims court or simplified one attempt is usually required. claim, assumed to be equivalent to 200% procedure for small claims (0–1.5) of income per capita or $5,000, which- Availability of pretrial attachment (0–1) The trial and judgment phase includes ever is greater. Three types of costs are Criteria used to assign cases to judges (0–1) the following: recorded: average attorney fees, court Evidentiary weight of a woman’s testimony (-1-0) ƒƒ The time between the moment a costs and enforcement costs. Case management index (0–6) notice of the case is served on Buyer and the moment a pretrial conference Average attorney fees are the fees that Regulations setting time standards for key court events (0–1) is held, if a pretrial conference is part Seller (plaintiff) must advance to a Regulations on adjournments or continuances (0–1) of the case management techniques local attorney to represent Seller in the used by the competent court. standardized case, regardless of final Availability of performance measurement reports (0–1) ƒƒ The time between the pretrial reimbursement. Court costs include all Availability of pretrial conference (0–1) conference and the first hearing, if costs that Seller (plaintiff) must advance to the court, regardless of the final cost Availability of electronic case management a pretrial conference is part of the system for judges (0–1) case management techniques used borne by Seller. Court costs include the Availability of electronic case management by the competent court. If not, the fees that must be paid to obtain an expert system for lawyers (0–1) time between the moment a notice opinion, regardless of whether they are Court automation index (0–4) of the case is served on Buyer and the paid to the court or to the expert directly. Ability to file initial complaint electronically (0–1) moment the first hearing is held. Enforcement costs are all costs that Seller Ability to serve initial complaint electronically ƒƒ The time to conduct all trial activities, (plaintiff) must advance to enforce the (0–1) including exchanges of briefs and judgment through a public sale of Buyer’s Ability to pay court fees electronically (0–1) evidence, multiple hearings, waiting movable assets, regardless of the final Publication of judgments (0–1) times in between hearings and the cost borne by Seller. Bribes are not taken obtaining of an expert opinion. into account. Alternative dispute resolution index (0–3) ƒƒ The time necessary for the judge to Arbitration (0–1.5) issue a written final judgment once QUALITY OF JUDICIAL Voluntary mediation or conciliation (0–1.5) the evidence period has closed. PROCESSES Quality of judicial processes index (0–18) ƒƒ The time limit for appeal. The quality of judicial processes index Sum of the court structure and proceedings, case measures whether each location has management, court automation and alternative dispute resolution indices The enforcement phase includes the adopted a series of good practices in its following: court system in four areas: court struc- ƒƒ The time it takes to obtain an enforce- ture and proceedings, case management, it is applicable to all civil cases and the able copy of the judgment and contact court automation and alternative dispute law sets a cap on the value of cases the relevant enforcement office. resolution (table 8.7). that can be handled through this court ƒƒ The time it takes to locate, identify, or procedure. If small claims are han- seize and transport Buyer’s (losing Court structure and proceedings dled by a stand-alone court, the point party) movable assets (including the index is assigned only if this court applies time necessary to obtain an order The court structure and proceedings a simplified procedure. An additional from the court to attach and seize the index has five components: score of 0.5 is assigned if parties assets, if applicable). ƒƒ Whether a specialized commercial can represent themselves before ƒƒ The time it takes to advertise, orga- court or a section dedicated solely to this court or during this procedure. nize and hold the auction. If more hearing commercial cases is in place. If no small claims court or simplified than one auction is usually required to A score of 1.5 is assigned if yes; 0 if no. procedure is in place, a score of 0 is fully recover the value of the claim in a ƒƒ Whether a small claims court or a assigned. case comparable to the standardized fast-track procedure for small claims ƒƒ Whether plaintiffs can obtain pretrial case, the time between multiple auc- is in place. A score of 1 is assigned if attachment of the defendant’s mov- tion attempts is recorded. such a court or procedure is in place, able assets if they fear that the assets DATA NOTES 109 may be moved out of the jurisdiction in more than 50% of cases; 0.5 if they lists; (v) evidence; (vi) jurisdiction or otherwise dissipated. A score of 1 is are available but not respected in and other procedural issues; and (vii) assigned if yes; 0 if no. more than 50% of cases; 0 if there are the narrowing down of contentious ƒƒ Whether cases are assigned randomly time standards for less than three of issues. A score of 1 is assigned if a and automatically to judges through- these key court events. pretrial conference in which at least out the competent court. A score of 1 ƒƒ Whether there are any laws regulat- three of these events are discussed is is assigned if the assignment of cases ing the maximum number of adjourn- held within the competent court; 0 if is random and automated; 0.5 if it is ments or continuances that can not. random but not automated; 0 if it is be granted, whether adjournments ƒƒ Whether judges within the compe- neither random nor automated. are limited by law to unforeseen tent court can use an electronic case ƒƒ Whether a woman’s testimony carries and exceptional circumstances and management system for at least the same evidentiary weight in court whether these rules are respected four of the following purposes: (i) to as a man’s. A score of −1 is assigned in more than 50% of cases. A score access laws, regulations and case if the law differentiates between the of 1 is assigned if all three conditions law; (ii) to automatically generate a evidentiary value of a woman’s testi- are met; 0.5 if only two of the three hearing schedule for all cases on their mony and that of a man’s testimony in conditions are met; 0 if only one of the docket; (iii) to send notifications (for any type of civil case, including family conditions is met or if none are. example, e-mails) to lawyers; (iv) cases; 0 if it does not. ƒƒ Whether there are any performance to track the status of a case on their measurement reports that can be docket; (v) to view and manage case The index ranges from 0 to 5, with higher generated about the competent court documents (briefs, motions); (vi) to values indicating a more sophisticated to monitor the court’s performance, to assist in writing judgments; (vii) to and streamlined court structure. In Bosnia track the progress of cases through the semi-automatically generate court and Herzegovina, for example, a special- court and to ensure compliance with orders; and (viii) to view court orders ized commercial court is in place (a score established time standards. A score of and judgments in a particular case. A of 1.5), and small claims can be resolved 1 is assigned if at least two of the fol- score of 1 is assigned if an electronic through a dedicated court in which self- lowing four reports are made publicly case management system is available representation is allowed (a score of 1.5). available: (i) time to disposition report that judges can use for at least four of Plaintiffs can obtain pretrial attachment (measuring the time the court takes these purposes; 0 if not. of the defendant’s movable assets if they to dispose or adjudicate its cases); (ii) ƒƒ Whether lawyers can use an elec- fear dissipation during trial (a score of 1). clearance rate report (measuring the tronic case management system for Cases are assigned randomly through an number of cases resolved relative to at least four of the following pur- electronic case management system (a the number of incoming cases); (iii) poses: (i) to access laws, regulations score of 1). A woman’s testimony carries age of pending cases report (providing and case law; (ii) to access forms the same evidentiary weight in court as a snapshot of all pending cases accord- to be submitted to the court; (iii) to a man’s (a score of 0). Adding these ing to case type, case age, last action receive notifications (for example, numbers gives Bosnia and Herzegovina held and next action scheduled); and e-mails); (iv) to track the status of a a score of 5 on the court structure and (iv) single case progress report (pro- case; (v) to view and manage case proceedings index. viding a snapshot of the status of one documents (briefs, motions); (vi) to case). A score of 0 is assigned if only file briefs and documents with the Case management index one of these reports is available or if court; and (vii) to view court orders The case management index has six none are. and decisions in a particular case. A components: ƒƒ Whether a pretrial conference is score of 1 is assigned if an electronic ƒƒ Whether any of the applicable laws or among the case management tech- case management system is available regulations on civil procedure contain niques used before the competent that lawyers can use for at least four time standards for at least three of the court and at least three of the follow- of these purposes; 0 if not. following key court events: (i) service ing issues are discussed during the of process; (ii) first hearing; (iii) fil- pretrial conference: (i) scheduling The index ranges from 0 to 6, with ing of the statement of defense; (iv) (including the time frame for filing higher values indicating a higher-quality completion of the evidence period; motions and other documents with and more efficient case management (v) filing of testimony by expert; and the court); (ii) case complexity and system. In Australia, for example, time (vi) submission of the final judgment. projected length of trial; (iii) possibil- standards for at least three key court A score of 1 is assigned if such time ity of settlement or alternative dispute events are established in applicable civil standards are available and respected resolution; (iv) exchange of witness procedure instruments and are respected 110 DOING BUSINESS IN SOUTH AFRICA 2018 in more than 50% of cases (a score of ƒƒ Whether court fees can be paid law or consolidated chapter or section 1). The law stipulates that adjournments electronically for cases filed before of the applicable code of civil proce- can be granted only for unforeseen and the competent court, either through a dure encompassing substantially all exceptional circumstances, and this rule dedicated platform or through online its aspects. A score of 0.5 is assigned is respected in more than 50% of cases banking. A score of 1 is assigned if fees if yes; 0 if no. (a score of 0.5). A time to disposition can be paid electronically and litigants ƒƒ Whether commercial disputes of all report, a clearance rate report and an age are not required to follow up with a kinds—aside from those dealing with of pending cases report can be generated hard copy of the receipt or produce a public order, public policy, bankruptcy, about the competent court (a score of 1). stamped copy of the receipt; 0 if not. consumer rights, employment issues A pretrial conference is among the case Electronic payment is acknowledged or intellectual property—can be sub- management techniques used before the regardless of the percentage of users, mitted to arbitration. A score of 0.5 is District Court of New South Wales (a as long as no additional in-person assigned if yes; 0 if no. score of 1). An electronic case manage- interactions are required and local ƒƒ Whether valid arbitration clauses ment system satisfying the criteria out- experts have used it enough to be able or agreements are enforced by local lined above is available to judges (a score to confirm that it is fully functional. courts in more than 50% of cases. A of 1) and to lawyers (a score of 1). Adding ƒƒ Whether judgments rendered by score of 0.5 is assigned if yes; 0 if no. these numbers gives Australia a score of local courts are made available to the ƒƒ Whether voluntary mediation, con- 5.5 on the case management index, the general public through publication in ciliation or both are a recognized way highest score attained by any economy official gazettes, in newspapers or on of resolving commercial disputes. A on this index. the internet. A score of 1 is assigned score of 0.5 is assigned if yes; 0 if no. if judgments rendered in commercial ƒƒ Whether voluntary mediation, Court automation index cases at all levels are made avail- conciliation or both are governed by The court automation index has four able to the general public; 0.5 if only a consolidated law or consolidated components: judgments rendered at the appeal chapter or section of the applicable ƒƒ Whether the initial complaint can and supreme court level are made code of civil procedure encompassing be filed electronically through a available to the general public; 0 in substantially all their aspects. A score dedicated platform (not e-mail or all other instances. No points are of 0.5 is assigned if yes; 0 if no. fax) within the relevant court. A score awarded if judgments need to be indi- ƒƒ Whether there are any financial incen- of 1 is assigned if such a platform is vidually requested from the court or if tives for parties to attempt mediation available and litigants are not required the case number or parties’ details are or conciliation (for example, if media- to follow up with a hard copy of the required in order to obtain a copy of a tion or conciliation is successful, a complaint; 0 if not. Electronic filing judgment. refund of court filing fees, an income is acknowledged regardless of the tax credit or the like). A score of 0.5 is percentage of users, as long as no The index ranges from 0 to 4, with higher assigned if yes; 0 if no. additional in-person interactions are values indicating a more automated, required and local experts have used efficient and transparent court system. In The index ranges from 0 to 3, with it enough to be able to confirm that it Estonia, for example, the initial summons higher values associated with greater is fully functional. can be filed online (a score of 1), it can availability of mechanisms of alternative ƒƒ Whether the initial complaint can be be served on the defendant electroni- dispute resolution. In Israel, for example, served on the defendant electroni- cally (a score of 1), and court fees can arbitration is regulated through a dedi- cally, through a dedicated system or be paid electronically as well (a score of cated statute (a score of 0.5), all relevant by e-mail, fax or SMS (short mes- 1). In addition, judgments in commercial commercial disputes can be submitted sage service) for cases filed before cases at all levels are made publicly avail- to arbitration (a score of 0.5), and valid the competent court. A score of 1 is able through the internet (a score of 1). arbitration clauses are usually enforced assigned if electronic service is avail- Adding these numbers gives Estonia a by the courts (a score of 0.5). Voluntary able and no further service of process score of 4 on the court automation index. mediation is a recognized way of resolv- is required; 0 if not. Electronic service ing commercial disputes (a score of 0.5), is acknowledged regardless of the Alternative dispute resolution it is regulated through a dedicated statute percentage of users, as long as no index (a score of 0.5), and part of the filing fees additional in-person interactions are The alternative dispute resolution index is reimbursed if the process is successful required and local experts have used has six components: (a score of 0.5). Adding these numbers it enough to be able to confirm that it ƒƒ Whether domestic commercial arbi- gives Israel a score of 3 on the alternative is fully functional. tration is governed by a consolidated dispute resolution index. DATA NOTES 111 Quality of judicial processes and cost indicators are classified as a warehouse in a regional trading partner index reform (for more details, see the chapter through a land border. The ranking The quality of judicial processes index is on “About Doing Business and Doing of economies on the ease of trading the sum of the scores on the court struc- Business in South Africa 2018”). Changes across borders is determined by sort- ture and proceedings, case management, with lower impact are not classified as ing their distance to frontier scores for court automation and alternative dispute reforms but they are still reflected in the trading across borders. These scores resolution indices. The index ranges from most updated indicators data. are the simple average of the distance 0 to 18, with higher values indicating bet- to frontier scores for the time and cost ter and more efficient judicial processes. The third types of reforms are legislative for documentary compliance and bor- changes of exceptional magnitude, such der compliance to export and import REFORMS as sizeable revisions of the applicable (figure 8.11). The indicator set on enforcing contracts civil procedure, or enforcement laws, tracks changes related to the efficiency that are anticipated to have a significant Although Doing Business collects and and quality of commercial dispute resolu- impact on time and cost in the future. publishes data on the time and cost for tion systems since 2015. Depending on domestic transport, it does not use these the impact on the data, certain changes The data details on enforcing contracts data in calculating the distance to frontier are classified as reforms. Reforms are can be found for each economy at http:// score for trading across borders or the divided into two types: those that make www.doingbusiness.org. This methodology ranking on the ease of trading across it easier to enforce a contract and those was initially developed by Simeon Djankov, borders. The main reason for this is that changes that make it more difficult. The Rafael La Porta, Florencio López-de-Silanes the time and cost for domestic transport enforcing contracts indicator set uses and Andrei Shleifer (“Courts,” Quarterly are affected by many external factors— three criteria to recognize a reform. Journal of Economics 118, no. 2 [2003]: such as the geography and topography 453–517) and is adopted here with several of the transit territory, road capacity and First, changes in laws and regulations changes. The quality of judicial processes general infrastructure, proximity to the that have any impact on the location’s index was introduced in Doing Business nearest port or border, and the location score on the quality of judicial processes 2016. The good practices tested in this index of warehouses where the traded goods index are classified as reforms. Examples were developed on the basis of internation- are stored—and so are not directly of reforms that affect the quality of judi- ally recognized good practices promoting influenced by an economy’s trade policies cial processes index include measures judicial efficiency. and reforms. to introduce electronic filing of the initial complaint, the creation of a commercial The data on trading across borders court or division, or the introduction TRADING ACROSS BORDERS are gathered through a questionnaire of dedicated systems to resolve small administered to local freight forwarders, claims. Changes affecting the quality Doing Business records the time and customs brokers, port authorities and of judicial processes index can be dif- cost associated with the logistical pro- traders. ferent in magnitude and scope and still cess of exporting and importing goods. be considered a reform. For example, Doing Business measures the time and If an economy has no formal, large-scale, implementing a new electronic case cost (excluding tariffs) associated with cross-border trade taking place in the management system for the use of three sets of procedures—documentary private sector as a result of government judges and lawyers represents a reform compliance, border compliance and restrictions, armed conflict or a natural with a 2-point increase in the index, while domestic transport—within the overall disaster, it is considered a “no practice” introducing incentives for the parties to process of exporting or importing a economy. A “no practice” economy use mediation represents a reform with a shipment of goods. Figure 8.9, using receives a distance to frontier score 0.5-point increase in the index. the example of Brazil (as exporter) of 0 for all the trading across borders and China (as importer), shows the indicators. Second, changes that have an impact on process of exporting a shipment from a the time and cost to resolve a dispute warehouse in the origin economy to a Assumptions of the case study may also be classified as reforms depend- warehouse in an overseas trading part- To make the data comparable across ing on the magnitude of the changes. ner through a port. Figure 8.10, using locations, several assumptions are According to the enforcing contracts the example of Kenya (as exporter) made about the traded goods and the methodology, any updates in legislation and Uganda (as importer), shows the transactions: leading to a change of 2% or more on process of exporting a shipment from a ƒƒ For each of the locations covered by the distance to frontier gap of the time warehouse in the origin economy to a Doing Business in South Africa 2018, it 112 DOING BUSINESS IN SOUTH AFRICA 2018 FIGURE 8.9  What makes up the time and cost to export to an overseas trading partner? be containerized, while import ship- ments of auto parts are assumed to be containerized. ƒƒ If government fees are determined by São Paulo Domestic transport: 8.6 hours, $763 the value of the shipment, the value is assumed to be $50,000. Border compliance: 49 hours, $959 ƒƒ The product is new, not secondhand Shanghai or used merchandise. Documentary compliance: 12 hours, $226 ƒƒ The exporting/importing firm hires and pays for a freight forwarder or Source: Doing Business database. customs broker (or both) and pays for all costs related to domestic transport, clearance and mandatory inspections FIGURE 8.10  What makes up the time and cost to export to a regional trading partner? by customs and other agencies, port or border handling, documentary Nairobi I II compliance fees and the like. ƒƒ The mode of transport is the one most I Domestic transport: 9 hours, $967 II I widely used for the chosen export or I II Border compliance: 21 hours, $143 import product and the trading part- Kampala ner, as is the seaport or land border Documentary compliance: 19 hours, $191 crossing. ƒƒ All electronic submissions of informa- Source: Doing Business database. tion requested by any government agency in connection with the ship- is assumed that a shipment is located ƒƒ The import and export case studies ment are considered to be documents at a warehouse in the largest busi- assume different traded products. obtained, prepared and submitted ness city of the exporting economy It is assumed that each location during the export or import process. (Johannesburg) and travels to a ware- imports a standardized shipment of ƒƒ A port or border is defined as a place house in the largest business city of 15 metric tons of containerized auto (seaport or land border crossing) the importing economy. parts (HS 8708) from its natural where merchandise can enter or leave import partner—the economy from an economy. which it imports the largest value ƒƒ Government agencies considered rel- FIGURE 8.11  Trading across borders: time and cost to export and import (price times quantity) of auto parts. evant are agencies such as customs, It is assumed that each location port authorities, road police, border Rankings are based on distance to frontier scores for eight indicators exports the product of its compara- guards, standardization agencies, tive advantage (defined by the larg- ministries or departments of agri- Time for documentary Cost for documentary est export value) to its natural export culture or industry, national security compliance and border compliance and border compliance when compliance when partner—the economy that is the agencies, central banks and any other exporting the product exporting the product of comparative of comparative largest purchaser of this product. government authorities. advantage advantage The export products and trading partner for Durban are those used Time for South Africa in the annual global Time is measured in hours, and 1 day 25% 25% Time Cost Doing Business assessment. Precious is 24 hours (for example, 22 days are to export to export metal and gems, mineral fuels, oil recorded as 22 × 24 = 528 hours). If cus- 25% 25% Time Cost products, live animals, residues and toms clearance takes 7.5 hours, the data to import to import waste of foods and products as well are recorded as is. Alternatively, suppose as pharmaceuticals are excluded that documents are submitted to a Time for documentary Cost for documentary from the list of possible export prod- customs agency at 8:00 a.m., are pro- compliance and border compliance and border compliance when compliance when ucts, however, and in these cases the cessed overnight and can be picked up at importing auto parts importing auto parts second largest product category is 8:00 a.m. the next day. In this case the considered as needed.1 time for customs clearance would be Note: The time and cost for domestic transport and ƒƒ A shipment is a unit of trade. Export recorded as 24 hours because the actual the number of documents to export and import are measured but do not count for the rankings. shipments do not necessarily need to procedure took 24 hours. DATA NOTES 113 Cost obtaining documents (such as time spent example, freight forwarders may prepare Insurance cost and informal payments for to get the document issued and stamped); a packing list because in their experience which no receipt is issued are excluded preparing documents (such as time spent this reduces the probability of physical or from the costs recorded. Costs are gathering information to complete the other intrusive inspections). reported in U.S. dollars. Contributors are customs declaration or certificate of ori- asked to convert local currency into U.S. gin); processing documents (such as time In addition, any documents that are dollars based on the exchange rate pre- spent waiting for the relevant authority mandatory for exporting or importing vailing on the day they answer the ques- to issue a phytosanitary certificate); pre- are included in the calculation of time tionnaire. Contributors are private sector senting documents (such as time spent and cost. Documents that need to be experts in international trade logistics showing a port terminal receipt to port obtained only once are not counted, and are informed about exchange rates authorities); and submitting documents however. And Doing Business does not and their movements. (such as time spent submitting a customs include documents needed to produce declaration to the customs agency in per- and sell in the domestic market—such Documentary compliance son or electronically). as certificates of third-party safety stan- Documentary compliance captures the dards testing that may be required to sell time and cost associated with compli- All electronic or paper submissions of toys domestically—unless a government ance with the documentary requirements information requested by any government agency needs to see these documents of all government agencies of the origin agency in connection with the shipment during the export process. economy, the destination economy and are considered to be documents obtained, any transit economies (table 8.8). The prepared and submitted during the export Border compliance aim is to measure the total burden of pre- or import process. All documents pre- Border compliance captures the time and paring the bundle of documents that will pared by the freight forwarder or customs cost associated with compliance with enable completion of the international broker for the product and partner pair the economy’s customs regulations and trade for the product and partner pair assumed in the case study are included with regulations relating to other inspec- assumed in the case study. As a ship- regardless of whether they are required tions that are mandatory in order for the ment moves from Mumbai to New York by law or in practice. Any documents pre- shipment to cross the economy’s border, City, for example, the freight forwarder pared and submitted so as to get access as well as the time and cost for handling must prepare and submit documents to to preferential treatment—for example, that takes place at its port or border. The the customs agency in India, to the port a certificate of origin—are included in time and cost for this segment include authorities in Mumbai and to the cus- the calculation of the time and cost for time and cost for customs clearance toms agency in New York City. documentary compliance. Any docu- and inspection procedures conducted ments prepared and submitted because by other agencies. For example, the time The time and cost for documentary of a perception that they ease the passage and cost for conducting a phytosanitary compliance include the time and cost for of the shipment are also included (for inspection would be included here. TABLE 8.8  What do the indicators on the time and cost to export and import cover? The computation of border compliance time and cost depends on where the Documentary compliance border compliance procedures take Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border place, who requires and conducts the handling in origin economy procedures and what the probability is Obtaining, preparing and submitting documents required by destination economy and any transit economies that inspections will be conducted. If all Covers all documents required by law and in practice, including electronic submissions of information as customs clearance and other inspections well as non-shipment-specific documents necessary to complete the trade take place at the port or border at the Border compliance same time, the time estimate for border Customs clearance and inspections by customs compliance takes this simultaneity into Inspections by other agencies (if applied to more than 10% of shipments) account. It is entirely possible that the Port or border handling at most widely used port or border of economy border compliance time and cost could Domestic transport be negligible or zero, as in the case of Loading and unloading of shipment at warehouse, dry port or border trade between members of the European Union or other customs unions. Transport by most widely used mode between warehouse and terminal or dry port Transport by most widely used mode between terminal or dry port and most widely used border or port If some or all customs or other inspec- Traffic delays and road police checks while shipment is en route tions take place at other locations, the 114 DOING BUSINESS IN SOUTH AFRICA 2018 time and cost for these procedures are take place in 100% of cases while physi- to a single Harmonized System (HS) added to the time and cost for those cal inspection occurs in 5% of cases. In classification code. This assumption is that take place at the port or border. In situations like this, Doing Business would particularly important for inspections, Kazakhstan, for example, all customs count the time only for scanning because because shipments of homogeneous clearance and inspections take place at it happens in more than 20% of cases products are often subject to fewer and a customs post in Almaty that is not at while physical inspection does not. The shorter inspections than shipments of the land border between Kazakhstan and border compliance time and cost for an products belonging to various HS codes. China. In this case border compliance economy do not include the time and time is the sum of the time spent at the cost for compliance with the regulations In some cases the shipment travels from terminal in Almaty and the handling time of any other economy. the warehouse to a customs post or at the border. terminal for clearance or inspections and Domestic transport then travels onward to the port or border. Doing Business asks contributors to Domestic transport captures the time In these cases the domestic transport estimate the time and cost for clearance and cost associated with transporting the time is the sum of the time for both and inspections by customs agencies— shipment from a warehouse in the loca- transport segments. The time and cost defined as documentary and physical tion measured to the seaport or land bor- for clearance or inspections are included inspections for the purpose of calculating der (if applicable). This set of procedures in the measures for border compliance, duties by verifying product classification, captures the time for (and cost of) the however, not in those for domestic confirming quantity, determining origin actual transport; any traffic delays and transport. and checking the veracity of other infor- road police checks; as well as time spent mation on the customs declaration. (This loading or unloading at the warehouse The data details on trading across borders category includes all inspections aimed or border. For a coastal economy with can be found for each economy at http:// at preventing smuggling.) These are an overseas trading partner, domestic www.doingbusiness.org. This methodology clearance and inspection procedures that transport captures the time and cost was initially developed by Djankov and oth- take place in the majority of cases and from the loading of the shipment at the ers (2008) and was revised in 2015. thus are considered the “standard” case. warehouse until the shipment reaches The time and cost estimates capture the the economy’s port (figure 8.9). For an efficiency of the customs agency of the economy trading through a land border, economy. domestic transport captures the time and cost from the loading of the shipment at NOTE Doing Business also asks contributors to the warehouse until the shipment reaches estimate the total time and cost for clear- the economy’s land border (figure 8.10). 1. To identify the trading partners and export product for each economy, Doing Business ance and inspections by customs and all collected data on trade flows for the most other agencies for the specified product. The time and cost estimates are based on recent four-year period from international These estimates account for inspections the most widely used mode of transport databases such as the United Nations Commodity Trade Statistics Database (UN related to health, safety, phytosanitary (truck, train, riverboat) and the most Comtrade). For economies for which trade standards, conformity and the like, and widely used route (road, border posts) flow data were not available, data from thus capture the efficiency of agencies as reported by contributors. The time ancillary government sources (various ministries and departments) and World that require and conduct these additional and cost estimates are based on the Bank Group country offices were used to inspections. mode and route chosen by the majority identify the export product and natural trading of contributors. partners. If inspections by agencies other than customs are conducted in 20% or fewer In the export case study, as noted, Doing cases, the border compliance time and Business does not assume a containerized cost measures take into account only shipment, and time and cost estimates clearance and inspections by customs may be based on the transport of 15 (the standard case). If inspections by tons of noncontainerized products. In other agencies take place in more than the import case study, auto parts are 20% of cases, the time and cost mea- assumed to be containerized. In the sures account for clearance and inspec- cases where cargo is containerized, the tions by all agencies. Different types of time and cost for transport and other inspections may take place with different procedures are based on a shipment con- probabilities—for example, scanning may sisting of homogeneous cargo belonging LOCATION PROFILES 115 Location Profiles BUFFALO CITY (East London) 2015 2018 2015 2018 û Dealing with construction permits (rank) 5 6 Registering property (rank) 4 6 Distance to frontier score (0–100) 71.80 71.66 Distance to frontier score (0–100) 59.22 57.81 Procedures (number) 18 18 Procedures (number) 8 8 Time (days) 104 104 Time (days) 24 21 Cost (% of warehouse value) 2.3 2.4 Cost (% of property value) 6.3 7.6 Building quality control index (0–15) 11 11 Quality of land administration index (0–30) 14.5 15 Getting electricity (rank) 3 5 Enforcing contracts (rank) 9 9 Distance to frontier score (0–100) 59.47 59.40 Distance to frontier score (0–100) 50.52 51.48 Procedures (number) 5 5 Time (days) 696 661 Time (days) 76 76 Cost (% of claim value) 35.8 35.8 Cost (% of income per capita) 287.9 313.0 Quality of judicial processes index (0–18) 7 7 Reliability of supply and transparency of tariffs index (0–8) 0 0 ü Reform making it easier to do business û Change making it more difficult to do business DEALING WITH CONSTRUCTION PERMITS LIST OF PROCEDURES Time: 35 days Procedure 8. Receive inspection from the Cost: ZAR 41,496 (ZAR 6,381 per square meter municipal water and sanitation authority Warehouse value: ZAR 3,768,738 ($274,000) multiplied by 0.5%) Agency: Water and Sanitation Department of Buffalo Data as of: May 1, 2018 City Metropolitan Municipality Procedure 5. Submit notification of Time: 1 day Procedure 1. Obtain geotechnical survey of the commencement of building work to the Cost: No cost land plot provincial authority Agency: Private firm Agency: Department of Labour Procedure 9. Receive final water connection Time: 14 days Time: 1 day from the municipal water and sanitation Cost: ZAR 22,695 Cost: No cost authority Agency: Water and Sanitation Department of Buffalo Procedure 2*. Obtain topographical survey of Procedure 6*. Submit notification of City Metropolitan Municipality the land plot commencement of building work to the Time: 14 days Agency: Private firm municipal authority Cost: No cost Time: 14 days Agency: Building Control of Buffalo City Cost: ZAR 15,000 Metropolitan Municipality Procedure 10*. Receive inspection of Time: 1 day compliance with construction regulations Procedure 3. Conduct pre-application Cost: No cost Agency: Department of Labour consultation Time: 1 day Agency: Town Planning Division of Buffalo City Procedure 7*. Apply for water and sewage Cost: No cost Metropolitan Municipality connection Time: 22 days Agency: Water and Sanitation Department of Buffalo Procedure 11. Receive inspection of all Cost: No cost City Metropolitan Municipality foundation trenches from the municipal Time: 1 day authority Procedure 4. Obtain approval of the building Cost: ZAR 12,775 (ZAR 8,650 for water connection; Agency: Building Inspectorate of Buffalo City plans from the municipal authority ZAR 4,125 for sewerage connection) Metropolitan Municipality Agency: Building Control of Buffalo City Time: 1 day Metropolitan Municipality Cost: No cost Source: Doing Business database. *Simultaneous with previous procedure 116 DOING BUSINESS IN SOUTH AFRICA 2018 Procedure 12. Receive open drainage Procedure 15. Submit notification of Procedure 18. Obtain Occupancy Certificate inspection from the municipal authority completion of building work to the municipal from the municipal authority Buffalo City Agency: Building Inspectorate of Buffalo City authority Agency: Building Control of Buffalo City Metropolitan Municipality Agency: Building Control of Buffalo City Metropolitan Municipality Time: 1 day Metropolitan Municipality Time: 7 days Cost: No cost Time: 1 day Cost: No cost Cost: No cost Procedure 13. Receive inspection of damp- proof course from the municipal authority Procedure 16. Receive final inspection from the Note: For more details on each procedure, refer to Agency: Building Inspectorate of Buffalo City municipal authority http://doingbusiness.org/southafrica. Metropolitan Municipality Agency: Building Control of Buffalo City *Simultaneous with previous procedure Time: 1 day Metropolitan Municipality Cost: No cost Time: 1 day Cost: No cost Procedure 14. Receive final drainage inspection from the municipal authority Procedure 17*. Receive inspection from the Agency: Building Inspectorate of Buffalo City municipal fire authority Metropolitan Municipality Agency: Fire and Rescue Services of Buffalo City Time: 1 day Metropolitan Municipality Cost: No cost Time: 1 day Cost: No cost BUILDING QUALITY CONTROL INDEX Score Building quality control index (0–15) 11 Quality of building regulations index (0–2) 2 Quality control before construction index (0–1) 1 Quality control during construction index (0–3) 1 Quality control after construction index (0–3) 3 Liability and insurance regimes index (0–2) 0 Professional certifications index (0–4) 4 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF DEALING WITH CONSTRUCTION PERMITS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Consider differentiating projects by risk and introducing risk-based • Department of Labour • Land use management/town inspections planning department • Department of Rural Development and • Increase efficiency by improving coordination, consolidating Land Reform • Building control department procedures and implementing electronic platforms • Building inspections department • Introduce stringent liability and insurance regimes for latent defects • South African Bureau of Standards • Roads and stormwater department (SABS) • Involve private-sector professionals in the construction permitting • Utility providers process • National Regulator for Compulsory • Fire department Specifications (NRCS) • Health department • Solid waste department Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 117 GETTING ELECTRICITY Buffalo City LIST OF PROCEDURES Procedure 3. Await completion of external Procedure 5. Obtain certificate of compliance connection works by distribution utility (COC) for the internal wiring and submit to Name of Utility: Electricity Department of Buffalo distribution utility to obtain final connection Agency: Electricity Department of Buffalo City City Metropolitan Municipality Metropolitan Municipality Agency: Private electrical engineer / consultant / Data as of: May 1, 2018 Time: 45 days contractor Cost: No cost (Included in procedure 1) Time: 1 day Procedure 1. Submit an application for Cost: No cost electricity connection to distribution utility and obtain connection fee estimate Procedure 4*. Sign supply contract and submit proof of payment of security deposit to Agency: Electricity Department of Buffalo City Note: For more details on each procedure, refer to distribution utility Metropolitan Municipality http://doingbusiness.org/southafrica. Agency: Electricity Department of Buffalo City Time: 30 days *Simultaneous with previous procedure Metropolitan Municipality Cost: ZAR 229,268 (ZAR 207,008 for the connection Time: 1 day fee, including material and labor cost + ZAR 22,260 for the network upgrade charge of ZAR 159 per kVA) Cost: ZAR 6,416 (ZAR 6,416 for the present value of lost interest earnings on the security deposit of ZAR 84,980, considering that a bank guarantee is Procedure 2*. Await external site inspection by accepted + ZAR 252 for the energizing fee) distribution utility Agency: Electricity Department of Buffalo City Metropolitan Municipality Time: 1 day Cost: No cost RELIABILITY OF SUPPLY AND TRANSPARENCY OF TARIFFS INDEX Score Reliability of supply and transparency of tariffs index (0–8) 0 Total duration and frequency of outages per customer a year (0–3) – Mechanisms for monitoring outages (0–1) 1 Mechanisms for restoring service (0–1) 1 Regulatory monitoring (0–1) 1 Financial deterrents aimed at limiting outages (0–1) 0 Communication of tariffs and tariff changes (0–1) 1 Note: Locations that do not use the SAIDI and SAIFI benchmarks to calculate outages are ineligible to score on the reliability of supply and transparency of tariffs index and thus receive 0 points on this indicator component. For more information please refer to the data notes. For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF GETTING ELECTRICITY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Start monitoring the reliability of supply using the SAIDI and SAIFI • National Energy Regulator of South • Municipal distribution utilities methodology Africa (NERSA) • Streamline the wayleave and excavation permit systems • Eskom • Identify bottlenecks in the internal process to reduce time • Department of Energy • Make the cost and process of getting electricity more transparent to the customer • Upgrade geographic information system to eliminate external site inspection • Reduce the burden of the security deposit Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 118 DOING BUSINESS IN SOUTH AFRICA 2018 REGISTERING PROPERTY Buffalo City LIST OF PROCEDURES Procedure 4*. Obtain an entomologist's Procedure 7. Parties sign all the documentation certificate at the conveyancer’s office Property value: ZAR 3,768,738 ($274,000) Agency: Certified entomologist Agency: Conveyancer's Office Data as of: May 1, 2018 Time: 7 days Time: 1 day Cost: ZAR 600 Cost: ZAR 36,581 (For properties valued above Procedure 1. Obtain a rates clearance ZAR 1,000,000 and up to and including certificate ZAR 5,000,000: ZAR 17,200 for the first Procedure 5*. Obtain a transfer duty receipt Agency: Buffalo City Municipality's Directorate of ZAR 1,000,000 plus ZAR 700 per ZAR 100,000 or Financial Services Agency: South African Revenue Service part thereof above that) Time: 10 days Time: 2 days Cost: ZAR 191 Cost: ZAR 247,561 (ZAR 80,500 plus 11% on value Procedure 8. The conveyancer lodges the deed above ZAR 2,250,000 for a property valued between ZAR 2,250,001 and ZAR 10,000,000) Agency: Deeds Registry of King William's Town Procedure 2*. The conveyancer prepares and Time: 9 days collects all the required documentation Cost: ZAR 1,275 (For properties valued above Procedure 6*. The conveyancer conducts a Agency: Conveyancer ZAR 2,000,000 and up to ZAR 4,000,000: title search and checks encumbrances on the Time: 10 days ZAR 1,275) property Cost: No cost (Included in procedure 7) Agency: Deeds Registry of King William's Town Time: Less than one day (online procedure) Procedure 3*. Obtain an electrical compliance Note: For more details on each procedure, refer to Cost: No cost (Included in procedure 7) http://doingbusiness.org/southafrica. certificate Agency: Certified electrician *Simultaneous with previous procedure Time: 7 days Cost: ZAR 1,250 QUALITY OF LAND ADMINISTRATION INDEX Score Quality of land administration index (0–30) 15 Reliability of infrastructure index (0–8) 5 Transparency of information index (0–6) 3.5 Geographic coverage index (0–8) 2 Land dispute resolution index (0–8) 4.5 Equal access to property rights index (-2–0) 0 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF REGISTERING PROPERTY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Streamline issuance of rates clearance certificates • Office of the Chief Registrar of Deeds • Municipalities • Improve coordination among stakeholders and consider • Office of the Chief Surveyor-General • Local deeds offices implementing a one-stop shop for property registration • Local surveyor-general's offices • Department of Rural Development and • Reinforce transparency in the land administration system Land Reform • Strengthen protections and resolution mechanisms for land- related issues and disputes • Department of Justice* • Expand geographic coverage * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 119 ENFORCING CONTRACTS Buffalo City INDICATOR DETAILS Time (days) Cost (% of claim value) Trial and Enforcement of Filing and service judgment judgement Total time Attorney fees Court fees Enforcement fees Total cost 40 557 64 661 25.2% 7.6% 3.0% 35.8% QUALITY OF JUDICIAL PROCESSES INDEX Score Quality of judicial processes index (0–18) 7 Court structure and proceedings (-1–5) 2 Case management (0–6) 2 Court automation (0–4) 0.5 Alternative dispute resolution (0–3) 2.5 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF ENFORCING CONTRACTS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Study magistrates’ court caseloads to identify and eliminate • Office of the Chief Justice • Magistrates’ courts causes of trial delay and consider limiting the frequency and causes of adjournments • Department of Justice* • Assess judicial capacity and resources needed to enhance case management and make it effective, especially in lower courts • Consider introducing specialized commercial courts or commercial sections in locations where needed * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 120 DOING BUSINESS IN SOUTH AFRICA 2018 CAPE TOWN (Cape Town) 2015 2018 2015 2018 û Dealing with construction permits (rank) 1 1 Registering property (rank) 8 7 Distance to frontier score (0–100) 76.19 75.48 Distance to frontier score (0–100) 56.45 54.69 Cape Town Procedures (number) 16 17 Procedures (number) 9 9 Time (days) 95 88 Time (days) 29.5 29.5 Cost (% of warehouse value) 2.3 2.4 Cost (% of property value) 6.3 7.6 Building quality control index (0–15) 12 12 Quality of land administration index (0–30) 14.5 15 ü Getting electricity (rank) 2 1 Enforcing contracts (rank) 7 7 Distance to frontier score (0–100) 60.27 79.81 Distance to frontier score (0–100) 54.71 54.71 Procedures (number) 4 4 Time (days) 545 545 Time (days) 97 91 Cost (% of claim value) 35.6 35.6 Cost (% of income per capita) 640.0 597.2 Quality of judicial processes index (0–18) 7 7 Reliability of supply and transparency of tariffs index (0–8) 0 6 ü Reform making it easier to do business û Change making it more difficult to do business DEALING WITH CONSTRUCTION PERMITS LIST OF PROCEDURES Procedure 5. Submit Integrated Waste Procedure 9. Receive inspection from the Management Plan for approval municipal water and sanitation authority Warehouse value: ZAR 3,768,738 ($274,000) Agency: Solid Waste Department of City of Cape Agency: Water and Sanitation Department of City of Data as of: May 1, 2018 Town Metropolitan Municipality Cape Town Metropolitan Municipality Time: 1 day Time: 1 day Procedure 1. Obtain geotechnical survey of the Cost: No cost Cost: No cost land plot Agency: Private firm Procedure 6. Submit notification of Procedure 10. Receive final water connection Time: 14 days commencement of building work to the from the municipal water and sanitation Cost: ZAR 22,695 provincial authority authority Agency: Department of Labour Agency: Water and Sanitation Department of City of Procedure 2*. Obtain topographical survey of Time: 1 day Cape Town Metropolitan Municipality the land plot Cost: No cost Time: 14 days Agency: Private firm Cost: No cost Time: 14 days Procedure 7*. Submit notification of Cost: ZAR 15,000 commencement of building work to the Procedure 11*. Receive inspection of municipal authority compliance with construction regulations Procedure 3. Conduct pre-application Agency: Building Development Management Agency: Department of Labour consultation Department of City of Cape Town Metropolitan Time: 1 day Agency: Building Development Management Municipality Cost: No cost Department of City of Cape Town Metropolitan Time: 1 day Municipality Cost: No cost Procedure 12. Receive inspection of all Time: 7 days foundation trenches from the municipal Cost: No cost Procedure 8*. Apply for water and sewage authority connection Agency: Building Inspectorate of City of Cape Town Procedure 4. Obtain approval of the building Agency: Water and Sanitation Department of City of Metropolitan Municipality plans from the municipal authority Cape Town Metropolitan Municipality Time: 1 day Agency: Building Development Management Time: 1 day Cost: No cost Department of City of Cape Town Metropolitan Cost: ZAR 10,050 (ZAR 8,190 for water connection; Municipality ZAR 1,860 for sewerage connection) Procedure 13. Receive inspection of Time: 37 days wastewater drainage systems Cost: ZAR 44,444 (ZAR 693 as fixed cost for the first Agency: Building Inspectorate of City of Cape Town 25 square meters + ZAR 34.3 for each additional Metropolitan Municipality square meter) Time: 1 day Cost: No cost Source: Doing Business database. *Simultaneous with previous procedure LOCATION PROFILES 121 Procedure 14. Submit notification of Procedure 16*. Receive inspection from the completion of building work to the municipal municipal fire authority authority Agency: Fire and Rescue Services of City of Cape Agency: Building Development Management Town Metropolitan Municipality Department of City of Cape Town Metropolitan Time: 1 day Municipality Cost: No cost Time: 1 day Cape Town Cost: No cost Procedure 17. Obtain Occupancy Certificate from the municipal authority Procedure 15. Receive final inspection from the Agency: Building Development Management municipal authority Department of City of Cape Town Metropolitan Agency: Building Development Management Municipality Department of City of Cape Town Metropolitan Time: 5 days Municipality Cost: No cost Time: 1 day Cost: No cost Note: For more details on each procedure, refer to http://doingbusiness.org/southafrica. *Simultaneous with previous procedure BUILDING QUALITY CONTROL INDEX Score Building quality control index (0–15) 12 Quality of building regulations index (0–2) 2 Quality control before construction index (0–1) 1 Quality control during construction index (0–3) 2 Quality control after construction index (0–3) 3 Liability and insurance regimes index (0–2) 0 Professional certifications index (0–4) 4 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF DEALING WITH CONSTRUCTION PERMITS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Consider differentiating projects by risk and introducing risk-based • Department of Labour • Land use management/town inspections planning department • Department of Rural Development and • Increase efficiency by consolidating procedures and expanding the Land Reform • Building control department scope of online services in construction permitting • Building inspections department • Introduce stringent liability and insurance regimes for latent defects • South African Bureau of Standards • Roads and stormwater department (SABS) • Involve private-sector professionals in the construction permitting • Utility providers process • National Regulator for Compulsory • Fire department Specifications (NRCS) • Health department • Solid waste department Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 122 DOING BUSINESS IN SOUTH AFRICA 2018 GETTING ELECTRICITY LIST OF PROCEDURES Procedure 2*. Await external site inspection by Procedure 4. Obtain certificate of compliance distribution utility (COC) for the internal wiring and submit to Name of Utility: Electricity Generation and distribution utility to obtain final connection Agency: Electricity Generation and Distribution Distribution Department of City of Cape Town Department of City of Cape Town Metropolitan Agency: Private electrical engineer / consultant / Cape Town Metropolitan Municipality Municipality contractor Data as of: May 1, 2018 Time: 12 days Time: 6 days Cost: No cost Cost: No cost Procedure 1. Submit an application for electricity connection to distribution utility and Procedure 3. Await completion of external obtain connection fee estimate connection works by distribution utility Note: For more details on each procedure, refer to Agency: Electricity Generation and Distribution http://doingbusiness.org/southafrica. Agency: Electricity Generation and Distribution Department of City of Cape Town Metropolitan *Simultaneous with previous procedure Department of City of Cape Town Metropolitan Municipality Municipality Time: 25 days Time: 60 days Cost: ZAR 450,125 (ZAR 350,625 for the Cost: No cost (Included in procedure 1) shared-network charge at MV/LV + ZAR 94,484 for the quotation fee, including material and labor cost + ZAR 5,016 for the present value of lost interest earnings on the security deposit of ZAR 12,800) RELIABILITY OF SUPPLY AND TRANSPARENCY OF TARIFFS INDEX Score Reliability of supply and transparency of tariffs index (0–8) 6 Total duration and frequency of outages per customer a year (0–3) 2 Mechanisms for monitoring outages (0–1) 1 Mechanisms for restoring service (0–1) 1 Regulatory monitoring (0–1) 1 Financial deterrents aimed at limiting outages (0–1) 0 Communication of tariffs and tariff changes (0–1) 1 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF GETTING ELECTRICITY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Continue the installation of an outage management system • National Energy Regulator of South • Municipal distribution utilities • Streamline the wayleave and excavation permit systems Africa (NERSA) • Identify bottlenecks in the internal process to reduce time • Eskom • Make the cost and process of getting electricity more transparent to • Department of Energy the customer • Upgrade geographic information system to eliminate external site inspection • Reduce the burden of the security deposit Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 123 REGISTERING PROPERTY LIST OF PROCEDURES Procedure 4*. Obtain an electrical compliance Procedure 8. Parties sign all the documentation certificate at the conveyancer’s office Property value: ZAR 3,768,738 ($274,000) Agency: Certified electrician Agency: Conveyancer's Office Data as of: May 1, 2018 Time: 7 days Time: 1 day Cape Town Cost: ZAR 1,250 Cost: ZAR 36,581 (For properties valued above Procedure 1. The conveyancer conducts a ZAR 1,000,000 and up to and including title search and checks encumbrances on the ZAR 5,000,000: ZAR 17,200 for the first property Procedure 5*. Obtain a plumbing certificate ZAR 1,000,000 plus ZAR 700 per ZAR 100,000 or Agency: Deeds Registry of Cape Town Agency: Certified plumber part thereof above that) Time: Less than one day (online procedure) Time: 7 days Cost: No cost (Included in procedure 8) Cost: ZAR 600 Procedure 9. The conveyancer lodges the deed Agency: Deeds Registry of Cape Town Procedure 2. Obtain a rates clearance Procedure 6*. Obtain an entomologist's Time: 14 days certificate certificate Cost: ZAR 1,275 (For properties valued above Agency: City of Cape Town's Revenue Department Agency: Certified entomologist ZAR 2,000,000 and up to ZAR 4,000,000: Time: 14 days Time: 7 days ZAR 1,275) Cost: ZAR 75 Cost: ZAR 600 Procedure 3*. The conveyancer prepares and Procedure 7*. Obtain a transfer duty receipt Note: For more details on each procedure, refer to collects all the required documentation Agency: South African Revenue Service http://doingbusiness.org/southafrica. Time: 2 days *Simultaneous with previous procedure Agency: Companies and Intellectual Property Commission Cost: ZAR 247,561 (ZAR 80,500 plus 11% on value Time: 10 days above ZAR 2,250,000 for a property valued between Cost: No cost (Included in procedure 8) ZAR 2,250,001 and ZAR 10,000,000) QUALITY OF LAND ADMINISTRATION INDEX Score Quality of land administration index (0–30) 15 Reliability of infrastructure index (0–8) 5 Transparency of information index (0–6) 3.5 Geographic coverage index (0–8) 2 Land dispute resolution index (0–8) 4.5 Equal access to property rights index (-2–0) 0 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF REGISTERING PROPERTY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Further streamline issuance of rates clearance certificates • Office of the Chief Registrar of Deeds • Municipalities • Improve coordination among stakeholders and consider • Office of the Chief Surveyor-General • Local deeds offices implementing a one-stop shop for property registration • Local surveyor-general's offices • Department of Rural Development and • Reinforce transparency in the land administration system Land Reform • Strengthen protections and resolution mechanisms for land- related issues and disputes • Department of Justice* • Expand geographic coverage * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 124 DOING BUSINESS IN SOUTH AFRICA 2018 ENFORCING CONTRACTS INDICATOR DETAILS Time (days) Cost (% of claim value) Cape Town Trial and Enforcement of Filing and service judgment judgement Total time Attorney fees Court fees Enforcement fees Total cost 31 438 76 545 25.0% 7.6% 3.0% 35.6% QUALITY OF JUDICIAL PROCESSES INDEX Score Quality of judicial processes index (0–18) 7 Court structure and proceedings (-1–5) 2 Case management (0–6) 2 Court automation (0–4) 0.5 Alternative dispute resolution (0–3) 2.5 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF ENFORCING CONTRACTS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Study magistrates’ court caseloads to identify and eliminate • Office of the Chief Justice • Magistrates’ courts causes of trial delay and consider limiting the frequency and causes of adjournments • Department of Justice* • Assess judicial capacity and resources needed to enhance case management and make it effective, especially in lower courts • Consider introducing specialized commercial courts or commercial sections in locations where needed * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 125 EKURHULENI (Germiston) 2015 2018 2015 2018 Dealing with construction permits (rank) 4 4 û Registering property (rank) 3 4 Distance to frontier score (0–100) 71.82 71.81 Distance to frontier score (0–100) 60.25 58.48 Procedures (number) 17 17 Procedures (number) 7 7 Time (days) 144 144 Time (days) 33 33 Cost (% of warehouse value) 2.1 2.2 Cost (% of property value) 6.3 7.6 Building quality control index (0–15) 12 12 Quality of land administration index (0–30) 14.5 15 Ekurhuleni Getting electricity (rank) 5 6 Enforcing contracts (rank) 5 5 Distance to frontier score (0–100) 52.35 52.09 Distance to frontier score (0–100) 55.58 55.58 Procedures (number) 6 6 Time (days) 513 513 Time (days) 104 104 Cost (% of claim value) 35.6 35.6 Cost (% of income per capita) 258.5 343.4 Quality of judicial processes index (0–18) 7 7 Reliability of supply and transparency of tariffs index (0–8) 0 0 ü Reform making it easier to do business û Change making it more difficult to do business DEALING WITH CONSTRUCTION PERMITS LIST OF PROCEDURES Procedure 5. Submit notification of Procedure 9. Receive final water connection commencement of building work to the from the municipal water and sanitation Warehouse value: ZAR 3,768,738 ($274,000) provincial authority authority Data as of: May 1, 2018 Agency: Department of Labour Agency: Water and Sanitation Department of City of Time: 1 day Ekurhuleni Metropolitan Municipality Procedure 1. Obtain geotechnical survey of the Time: 21 days Cost: No cost land plot Cost: No cost Agency: Private firm Procedure 6*. Submit notification of Time: 14 days Procedure 10*. Receive inspection of commencement of building work to the Cost: ZAR 22,695 municipal authority compliance with construction regulations Agency: Building Control of City of Ekurhuleni Agency: Department of Labour Procedure 2*. Obtain topographical survey of Metropolitan Municipality Time: 1 day the land plot Time: 1 day Cost: No cost Agency: Private firm Cost: No cost Time: 14 days Procedure 11. Receive inspection of all Cost: ZAR 15,000 Procedure 7*. Apply for water and sewage foundation trenches from the municipal connection authority Procedure 3. Obtain Site Development Plan Agency: Water and Sanitation Department of City of Agency: Building Inspectorate of City of Ekurhuleni (SDP) approval Ekurhuleni Metropolitan Municipality Metropolitan Municipality Agency: Town Planning of City of Ekurhuleni Time: 1 day Time: 1 day Metropolitan Municipality Cost: ZAR 15,755 (ZAR 6,290 for water connection; Cost: No cost Time: 60 days ZAR 9,465 for sewerage connection) Cost: ZAR 400 Procedure 12. Receive inspection of first-floor Procedure 8. Receive inspection from the slab from the municipal Building Inspectorate Procedure 4. Obtain approval of the building municipal water and sanitation authority authority plans from the municipal authority Agency: Water and Sanitation Department of City of Agency: Building Inspectorate of City of Ekurhuleni Agency: Building Control of City of Ekurhuleni Ekurhuleni Metropolitan Municipality Metropolitan Municipality Metropolitan Municipality Time: 1 day Time: 1 day Time: 30 days Cost: No cost Cost: No cost Cost: ZAR 27,267 (ZAR 15.5 per square meter: submission fee + ZAR 6,100: application for permission to occupy a building before issuing the Certificate of Occupancy + 5%: application for Certificate of Occupancy) Source: Doing Business database. *Simultaneous with previous procedure 126 DOING BUSINESS IN SOUTH AFRICA 2018 Procedure 13. Receive inspection of Procedure 16*. Receive inspection from the wastewater drainage systems municipal fire authority Agency: Building Inspectorate of City of Ekurhuleni Agency: Fire Station Department of City of Metropolitan Municipality Ekurhuleni Metropolitan Municipality Time: 1 day Time: 1 day Cost: No cost Cost: No cost Procedure 14. Submit notification of Procedure 17. Obtain Occupancy Certificate completion of building work to the municipal from the municipal authority authority Agency: Building Control of City of Ekurhuleni Agency: Building Control of City of Ekurhuleni Metropolitan Municipality Metropolitan Municipality Time: 8 days Ekurhuleni Time: 1 day Cost: No cost Cost: No cost Procedure 15. Receive final inspection from the Note: For more details on each procedure, refer to municipal authority http://doingbusiness.org/southafrica. Agency: Building Control of City of Ekurhuleni *Simultaneous with previous procedure Metropolitan Municipality Time: 1 day Cost: No cost BUILDING QUALITY CONTROL INDEX Score Building quality control index (0–15) 12 Quality of building regulations index (0–2) 2 Quality control before construction index (0–1) 1 Quality control during construction index (0–3) 2 Quality control after construction index (0–3) 3 Liability and insurance regimes index (0–2) 0 Professional certifications index (0–4) 4 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF DEALING WITH CONSTRUCTION PERMITS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Consider differentiating projects by risk and introducing risk-based • Department of Labour • Land use management/town inspections planning department • Department of Rural Development and • Increase efficiency by improving coordination, consolidating Land Reform • Building control department procedures and implementing electronic platforms • Building inspections department • Introduce stringent liability and insurance regimes for latent defects • South African Bureau of Standards • Roads and stormwater department (SABS) • Involve private-sector professionals in the construction permitting • Utility providers process • National Regulator for Compulsory • Fire department Specifications (NRCS) • Health department • Solid waste department Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 127 GETTING ELECTRICITY LIST OF PROCEDURES Procedure 3. Sign supply contract and submit Procedure 6. Await final inspection and submit proof of payment of security deposit certificate of compliance (COC) for the internal Name of Utility: Energy Department of City of wiring to distribution utility to obtain final Agency: Energy Department of City of Ekurhuleni Ekurhuleni Metropolitan Municipality Metropolitan Municipality connection Data as of: May 1, 2018 Time: 2 days Agency: Private electrical engineer / consultant / Cost: ZAR 40,216 (Equal to the present value of lost contractor Procedure 1. Submit an application for interest earnings on the security deposit of Time: 3 days electricity connection to distribution utility and ZAR 102,620) Cost: No cost obtain connection fee estimate Ekurhuleni Agency: Energy Department of City of Ekurhuleni Procedure 4. Await utility’s inspection of meter Metropolitan Municipality box Note: For more details on each procedure, refer to Time: 25 days http://doingbusiness.org/southafrica. Agency: Energy Department of City of Ekurhuleni Cost: ZAR 218,629 (ZAR 120,629 for the connection Metropolitan Municipality *Simultaneous with previous procedure fee, including material and labor cost + ZAR 98,000 Time: 14 days for the transformer capacity) Cost: No cost Procedure 2*. Await external site inspection by distribution utility Procedure 5. Await completion of external connection works by distribution utility Agency: Energy Department of City of Ekurhuleni Metropolitan Municipality Agency: Energy Department of City of Ekurhuleni Metropolitan Municipality Time: 1 day Time: 60 days Cost: No cost Cost: No cost (Included in procedure 1) RELIABILITY OF SUPPLY AND TRANSPARENCY OF TARIFFS INDEX Score Reliability of supply and transparency of tariffs index (0–8) 0 Total duration and frequency of outages per customer a year (0–3) – Mechanisms for monitoring outages (0–1) 1 Mechanisms for restoring service (0–1) 1 Regulatory monitoring (0–1) 1 Financial deterrents aimed at limiting outages (0–1) 0 Communication of tariffs and tariff changes (0–1) 1 Note: Locations that do not use the SAIDI and SAIFI benchmarks to calculate outages are ineligible to score on the reliability of supply and transparency of tariffs index and thus receive 0 points on this indicator component. For more information please refer to the data notes. For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF GETTING ELECTRICITY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Start monitoring the reliability of supply using the SAIDI and SAIFI • National Energy Regulator of South • Municipal distribution utilities methodology Africa (NERSA) • Streamline the wayleave and excavation permit systems • Eskom • Identify bottlenecks in the internal process to reduce time • Department of Energy • Make the cost and process of getting electricity more transparent to the customer • Upgrade geographic information system to eliminate external site inspection • Reduce the burden of the security deposit Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 128 DOING BUSINESS IN SOUTH AFRICA 2018 REGISTERING PROPERTY LIST OF PROCEDURES Procedure 4*. Obtain a transfer duty receipt Procedure 7. The conveyancer lodges the deed Agency: South African Revenue Service Agency: Deeds Registry of Johannesburg Property value: ZAR 3,768,738 ($274,000) Time: 2 days Time: 11 days Data as of: May 1, 2018 Cost: ZAR 247,561 (ZAR 80,500 plus 11% on value Cost: ZAR 1,275 (For properties valued above above ZAR 2,250,000 for a property valued between ZAR 2,000,000 and up to ZAR 4,000,000: Procedure 1. Obtain a rates clearance ZAR 2,250,001 and ZAR 10,000,000) ZAR 1,275) certificate Agency: Ekurhuleni Municipality's Finance Procedure 5*. The conveyancer conducts a Department Ekurhuleni title search and checks encumbrances on the Note: For more details on each procedure, refer to Time: 21 days property http://doingbusiness.org/southafrica. Cost: ZAR 237 Agency: Deeds Registry of Johannesburg *Simultaneous with previous procedure Time: Less than one day (online procedure) Procedure 2*. The conveyancer prepares and Cost: No cost (Included in procedure 6) collects all the required documentation Agency: Companies and Intellectual Property Procedure 6. Parties sign all the documentation Commission at the conveyancer’s office Time: 10 days Agency: Conveyancer's Office Cost: No cost (Included in procedure 6) Time: 1 day Cost: ZAR 36,581 (For properties valued above Procedure 3*. Obtain an electrical compliance ZAR 1,000,000 and up to and including certificate ZAR 5,000,000: ZAR 17,200 for the first Agency: Certified electrician ZAR 1,000,000 plus ZAR 700 per ZAR 100,000 or Time: 7 days part thereof above that) Cost: ZAR 1,250 QUALITY OF LAND ADMINISTRATION INDEX Score Quality of land administration index (0–30) 15 Reliability of infrastructure index (0–8) 5 Transparency of information index (0–6) 3.5 Geographic coverage index (0–8) 2 Land dispute resolution index (0–8) 4.5 Equal access to property rights index (-2–0) 0 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF REGISTERING PROPERTY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Streamline issuance of rates clearance certificates • Office of the Chief Registrar of Deeds • Municipalities • Improve coordination among stakeholders and consider • Office of the Chief Surveyor-General • Local deeds offices implementing a one-stop shop for property registration • Local surveyor-general's offices • Department of Rural Development and • Reinforce transparency in the land administration system Land Reform • Strengthen protections and resolution mechanisms for land- related issues and disputes • Department of Justice* • Expand geographic coverage * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 129 ENFORCING CONTRACTS INDICATOR DETAILS Time (days) Cost (% of claim value) Trial and Enforcement of Filing and service judgment judgement Total time Attorney fees Court fees Enforcement fees Total cost 30 400 83 513 25.0% 7.6% 3.0% 35.6% Ekurhuleni QUALITY OF JUDICIAL PROCESSES INDEX Score Quality of judicial processes index (0–18) 7 Court structure and proceedings (-1–5) 2 Case management (0–6) 2 Court automation (0–4) 0.5 Alternative dispute resolution (0–3) 2.5 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF ENFORCING CONTRACTS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Study magistrates’ court caseloads to identify and eliminate • Office of the Chief Justice • Magistrates’ courts causes of trial delay and consider limiting the frequency and causes of adjournments • Department of Justice* • Assess judicial capacity and resources needed to enhance case management and make it effective, especially in lower courts • Consider introducing specialized commercial courts or commercial sections in locations where needed * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 130 DOING BUSINESS IN SOUTH AFRICA 2018 eTHEKWINI (Durban) 2015 2018 2015 2018 û Dealing with construction permits (rank) 2 2 û Registering property (rank) 6 8 Distance to frontier score (0–100) 73.67 73.65 Distance to frontier score (0–100) 58.62 54.58 Procedures (number) 17 17 Procedures (number) 8 8 Time (days) 117 117 Time (days) 29 48 Cost (% of warehouse value) 2.2 2.2 Cost (% of property value) 6.3 7.6 Building quality control index (0–15) 12 12 Quality of land administration index (0–30) 14.5 15 ü Getting electricity (rank) 4 2 Enforcing contracts (rank) 4 4 Distance to frontier score (0–100) 57.52 69.40 Distance to frontier score (0–100) 55.74 55.74 Procedures (number) 5 5 Time (days) 521 521 eThekwini Time (days) 93 100 Cost (% of claim value) 34.6 34.6 Cost (% of income per capita) 323.6 277.2 Quality of judicial processes index (0–18) 7 7 Reliability of supply and transparency of tariffs index (0–8) 0 4 ü Reform making it easier to do business û Change making it more difficult to do business DEALING WITH CONSTRUCTION PERMITS LIST OF PROCEDURES Procedure 5. Submit notification of Procedure 9. Receive final water connection commencement of building work to the from the municipal water and sanitation Warehouse value: ZAR 3,768,738 ($274,000) provincial authority authority Data as of: May 1, 2018 Agency: Department of Labour Agency: Water and Sanitation Department of Time: 1 day eThekwini Metropolitan Municipality Procedure 1. Obtain geotechnical survey of the Time: 14 days Cost: No cost land plot Cost: No cost Agency: Private firm Procedure 6*. Submit notification of Time: 14 days Procedure 10*. Receive inspection of commencement of building work to the Cost: ZAR 22,695 municipal authority compliance with construction regulations Agency: Building Inspectorate Branch of eThekwini Agency: Department of Labour Procedure 2*. Obtain topographical survey of Metropolitan Municipality Time: 1 day the land plot Time: 1 day Cost: No cost Agency: Private firm Cost: No cost Time: 14 days Procedure 11. Receive inspection of all Cost: ZAR 15,000 Procedure 7*. Apply for water and sewage foundation trenches from the municipal connection authority Procedure 3. Submits Pre-Assessment Plan (PA Agency: Water and Sanitation Department of Agency: Building Inspectorate Branch of eThekwini Plan) to the municipal Land Use Management eThekwini Metropolitan Municipality Metropolitan Municipality authority Time: 1 day Time: 1 day Agency: Land Use Management Branch of eThekwini Cost: ZAR 21,040 (ZAR 11,565 for water connection Cost: No cost Metropolitan Municipality + ZAR 9,475 for sewerage connection) Time: 30 days Procedure 12. Receive inspection of Cost: No cost Procedure 8. Receive inspection from the wastewater drainage systems municipal water and sanitation authority Agency: Building Inspectorate Branch of eThekwini Procedure 4. Obtain approval of the building Agency: Water and Sanitation Department of Metropolitan Municipality plans from the municipal authority eThekwini Metropolitan Municipality Time: 1 day Agency: Development Applications and Approvals Time: 1 day Cost: No cost Branch of eThekwini Metropolitan Municipality Cost: No cost Time: 36 days Cost: ZAR 25,606 (Calculated based on a three-tier system. 0-100 square meters: ZAR 10 per square meter; 101-1,000: ZAR 22.5 per square meter; 1,000 or more square meters: ZAR 10.5 per square meter) Source: Doing Business database. *Simultaneous with previous procedure LOCATION PROFILES 131 Procedure 13. Receive inspection of Procedure 15. Receive final inspection from the Procedure 17. Obtain Occupancy Certificate roof trusses from the municipal Building municipal authority from the municipal authority Inspectorate authority Agency: Building Inspectorate Branch of eThekwini Agency: Building Inspectorate Branch of eThekwini Agency: Building Inspectorate Branch of eThekwini Metropolitan Municipality Metropolitan Municipality Metropolitan Municipality Time: 1 day Time: 12 days Time: 1 day Cost: No cost Cost: No cost Cost: No cost Procedure 16*. Receive inspection from the Procedure 14. Submit notification of municipal fire authority Note: For more details on each procedure, refer to completion of building work to the municipal Agency: Fire Department of eThekwini Metropolitan http://doingbusiness.org/southafrica. authority Municipality *Simultaneous with previous procedure Agency: Building Inspectorate Branch of eThekwini Time: 1 day Metropolitan Municipality Cost: No cost Time: 1 day Cost: No cost eThekwini BUILDING QUALITY CONTROL INDEX Score Building quality control index (0–15) 12 Quality of building regulations index (0–2) 2 Quality control before construction index (0–1) 1 Quality control during construction index (0–3) 2 Quality control after construction index (0–3) 3 Liability and insurance regimes index (0–2) 0 Professional certifications index (0–4) 4 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF DEALING WITH CONSTRUCTION PERMITS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Consider differentiating projects by risk and introducing risk-based • Department of Labour • Land use management/town inspections planning department • Department of Rural Development and • Increase efficiency by improving coordination, consolidating Land Reform • Building control department procedures and implementing electronic platforms • Building inspections department • Introduce stringent liability and insurance regimes for latent defects • South African Bureau of Standards • Roads and stormwater department (SABS) • Involve private-sector professionals in the construction permitting • Utility providers process • National Regulator for Compulsory • Fire department Specifications (NRCS) • Health department • Solid waste department Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 132 DOING BUSINESS IN SOUTH AFRICA 2018 GETTING ELECTRICITY LIST OF PROCEDURES Procedure 3*. Open customer account, sign Procedure 5. Obtain certificate of compliance supply contract and submit proof of payment (COC) for the internal wiring and submit to Name of Utility: eThekwini Electricity of security deposit to distribution utility distribution utility to obtain final connection Data as of: May 1, 2018 Agency: eThekwini Electricity Agency: Private electrical engineer / consultant / Time: 1 day contractor Procedure 1. Submit an application for Time: 4 days Cost: ZAR 44,677 (Equal to the present value of lost electricity connection to distribution utility and interest earnings on the security deposit of Cost: No cost obtain connection fee estimate ZAR 114,000) Agency: eThekwini Electricity Time: 29 days Procedure 4. Await completion of external *Note: For more details on each procedure, refer to Cost: ZAR 164,275 (ZAR 123,982 for the basic connection works by distribution utility http://doingbusiness.org/southafrica. component, including recovery of proportional costs Agency: eThekwini Electricity *Simultaneous with previous procedure of transformer + ZAR 4,807 for metering + ZAR 1,237 for sundry + ZAR 34,249 for the service Time: 60 days eThekwini mains component, including cable installation) Cost: No cost (Included in procedure 1) Procedure 2. Await utility’s inspection of meter box Agency: eThekwini Electricity Time: 7 days Cost: No cost RELIABILITY OF SUPPLY AND TRANSPARENCY OF TARIFFS INDEX Score Reliability of supply and transparency of tariffs index (0–8) 4 Total duration and frequency of outages per customer a year (0–3) 0 Mechanisms for monitoring outages (0–1) 1 Mechanisms for restoring service (0–1) 1 Regulatory monitoring (0–1) 1 Financial deterrents aimed at limiting outages (0–1) 0 Communication of tariffs and tariff changes (0–1) 1 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF GETTING ELECTRICITY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Continue the installation of an advanced distribution management • National Energy Regulator of South • Municipal distribution utilities system Africa (NERSA) • Streamline the wayleave and excavation permit systems • Eskom • Identify bottlenecks in the internal process to reduce time • Department of Energy • Make the cost and process of getting electricity more transparent to the customer • Upgrade geographic information system to eliminate external site inspection • Reduce the burden of the security deposit Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 133 REGISTERING PROPERTY LIST OF PROCEDURES Procedure 4*. Obtain an entomologist's Procedure 7. Parties sign all the documentation certificate at the conveyancer’s office Property value: ZAR 3,768,738 ($274,000) Agency: Certified entomologist Agency: Conveyancer's Office Data as of: May 1, 2018 Time: 7 days Time: 1 day Cost: ZAR 600 Cost: ZAR 36,581 (For properties valued above Procedure 1. Obtain a rates clearance ZAR 1,000,000 and up to and including certificate ZAR 5,000,000: ZAR 17,200 for the first Procedure 5*. Obtain a transfer duty receipt Agency: eThekwini Municipality's Revenue ZAR 1,000,000 plus ZAR 700 per ZAR 100,000 or Department Agency: South African Revenue Service part thereof above that) Time: 33 days Time: 2 days Cost: ZAR 189 Cost: ZAR 247,561 (ZAR 80,500 plus 11% on value Procedure 8. The conveyancer lodges the deed above ZAR 2,250,000 for a property valued between ZAR 2,250,001 and ZAR 10,000,000) Agency: Deeds Registry of Pietermaritzburg Procedure 2*. The conveyancer prepares and Time: 14 days eThekwini collects all the required documentation Cost: ZAR 1,275 (For properties valued above Procedure 6*. The conveyancer conducts a Agency: Companies and Intellectual Property ZAR 2,000,000 and up to ZAR 4,000,000: title search and checks encumbrances on the Commission ZAR 1,275) property Time: 10 days Agency: Deeds Registry of Pietermaritzburg Cost: No cost (Included in procedure 7) Time: Less than one day (online procedure) Note: For more details on each procedure, refer to Cost: No cost (Included in procedure 7) http://doingbusiness.org/southafrica. Procedure 3*. Obtain an electrical compliance certificate *Simultaneous with previous procedure Agency: Certified electrician Time: 7 days Cost: ZAR 1,250 QUALITY OF LAND ADMINISTRATION INDEX Score Quality of land administration index (0–30) 15 Reliability of infrastructure index (0–8) 5 Transparency of information index (0–6) 3.5 Geographic coverage index (0–8) 2 Land dispute resolution index (0–8) 4.5 Equal access to property rights index (-2–0) 0 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF REGISTERING PROPERTY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Streamline issuance of rates clearance certificates • Office of the Chief Registrar of Deeds • Municipalities • Improve coordination among stakeholders and consider • Office of the Chief Surveyor-General • Local deeds offices implementing a one-stop shop for property registration • Local surveyor-general's offices • Department of Rural Development and • Reinforce transparency in the land administration system Land Reform • Strengthen protections and resolution mechanisms for land- related issues and disputes • Department of Justice* • Expand geographic coverage * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 134 DOING BUSINESS IN SOUTH AFRICA 2018 ENFORCING CONTRACTS INDICATOR DETAILS Time (days) Cost (% of claim value) Trial and Enforcement of Filing and service judgment judgement Total time Attorney fees Court fees Enforcement fees Total cost 33 408 80 521 24.0% 7.6% 3.0% 34.6% QUALITY OF JUDICIAL PROCESSES INDEX Score eThekwini Quality of judicial processes index (0–18) 7 Court structure and proceedings (-1–5) 2 Case management (0–6) 2 Court automation (0–4) 0.5 Alternative dispute resolution (0–3) 2.5 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF ENFORCING CONTRACTS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Study magistrates’ court caseloads to identify and eliminate • Office of the Chief Justice • Magistrates’ courts causes of trial delay and consider limiting the frequency and causes of adjournments • Department of Justice* • Assess judicial capacity and resources needed to enhance case management and make it effective, especially in lower courts • Consider introducing specialized commercial courts or commercial sections in locations where needed * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 135 JOHANNESBURG (Johannesburg) 2015 2018 2015 2018 Dealing with construction permits (rank) 8 8 û Registering property (rank) 1 2 Distance to frontier score (0–100) 67.98 68.16 Distance to frontier score (0–100) 61.45 59.68 Procedures (number) 20 20 Procedures (number) 7 7 Time (days) 155 155 Time (days) 23 23 Cost (% of warehouse value) 2.2 2.0 Cost (% of property value) 6.3 7.6 Building quality control index (0–15) 12 12 Quality of land administration index (0–30) 14.5 15 ü Getting electricity (rank) 8 3 Enforcing contracts (rank) 8 8 Distance to frontier score (0–100) 41.81 68.77 Distance to frontier score (0–100) 54.10 54.10 Procedures (number) 5 5 Time (days) 600 600 Time (days) 226 109 Cost (% of claim value) 33.2 33.2 Cost (% of income per capita) 729.5 165.4 Quality of judicial processes index (0–18) 7 7 Reliability of supply and transparency of tariffs index (0–8) 0 4 Johannesburg ü Reform making it easier to do business û Change making it more difficult to do business DEALING WITH CONSTRUCTION PERMITS LIST OF PROCEDURES Procedure 6*. Obtain stamp on the plans from Procedure 11*. Apply for water and sewage the Water and Sanitation Department connection Warehouse value: ZAR 3,768,738 ($274,000) Agency: Johannesburg Water Agency: Johannesburg Water Data as of: May 1, 2018 Time: 4 days Time: 1 day Cost: No cost Cost: ZAR 15,019 Procedure 1. Obtain geotechnical survey of the land plot Procedure 7. Obtain Site Development Plan Procedure 12. Receive inspection from the Agency: Private firm (SDP) approval municipal water and sanitation authority Time: 14 days Agency: Land Use Development Management of City Agency: Johannesburg Water Cost: ZAR 22,695 of Johannesburg Metropolitan Municipality Time: 1 day Time: 53 days Cost: No cost Procedure 2*. Obtain topographical survey of Cost: ZAR 840 the land plot Procedure 13. Receive final water connection Agency: Private firm Procedure 8. Obtain approval of the building from the municipal water and sanitation Time: 14 days plans from the municipal authority authority Cost: ZAR 15,000 Agency: Building Development Management of City Agency: Johannesburg Water of Johannesburg Metropolitan Municipality Time: 10 days Procedure 3*. Obtain stamp on the plans from Time: 60 days Cost: No cost the Roads and Stormwater Department Cost: ZAR 23,110 (For the first 1,000 m² = ZAR 18/ Agency: Johannesburg Roads Agency m² and for the second 1,000 m² = ZAR 17/m²) Procedure 14. Receive inspection of Time: 7 days compliance with construction regulations Cost: No cost Procedure 9. Submit notification of Agency: Department of Labour commencement of building work to the Time: 1 day Procedure 4*. Obtain stamp on the plans from provincial authority Cost: No cost the Energy Department Agency: Department of Labour Agency: City Power Time: 1 day Procedure 15. Receive inspection of all Time: 7 days Cost: No cost foundation trenches from the municipal Cost: No cost authority Procedure 10*. Submit notification of Agency: Building Development Management of City Procedure 5*. Obtain stamp on the plans from commencement of building work to the of Johannesburg Metropolitan Municipality the Fire Department municipal authority Time: 1 day Agency: Fire Department of City of Johannesburg Agency: Building Development Management of City Cost: No cost Time: 4 days of Johannesburg Metropolitan Municipality Cost: No cost Time: 1 day Cost: No cost Source: Doing Business database. *Simultaneous with previous procedure 136 DOING BUSINESS IN SOUTH AFRICA 2018 Procedure 16. Receive inspection of Procedure 19*. Receive inspection from the wastewater drainage systems municipal fire authority Agency: Building Development Management of City Agency: Fire Department of City of Johannesburg of Johannesburg Metropolitan Municipality Time: 1 day Time: 1 day Cost: No cost Cost: No cost Procedure 20. Obtain occupancy certificate Procedure 17. Submit notification of from the municipal authority completion of building work to the municipal Agency: Building Development Management of City authority of Johannesburg Metropolitan Municipality Agency: Building Development Management of City Time: 7 days of Johannesburg Metropolitan Municipality Cost: No cost Time: 1 day Cost: No cost Note: For more details on each procedure, refer to Procedure 18. Receive final inspection from the http://doingbusiness.org/southafrica. municipal authority *Simultaneous with previous procedure Agency: Building Development Management of City of Johannesburg Metropolitan Municipality Time: 1 day Johannesburg Cost: No cost BUILDING QUALITY CONTROL INDEX Score Building quality control index (0–15) 12 Quality of building regulations index (0–2) 2 Quality control before construction index (0–1) 1 Quality control during construction index (0–3) 2 Quality control after construction index (0–3) 3 Liability and insurance regimes index (0–2) 0 Professional certifications index (0–4) 4 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF DEALING WITH CONSTRUCTION PERMITS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Consider differentiating projects by risk and introducing risk-based • Department of Labour • Land use management/town inspections planning department • Department of Rural Development and • Increase efficiency by improving coordination, consolidating Land Reform • Building control department procedures and implementing electronic platforms • Building inspections department • Introduce stringent liability and insurance regimes for latent defects • South African Bureau of Standards • Roads and stormwater department (SABS) • Involve private-sector professionals in the construction permitting • Utility providers process • National Regulator for Compulsory • Fire department Specifications (NRCS) • Health department • Solid waste department Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 137 GETTING ELECTRICITY LIST OF PROCEDURES Procedure 3*. Await utility's inspection of Procedure 5. Await completion of external circuit breaker connection works by distribution utility and Name of Utility: City Power obtain final connection Agency: City Power Data as of: May 1, 2018 Agency: City Power Time: 3 days Cost: No cost Time: 42 days Procedure 1. Submit an application for Cost: No cost (Included in procedure 1) electricity connection to distribution utility and obtain budget quotation and service Procedure 4*. Obtain certificate of compliance connection fee (COC) for the internal wiring and submit to distribution utility Note: For more details on each procedure, refer to Agency: City Power http://doingbusiness.org/southafrica. Agency: Private electrical engineer / consultant / Time: 60 days *Simultaneous with previous procedure contractor Cost: ZAR 124,635 (ZAR 118,600 for the standard Time: 1 day service connection fee - ZAR 30,000 for the design fee + ZAR 6,035 for the present value of lost interest Cost: No cost earnings on the security deposit of ZAR 15,400) Procedure 2. Await and attend on-site kick off meeting with all stakeholders Johannesburg Agency: City Power Time: 7 days Cost: No cost RELIABILITY OF SUPPLY AND TRANSPARENCY OF TARIFFS INDEX Score Reliability of supply and transparency of tariffs index (0–8) 4 Total duration and frequency of outages per customer a year (0–3) 0 Mechanisms for monitoring outages (0–1) 1 Mechanisms for restoring service (0–1) 1 Regulatory monitoring (0–1) 1 Financial deterrents aimed at limiting outages (0–1) 0 Communication of tariffs and tariff changes (0–1) 1 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF GETTING ELECTRICITY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Consider implementing an automated outage monitoring and • National Energy Regulator of South • Municipal distribution utilities restoration system Africa (NERSA) • Streamline the wayleave and excavation permit systems • Eskom • Identify bottlenecks in the internal process to reduce time • Department of Energy • Upgrade geographic information system to eliminate external site inspection • Reduce the burden of the security deposit Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 138 DOING BUSINESS IN SOUTH AFRICA 2018 REGISTERING PROPERTY LIST OF PROCEDURES Procedure 4*. Obtain a transfer duty receipt Procedure 7. The conveyancer lodges the deed Agency: South African Revenue Service Agency: Deeds Registry of Johannesburg Property value: ZAR 3,768,738 ($274,000) Time: 2 days Time: 11 days Data as of: May 1, 2018 Cost: ZAR 247,561 (ZAR 80,500 plus 11% on value Cost: ZAR 1,275 (For properties valued above above ZAR 2,250,000 for a property valued between ZAR 2,000,000 and up to ZAR 4,000,000: Procedure 1. Obtain a rates clearance ZAR 2,250,001 and ZAR 10,000,000) ZAR 1,275) certificate Agency: City of Johannesburg's Revenue Department Procedure 5*. The conveyancer conducts a Time: 11 days title search and checks encumbrances on the Note: For more details on each procedure, refer to Cost: ZAR 248 property http://doingbusiness.org/southafrica. Agency: Deeds Registry of Johannesburg *Simultaneous with previous procedure Procedure 2*. The conveyancer prepares and Time: Less than one day (online procedure) collects all the required documentation Cost: No cost (Included in procedure 6) Agency: Companies and Intellectual Property Commission Procedure 6. Parties sign all the documentation Time: 10 days at the conveyancer’s office Cost: No cost (Included in procedure 6) Agency: Conveyancer's Office Johannesburg Time: 1 day Procedure 3*. Obtain an electrical compliance Cost: ZAR 36,581 (For properties valued above certificate ZAR 1,000,000 and up to and including Agency: Certified electrician ZAR 5,000,000: ZAR 17,200 for the first Time: 7 days ZAR 1,000,000 plus ZAR 700 per ZAR 100,000 or Cost: ZAR 1,250 part thereof above that) QUALITY OF LAND ADMINISTRATION INDEX Score Quality of land administration index (0–30) 15 Reliability of infrastructure index (0–8) 5 Transparency of information index (0–6) 3.5 Geographic coverage index (0–8) 2 Land dispute resolution index (0–8) 4.5 Equal access to property rights index (-2–0) 0 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF REGISTERING PROPERTY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Further streamline issuance of rates clearance certificates • Office of the Chief Registrar of Deeds • Municipalities • Improve coordination among stakeholders and consider • Office of the Chief Surveyor-General • Local deeds offices implementing a one-stop shop for property registration • Local surveyor-general's offices • Department of Rural Development and • Reinforce transparency in the land administration system Land Reform • Strengthen protections and resolution mechanisms for land- related issues and disputes • Department of Justice* • Expand geographic coverage * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 139 ENFORCING CONTRACTS INDICATOR DETAILS Time (days) Cost (% of claim value) Trial and Enforcement of Filing and service judgment judgement Total time Attorney fees Court fees Enforcement fees Total cost 30 490 80 600 22.6% 7.6% 3.0% 33.2% QUALITY OF JUDICIAL PROCESSES INDEX Score Quality of judicial processes index (0–18) 7 Court structure and proceedings (-1–5) 2 Case management (0–6) 2 Johannesburg Court automation (0–4) 0.5 Alternative dispute resolution (0–3) 2.5 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF ENFORCING CONTRACTS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Study magistrates’ court caseloads to identify and eliminate • Office of the Chief Justice • Magistrates’ courts causes of trial delay and consider limiting the frequency and causes of adjournments • Department of Justice* • Assess judicial capacity and resources needed to enhance case management and make it effective, especially in lower courts • Consider introducing specialized commercial courts or commercial sections in locations where needed * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 140 DOING BUSINESS IN SOUTH AFRICA 2018 MANGAUNG (Bloemfontein) 2015 2018 2015 2018 Dealing with construction permits (rank) 7 7 ü Registering property (rank) 9 1 Distance to frontier score (0–100) 71.06 71.25 Distance to frontier score (0–100) 55.89 59.73 Procedures (number) 20 20 Procedures (number) 8 7 Time (days) 114 110 Time (days) 52 22.5 Cost (% of warehouse value) 2.1 2.2 Cost (% of property value) 6.3 7.6 Building quality control index (0–15) 12 12 Quality of land administration index (0–30) 14.5 15 û Getting electricity (rank) 1 4 Enforcing contracts (rank) 1 1 Distance to frontier score (0–100) 62.59 59.82 Distance to frontier score (0–100) 59.01 59.01 Procedures (number) 4 4 Time (days) 473 473 Time (days) 80 106 Cost (% of claim value) 29.4 29.4 Cost (% of income per capita) 485.9 468.2 Quality of judicial processes index (0–18) 7 7 Reliability of supply and transparency of tariffs index (0–8) 0 0 ü Reform making it easier to do business û Change making it more difficult to do business DEALING WITH CONSTRUCTION PERMITS Mangaung LIST OF PROCEDURES Procedure 5*. Obtain stamp on the plans from Procedure 10*. Apply for water and sewage the Health Department connection Warehouse value: ZAR 3,768,738 ($274,000) Agency: Health Department of Mangaung Agency: Water and Sanitation Office Mangaung Data as of: May 1, 2018 Metropolitan Municipality Metropolitan Municipality Time: 2 days Time: 1 day Procedure 1. Obtain geotechnical survey of the Cost: No cost Cost: ZAR 21,235 (ZAR 11,035 for water connection land plot + ZAR 10,200 for sewerage connection) Agency: Private firm Procedure 6*. Obtain stamp on the plans from Time: 14 days the Energy Department Procedure 11. Receive inspection from the Cost: ZAR 22,695 Agency: Centlec municipal water and sanitation authority Time: 2 days Agency: Water and Sanitation Office Mangaung Procedure 2*. Obtain topographical survey of Cost: No cost Metropolitan Municipality the land plot Time: 1 day Agency: Private firm Cost: No cost Procedure 7. Obtain approval of the building Time: 14 days plans from the municipal authority Cost: ZAR 15,000 Agency: Building and Zoning Control of Mangaung Procedure 12. Receive final water connection Metropolitan Municipality from the municipal water and sanitation Procedure 3*. Obtain stamp on the plans from Time: 60 days authority the Fire Department Cost: ZAR 16,908 (ZAR 13 per square meter) Agency: Water and Sanitation Office Mangaung Agency: Fire Department of Mangaung Metropolitan Metropolitan Municipality Municipality Time: 5 days Procedure 8. Submit notification of Time: 5 days commencement of building work to the Cost: No cost Cost: No cost provincial authority Agency: Department of Labour Procedure 13*. Receive inspection of Procedure 4*. Obtain stamp on the plans from Time: 1 day compliance with construction regulations the Solid Waste Department Cost: No cost Agency: Department of Labour Agency: Solid Waste Management of Mangaung Time: 1 day Metropolitan Municipality Cost: No cost Procedure 9*. Submit notification of Time: 2 days commencement of building work to the Cost: No cost municipal authority Agency: Building and Zoning Control of Mangaung Metropolitan Municipality Time: 1 day Cost: No cost Source: Doing Business database. *Simultaneous with previous procedure LOCATION PROFILES 141 Procedure 14. Receive inspection of all Procedure 17. Submit notification of Procedure 20. Obtain Occupancy Certificate foundation trenches from the municipal completion of building work to the municipal from the municipal authority authority authority Agency: Building and Zoning Control of Mangaung Agency: Building Inspectorate of Mangaung Agency: Building and Zoning Control of Mangaung Metropolitan Municipality Metropolitan Municipality Metropolitan Municipality Time: 20 days Time: 1 day Time: 1 day Cost: ZAR 5,500 Cost: No cost Cost: No cost Procedure 15. Receive inspection of Procedure 18. Receive final inspection from the Note: For more details on each procedure, refer to underground wastewater drainage systems municipal authority http://doingbusiness.org/southafrica. from the municipal authority Agency: Building and Zoning Control of Mangaung *Simultaneous with previous procedure Agency: Building Inspectorate of Mangaung Metropolitan Municipality Metropolitan Municipality Time: 1 day Time: 1 day Cost: No cost Cost: No cost Procedure 19*. Receive inspection from the Procedure 16. Receive inspection of municipal fire authority aboveground wastewater drainage systems Agency: Fire Department of Mangaung Metropolitan from the municipal authority Municipality Agency: Building Inspectorate of Mangaung Time: 1 day Metropolitan Municipality Cost: No cost Time: 1 day Cost: No cost Mangaung BUILDING QUALITY CONTROL INDEX Score Building quality control index (0–15) 12 Quality of building regulations index (0–2) 2 Quality control before construction index (0–1) 1 Quality control during construction index (0–3) 2 Quality control after construction index (0–3) 3 Liability and insurance regimes index (0–2) 0 Professional certifications index (0–4) 4 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF DEALING WITH CONSTRUCTION PERMITS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Consider differentiating projects by risk and introducing risk-based • Department of Labour • Land use management/town inspections planning department • Department of Rural Development and • Increase efficiency by improving coordination, consolidating Land Reform • Building control department procedures and implementing electronic platforms • Building inspections department • Introduce stringent liability and insurance regimes for latent defects • South African Bureau of Standards • Roads and stormwater department (SABS) • Involve private-sector professionals in the construction permitting • Utility providers process • National Regulator for Compulsory • Fire department Specifications (NRCS) • Health department • Solid waste department Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 142 DOING BUSINESS IN SOUTH AFRICA 2018 GETTING ELECTRICITY LIST OF PROCEDURES Procedure 2*. Open customer account, sign Procedure 4. Obtain certificate of compliance supply contract and submit proof of payment (COC) for the internal wiring and submit to Name of Utility: CENTLEC of security deposit to distribution utility distribution utility to obtain final connection Data as of: May 1, 2018 Agency: CENTLEC Agency: Private electrical engineer / consultant / Time: 1 day contractor Procedure 1. Submit an application for Time: 11 days Cost: ZAR 9,581 (Equal to the present value of electricity connection to distribution utility and lost interest earnings on the security deposit of Cost: No cost obtain connection fee estimate ZAR 126,900, considering that a bank guarantee is Agency: CENTLEC accepted) Time: 50 days Note: For more details on each procedure, refer to Cost: ZAR 343,312 (ZAR 275,125 for the network Procedure 3. Await completion of external http://doingbusiness.org/southafrica. contribution [including ZAR 123,959 for the primary connection works by distribution utility *Simultaneous with previous procedure contribution MV + ZAR 106,757 for the secondary Agency: CENTLEC contribution LV + ZAR 44,409 for the low-tension cost] + ZAR 68,187 for connection material cost and Time: 45 days labor) Cost: No cost (Included in procedure 1) RELIABILITY OF SUPPLY AND TRANSPARENCY OF TARIFFS INDEX Score Reliability of supply and transparency of tariffs index (0–8) 0 Mangaung Total duration and frequency of outages per customer a year (0–3) – Mechanisms for monitoring outages (0–1) 1 Mechanisms for restoring service (0–1) 1 Regulatory monitoring (0–1) 1 Financial deterrents aimed at limiting outages (0–1) 0 Communication of tariffs and tariff changes (0–1) 1 Note: Locations that do not use the SAIDI and SAIFI benchmarks to calculate outages are ineligible to score on the reliability of supply and transparency of tariffs index and thus receive 0 points on this indicator component. For more information please refer to the data notes. For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF GETTING ELECTRICITY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Start monitoring the reliability of supply using the SAIDI and SAIFI • National Energy Regulator of South • Municipal distribution utilities methodology Africa (NERSA) • Streamline the wayleave and excavation permit systems • Eskom • Identify bottlenecks in the internal process to reduce time • Department of Energy • Make the cost and process of getting electricity more transparent to the customer • Upgrade geographic information system to eliminate external site inspection • Reduce the burden of the security deposit Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 143 REGISTERING PROPERTY LIST OF PROCEDURES Procedure 4*. Obtain an electrical compliance Procedure 7. The conveyancer lodges the deed certificate Agency: Deeds Registry of Bloemfontein Property value: ZAR 3,768,738 ($274,000) Agency: Certified electrician Time: 9 days Data as of: May 1, 2018 Time: 7 days Cost: ZAR 1,275 (For properties valued above ZAR Cost: ZAR 1,250 2,000,000 and up to ZAR 4,000,000: ZAR 1,275) Procedure 1. The conveyancer conducts a title search and checks encumbrances on the property Procedure 5*. Obtain a transfer duty receipt Agency: South African Revenue Service Note: For more details on each procedure, refer to Agency: Deeds Registry of Bloemfontein http://doingbusiness.org/southafrica. Time: Less than one day (online procedure) Time: 2 days *Simultaneous with previous procedure Cost: No cost (Included in procedure 6) Cost: ZAR 247,561 (ZAR 80,500 plus 11% on value above ZAR 2,250,000 for a property valued between ZAR 2,250,001 and ZAR 10,000,000) Procedure 2. Obtain a rates clearance certificate Procedure 6. Parties sign all the documentation Agency: Mangaung Municipality's Rates Clearance at the conveyancer’s office Department Agency: Conveyancer's Office Time: 12 days Time: 1 day Cost: ZAR 363 Cost: ZAR 36,581 (For properties valued above ZAR 1,000,000 and up to and including ZAR 5,000,000: Procedure 3*. The conveyancer prepares and ZAR 17,200 for the first ZAR 1,000,000 plus ZAR 700 collects all the required documentation per ZAR 100,000 or part thereof above that) Agency: Companies and Intellectual Property Commission Mangaung Time: 10 days Cost: No cost (Included in procedure 6) QUALITY OF LAND ADMINISTRATION INDEX Score Quality of land administration index (0–30) 15 Reliability of infrastructure index (0–8) 5 Transparency of information index (0–6) 3.5 Geographic coverage index (0–8) 2 Land dispute resolution index (0–8) 4.5 Equal access to property rights index (-2–0) 0 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF REGISTERING PROPERTY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Further streamline issuance of rates clearance certificates • Office of the Chief Registrar of Deeds • Municipalities • Improve coordination among stakeholders and consider • Office of the Chief Surveyor-General • Local deeds offices implementing a one-stop shop for property registration • Local surveyor-general's offices • Department of Rural Development and • Reinforce transparency in the land administration system Land Reform • Strengthen protections and resolution mechanisms for land- related issues and disputes • Department of Justice* • Expand geographic coverage * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 144 DOING BUSINESS IN SOUTH AFRICA 2018 ENFORCING CONTRACTS INDICATOR DETAILS Time (days) Cost (% of claim value) Trial and Enforcement of Filing and service judgment judgement Total time Attorney fees Court fees Enforcement fees Total cost 30 360 83 473 18.8% 7.6% 3.0% 29.4% QUALITY OF JUDICIAL PROCESSES INDEX Score Quality of judicial processes index (0–18) 7 Court structure and proceedings (-1–5) 2 Case management (0–6) 2 Court automation (0–4) 0.5 Alternative dispute resolution (0–3) 2.5 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. Mangaung POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF ENFORCING CONTRACTS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Study magistrates’ court caseloads to identify and eliminate • Office of the Chief Justice • Magistrates’ courts causes of trial delay and consider limiting the frequency and causes of adjournments • Department of Justice* • Assess judicial capacity and resources needed to enhance case management and make it effective, especially in lower courts • Consider introducing specialized commercial courts or commercial sections in locations where needed * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 145 MSUNDUZI (Pietermaritzburg) 2015 2018 2015 2018 Dealing with construction permits (rank) 3 3 û Registering property (rank) 7 9 Distance to frontier score (0–100) 73.07 73.17 Distance to frontier score (0–100) 56.70 52.78 Procedures (number) 17 17 Procedures (number) 8 8 Time (days) 129 129 Time (days) 45 63 Cost (% of warehouse value) 2.0 1.9 Cost (% of property value) 6.3 7.6 Building quality control index (0–15) 12 12 Quality of land administration index (0–30) 14.5 15 Getting electricity (rank) 7 8 Enforcing contracts (rank) 2 2 Distance to frontier score (0–100) 47.54 47.59 Distance to frontier score (0–100) 58.78 58.78 Procedures (number) 6 6 Time (days) 469 469 Time (days) 143 143 Cost (% of claim value) 30.3 30.3 Cost (% of income per capita) 446.0 428.5 Quality of judicial processes index (0–18) 7 7 Reliability of supply and transparency of tariffs index (0–8) 0 0 ü Reform making it easier to do business û Change making it more difficult to do business DEALING WITH CONSTRUCTION PERMITS LIST OF PROCEDURES Procedure 5. Submit notification of Procedure 9. Receive final water connection commencement of building work to the from the municipal water and sanitation Warehouse value: ZAR 3,768,738 ($274,000) provincial authority authority Data as of: May 1, 2018 Msunduzi Agency: Department of Labour Agency: Water and Sanitation Unit of Msunduzi Time: 1 day Local Municipality Procedure 1. Obtain geotechnical survey of the Time: 18 days Cost: No cost land plot Cost: No cost Agency: Private firm Procedure 6*. Submit notification of Time: 14 days Procedure 10*. Receive inspection of commencement of building work to the Cost: ZAR 22,695 municipal authority compliance with construction regulations Agency: Building Control of Msunduzi Local Agency: Department of Labour Procedure 2*. Obtain topographical survey of Municipality Time: 1 day the land plot Time: 1 day Cost: No cost Agency: Private firm Cost: No cost Time: 14 days Procedure 11. Receive inspection of all Cost: ZAR 15,000 Procedure 7*. Apply for water and sewage foundation trenches from the municipal connection authority Procedure 3. Receive Pre-Scrutiny Inspection of Agency: Water and Sanitation Unit of Msunduzi Agency: Building Control & Signage Unit of building plans from the municipal authority Local Municipality Msunduzi Local Municipality Agency: Land Survey and Town Planning Time: 1 day Time: 1 day Departments of Msunduzi Local Municipality Cost: ZAR 16,420 (ZAR 12,905 for water connection Cost: No cost Time: 16 days + ZAR 3,515 for sewerage connection) Cost: ZAR 3,700 (25% of the plan approval fee for Procedure 12. Receive inspection of first-floor scrutiny and comment) Procedure 8. Receive inspection from the slab from the municipal Building Inspectorate municipal water and sanitation authority authority Procedure 4. Obtain approval of the building Agency: Water and Sanitation Unit of Msunduzi Agency: Building Control & Signage Unit of plans from the municipal authority Local Municipality Msunduzi Local Municipality Agency: Building Control of Msunduzi Local Time: 1 day Time: 1 day Municipality Cost: No cost Cost: No cost Time: 60 days Cost: ZAR 14,795 (ZAR 448 for the first 20 square meters + ZAR 112 for each additional 10 square meters: Plans approval fee) Source: Doing Business database. *Simultaneous with previous procedure 146 DOING BUSINESS IN SOUTH AFRICA 2018 Procedure 13. Receive inspection of Procedure 16*. Receive inspection from the wastewater drainage systems municipal fire authority Agency: Building Control & Signage Unit of Agency: Fire Department of Msunduzi Local Msunduzi Local Municipality Municipality Time: 1 day Time: 1 day Cost: No cost Cost: No cost Procedure 14. Submit notification of Procedure 17. Obtain Occupancy Certificate completion of building work to the municipal from the municipal authority authority Agency: Building Control & Signage Unit of Agency: Building Control & Signage Unit of Msunduzi Local Municipality Msunduzi Local Municipality Time: 10 days Time: 1 day Cost: No cost Cost: No cost Procedure 15. Receive final inspection from the Note: For more details on each procedure, refer to municipal authority http://doingbusiness.org/southafrica. Agency: Building Control & Signage Unit of *Simultaneous with previous procedure Msunduzi Local Municipality Time: 1 day Cost: No cost BUILDING QUALITY CONTROL INDEX Score Building quality control index (0–15) 12 Quality of building regulations index (0–2) 2 Quality control before construction index (0–1) 1 Msunduzi Quality control during construction index (0–3) 2 Quality control after construction index (0–3) 3 Liability and insurance regimes index (0–2) 0 Professional certifications index (0–4) 4 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF DEALING WITH CONSTRUCTION PERMITS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Consider differentiating projects by risk and introducing risk-based • Department of Labour • Land use management/town inspections planning department • Department of Rural Development and • Increase efficiency by consolidating procedures and expanding the Land Reform • Building control department scope of online services in construction permitting • Building inspections department • Introduce stringent liability and insurance regimes for latent defects • South African Bureau of Standards • Roads and stormwater department (SABS) • Involve private-sector professionals in the construction permitting • Utility providers process • National Regulator for Compulsory • Fire department Specifications (NRCS) • Health department • Solid waste department Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 147 GETTING ELECTRICITY LIST OF PROCEDURES Procedure 2*. Await external site inspection by Procedure 5. Open customer account, sign distribution utility supply contract and submit proof of payment Name of Utility: Electricity Department of of security deposit to distribution utility Agency: Electricity Department of Msunduzi Msunduzi Metropolitan Municipality Metropolitan Municipality Agency: Electricity Department of Msunduzi Data as of: May 1, 2018 Time: 1 day Metropolitan Municipality Cost: No cost Time: 1 day Procedure 1. Submit an application for Cost: ZAR 20,567 (Equal to the present value of lost electricity connection to distribution utility and interest earnings on the security deposit of obtain connection fee estimate Procedure 3. Await utility’s inspection of meter box ZAR 52,480) Agency: Electricity Department of Msunduzi Metropolitan Municipality Agency: Electricity Department of Msunduzi Metropolitan Municipality Procedure 6. Await completion of external Time: 30 days connection works by distribution utility and Time: 7 days Cost: ZAR 302,421 (ZAR 34,188 for the basic charge obtain final connection + ZAR 268,233 for the Connection Fee (ZAR 217,838 Cost: No cost Agency: Electricity Department of Msunduzi for the pro-rata fee for mini-substation + ZAR 7,324 Metropolitan Municipality for metering instrumentation + ZAR 33,800 for labor Procedure 4*. Obtain certificate of compliance Time: 105 days + 7,224 for transport + 2,047 for reinstatement) (COC) for the internal wiring and submit to distribution utility Cost: No cost (Included in procedure 1) Agency: Private electrical engineer / consultant / contractor Note: For more details on each procedure, refer to Time: 1 day http://doingbusiness.org/southafrica. Cost: No cost *Simultaneous with previous procedure RELIABILITY OF SUPPLY AND TRANSPARENCY OF TARIFFS INDEX Score Reliability of supply and transparency of tariffs index (0–8) 0 Msunduzi Total duration and frequency of outages per customer a year (0–3) – Mechanisms for monitoring outages (0–1) 1 Mechanisms for restoring service (0–1) 1 Regulatory monitoring (0–1) 1 Financial deterrents aimed at limiting outages (0–1) 0 Communication of tariffs and tariff changes (0–1) 1 Note: Locations that do not use the SAIDI and SAIFI benchmarks to calculate outages are ineligible to score on the reliability of supply and transparency of tariffs index and thus receive 0 points on this indicator component. For more information please refer to the data notes. For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF GETTING ELECTRICITY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Start monitoring the reliability of supply using the SAIDI and SAIFI • National Energy Regulator of South • Municipal distribution utilities methodology Africa (NERSA) • Streamline the wayleave and excavation permit systems • Eskom • Identify bottlenecks in the internal process to reduce time • Department of Energy • Make the cost and process of getting electricity more transparent to the customer • Upgrade geographic information system to eliminate external site inspection • Reduce the burden of the security deposit Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 148 DOING BUSINESS IN SOUTH AFRICA 2018 REGISTERING PROPERTY LIST OF PROCEDURES Procedure 4*. Obtain an entomologist's Procedure 7. Parties sign all the documentation certificate at the conveyancer’s office Property value: ZAR 3,768,738 ($274,000) Agency: Certified entomologist Agency: Conveyancer's Office Data as of: May 1, 2018 Time: 7 days Time: 1 day Cost: ZAR 600 Cost: ZAR 36,581 (For properties valued above Procedure 1. Obtain a rates clearance ZAR 1,000,000 and up to and including certificate ZAR 5,000,000: ZAR 17,200 for the first Procedure 5*. Obtain a transfer duty receipt Agency: Msunduzi Municipality's Rates Department ZAR 1,000,000 plus ZAR 700 per ZAR 100,000 or Agency: South African Revenue Service Time: 48 days part thereof above that) Time: 2 days Cost: ZAR 315 Cost: ZAR 247,561 (ZAR 80,500 plus 11% on value Procedure 8. The conveyancer lodges the deed above ZAR 2,250,000 for a property valued between Procedure 2*. The conveyancer prepares and ZAR 2,250,001 and ZAR 10,000,000) Agency: Deeds Registry of Pietermaritzburg collects all the required documentation Time: 14 days Agency: Companies and Intellectual Property Cost: ZAR 1,275 (For properties valued above Procedure 6*. The conveyancer conducts a Commission ZAR 2,000,000 and up to ZAR 4,000,000: title search and checks encumbrances on the Time: 10 days ZAR 1,275) property Cost: No cost (Included in procedure 7) Agency: Deeds Registry of Pietermaritzburg Time: Less than one day (online procedure) Procedure 3*. Obtain an electrical compliance Note: For more details on each procedure, refer to Cost: No cost (Included in procedure 7) http://doingbusiness.org/southafrica. certificate Agency: Certified electrician *Simultaneous with previous procedure Time: 7 days Cost: ZAR 1,250 QUALITY OF LAND ADMINISTRATION INDEX Msunduzi Score Quality of land administration index (0–30) 15 Reliability of infrastructure index (0–8) 5 Transparency of information index (0–6) 3.5 Geographic coverage index (0–8) 2 Land dispute resolution index (0–8) 4.5 Equal access to property rights index (-2–0) 0 For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF REGISTERING PROPERTY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Streamline issuance of rates clearance certificates • Office of the Chief Registrar of Deeds • Municipalities • Improve coordination among stakeholders and consider • Office of the Chief Surveyor-General • Local deeds offices implementing a one-stop shop for property registration • Local surveyor-general's offices • Department of Rural Development and • Reinforce transparency in the land administration system Land Reform • Strengthen protections and resolution mechanisms for land- related issues and disputes • Department of Justice* • Expand geographic coverage * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 149 ENFORCING CONTRACTS INDICATOR DETAILS Time (days) Cost (% of claim value) Trial and Enforcement of Filing and service judgment judgement Total time Attorney fees Court fees Enforcement fees Total cost 33 353 83 469 19.7% 7.6% 3.0% 30.3% QUALITY OF JUDICIAL PROCESSES INDEX Score Quality of judicial processes index (0–18) 7 Court structure and proceedings (-1–5) 2 Case management (0–6) 2 Court automation (0–4) 0.5 Alternative dispute resolution (0–3) 2.5 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF ENFORCING CONTRACTS Relevant departments, agencies and other stakeholders Msunduzi Regulatory area National level Local level • Study magistrates’ court caseloads to identify and eliminate • Office of the Chief Justice • Magistrates’ courts causes of trial delay and consider limiting the frequency and causes of adjournments • Department of Justice* • Assess judicial capacity and resources needed to enhance case management and make it effective, especially in lower courts • Consider introducing specialized commercial courts or commercial sections in locations where needed * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 150 DOING BUSINESS IN SOUTH AFRICA 2018 NELSON MANDELA BAY (Port Elizabeth) 2015 2018 2015 2018 Dealing with construction permits (rank) 6 5 Registering property (rank) 5 5 Distance to frontier score (0–100) 71.10 71.70 Distance to frontier score (0–100) 59.10 57.93 Procedures (number) 20 20 Procedures (number) 8 8 Time (days) 101 96 Time (days) 25 20 Cost (% of warehouse value) 2.8 2.6 Cost (% of property value) 6.3 7.6 Building quality control index (0–15) 12 12 Quality of land administration index (0–30) 14.5 15 ü Getting electricity (rank) 9 9 Enforcing contracts (rank) 6 6 Distance to frontier score (0–100) 35.69 42.19 Distance to frontier score (0–100) 54.85 54.85 Procedures (number) 6 6 Time (days) 611 611 Time (days) 347 190 Cost (% of claim value) 30.4 30.4 Cost (% of income per capita) 587.7 523.8 Quality of judicial processes index (0–18) 7 7 Reliability of supply and transparency of tariffs index (0–8) 0 0 ü Reform making it easier to do business û Change making it more difficult to do business DEALING WITH CONSTRUCTION PERMITS LIST OF PROCEDURES Procedure 5*. Obtain stamp on the plans from Procedure 10*. Submit notification of the Water and Sanitation Department commencement of building work to the Warehouse value: ZAR 3,768,738 ($274,000) municipal authority Agency: Water and Sanitation Department of Nelson Data as of: May 1, 2018 Mandela Bay Metropolitan Municipality Agency: Building Control of Nelson Mandela Bay Time: 2 days Metropolitan Municipality Procedure 1. Obtain geotechnical survey of the Cost: No cost Time: 1 day land plot Cost: No cost Nelson Mandela Bay Agency: Private firm Procedure 6*. Obtain stamp on the plans from Time: 14 days the Energy Department Procedure 11*. Apply for water and sewage Cost: ZAR 22,695 Agency: Electricity and Energy Directorate of Nelson connection Mandela Metropolitan Municipality Agency: Water and Sanitation Department of Nelson Procedure 2*. Obtain topographical survey of Time: 2 days Mandela Bay Metropolitan Municipality the land plot Cost: No cost Time: 1 day Agency: Private firm Cost: ZAR 15,650 (ZAR 5,175 for water connection Time: 14 days Procedure 7. Obtain Site Development Plan + ZAR 10,475 for sewerage connection) Cost: ZAR 15,000 (SDP) approval Agency: Land Use Management Division of Nelson Procedure 12. Receive inspection from the Procedure 3*. Obtain stamp on the plans from Mandela Bay Metropolitan Municipality municipal water and sanitation authority the Roads and Stormwater Department Time: 35 days Agency: Water and Sanitation Department of Nelson Agency: Roads, Stormwater and Transportation Cost: No cost Mandela Bay Metropolitan Municipality Department Time: 1 day Time: 2 days Procedure 8. Obtain approval of the building Cost: No cost Cost: No cost plans from the municipal authority Agency: Building Control of Nelson Mandela Bay Procedure 13. Receive final water connection Procedure 4*. Obtain stamp on the plans from Metropolitan Municipality from the municipal water and sanitation the Fire Department Time: 14 days authority Agency: Fire Department of Nelson Mandela Bay Cost: ZAR 44,960 (ZAR 3,841 per square meter Agency: Water and Sanitation Department of Nelson Metropolitan Municipality multiplied by 0.9%) Mandela Bay Metropolitan Municipality Time: 2 days Time: 18 days Cost: No cost Procedure 9. Submit notification of Cost: No cost commencement of building work to the provincial authority Agency: Department of Labour Time: 1 day Cost: No cost Source: Doing Business database. *Simultaneous with previous procedure LOCATION PROFILES 151 Procedure 14*. Receive inspection of Procedure 17. Submit notification of Procedure 20. Obtain Occupancy Certificate compliance with construction regulations completion of building work to the municipal from the municipal authority Agency: Department of Labour authority Agency: Building Control of Nelson Mandela Bay Time: 1 day Agency: Building Control of Nelson Mandela Bay Metropolitan Municipality Cost: No cost Metropolitan Municipality Time: 5 days Time: 1 day Cost: No cost Procedure 15. Receive inspection of all Cost: No cost foundation trenches from the municipal authority Procedure 18. Receive final inspection from the Note: For more details on each procedure, refer to Agency: Building Control of Nelson Mandela Bay municipal authority http://doingbusiness.org/southafrica. Metropolitan Municipality Agency: Building Control of Nelson Mandela Bay *Simultaneous with previous procedure Time: 1 day Metropolitan Municipality Cost: No cost Time: 1 day Cost: No cost Procedure 16. Receive inspection of wastewater drainage systems Procedure 19*. Receive inspection from the Agency: Building Control of Nelson Mandela Bay municipal fire authority Metropolitan Municipality Agency: Fire Department of Nelson Mandela Bay Time: 1 day Metropolitan Municipality Cost: No cost Time: 1 day Cost: No cost BUILDING QUALITY CONTROL INDEX Score Building quality control index (0–15) 12 Quality of building regulations index (0–2) 2 Quality control before construction index (0–1) 1 Quality control during construction index (0–3) 2 Quality control after construction index (0–3) 3 Nelson Mandela Bay Liability and insurance regimes index (0–2) 0 Professional certifications index (0–4) 4 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF DEALING WITH CONSTRUCTION PERMITS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Consider differentiating projects by risk and introducing risk-based • Department of Labour • Land use management/town inspections planning department • Department of Rural Development and • Increase efficiency by improving coordination, consolidating Land Reform • Building control department procedures and implementing electronic platforms • Building inspections department • Introduce stringent liability and insurance regimes for latent defects • South African Bureau of Standards • Roads and stormwater department (SABS) • Involve private-sector professionals in the construction permitting • Utility providers process • National Regulator for Compulsory • Fire department Specifications (NRCS) • Health department • Solid waste department Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 152 DOING BUSINESS IN SOUTH AFRICA 2018 GETTING ELECTRICITY LIST OF PROCEDURES Procedure 2*. Await external site inspection by Procedure 5. Open customer account, sign distribution utility supply contract with distribution utility and Name of Utility: Electricity & Energy Directorate of await meter installation Agency: Electricity & Energy Directorate of Nelson Nelson Mandela Bay Municipality Mandela Bay Municipality Agency: Electricity & Energy Directorate of Nelson Data as of: May 1, 2018 Time: 1 day Mandela Bay Municipality Cost: No cost Time: 9 days Procedure 1. Submit an application for Cost: ZAR 6,740 (Equal to the present value of lost electricity connection to the distribution utility interest earnings on the security deposit of and obtain a connection fee estimate Procedure 3. Await utility’s inspection of meter box ZAR 17,200) Agency: Electricity & Energy Directorate of Nelson Mandela Bay Municipality Agency: Electricity & Energy Directorate of Nelson Mandela Bay Municipality Procedure 6*. Obtain certificate of compliance Time: 68 days (COC) for the internal wiring and submit to Time: 8 days Cost: ZAR 388,095 (ZAR 68,678 for the connection distribution utility to obtain final connection fee, including material and labor cost + ZAR Cost: No cost Agency: Private electrical engineer / consultant / 9,821 for metering + ZAR 309,596 for the capital contractor distribution charge, calculated as ZAR 2,521 per kVA) Procedure 4. Await completion of external Time: 2 days connection works by distribution utility Cost: No cost Agency: Electricity & Energy Directorate of Nelson Mandela Bay Municipality Note: For more details on each procedure, refer to Time: 105 days http://doingbusiness.org/southafrica. Cost: No cost (Included in procedure 1) *Simultaneous with previous procedure RELIABILITY OF SUPPLY AND TRANSPARENCY OF TARIFFS INDEX Score Reliability of supply and transparency of tariffs index (0–8) 0 Total duration and frequency of outages per customer a year (0–3) – Mechanisms for monitoring outages (0–1) 1 Nelson Mandela Bay Mechanisms for restoring service (0–1) 1 Regulatory monitoring (0–1) 1 Financial deterrents aimed at limiting outages (0–1) 0 Communication of tariffs and tariff changes (0–1) 1 Note: Locations that do not use the SAIDI and SAIFI benchmarks to calculate outages are ineligible to score on the reliability of supply and transparency of tariffs index and thus receive 0 points on this indicator component. For more information please refer to the data notes. For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF GETTING ELECTRICITY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Start monitoring the reliability of supply using the SAIDI and SAIFI • National Energy Regulator of South • Municipal distribution utilities methodology Africa (NERSA) • Streamline the wayleave and excavation permit systems • Eskom • Identify bottlenecks in the internal process to reduce time • Department of Energy • Make the cost and process of getting electricity more transparent to the customer • Upgrade geographic information system to eliminate external site inspection • Reduce the burden of the security deposit Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 153 REGISTERING PROPERTY LIST OF PROCEDURES Procedure 4*. Obtain an entomologist's Procedure 7. Parties sign all the documentation certificate at the conveyancer’s office Property value: ZAR 3,768,738 ($274,000) Agency: Certified entomologist Agency: Conveyancer's Office Data as of: May 1, 2018 Time: 7 days Time: 1 day Cost: ZAR 600 Cost: ZAR 36,581 (For properties valued above Procedure 1. The conveyancer prepares and ZAR 1,000,000 and up to and including collects all the required documentation ZAR 5,000,000: ZAR 17,200 for the first Procedure 5*. Obtain a transfer duty receipt Agency: Companies and Intellectual Property ZAR 1,000,000 plus ZAR 700 per ZAR 100,000 or Commission Agency: South African Revenue Service part thereof above that) Time: 10 days Time: 2 days Cost: No cost (Included in procedure 7) Cost: ZAR 247,561 (ZAR 80,500 plus 11% on value Procedure 8. The conveyancer lodges the deed above ZAR 2,250,000 for a property valued between ZAR 2,250,001 and ZAR 10,000,000) Agency: Deeds Registry of King William's Town Procedure 2*. Obtain a rates clearance Time: 9 days certificate Cost: ZAR 1,275 (For properties valued above Procedure 6*. The conveyancer conducts a Agency: Nelson Mandela Bay Municipality's Property ZAR 2,000,000 and up to ZAR 4,000,000: title search and checks encumbrances on the Valuation Department     ZAR 1,275) property Time: 7 days Agency: Deeds Registry of King William's Town Cost: ZAR 132 (ZAR 88 for certificate and ZAR 44 for valuation) Time: Less than one day (online procedure) Note: For more details on each procedure, refer to Cost: No cost (Included in procedure 7) http://doingbusiness.org/southafrica. Procedure 3*. Obtain an electrical compliance *Simultaneous with previous procedure certificate Agency: Certified electrician Time: 7 days Cost: ZAR 1,250 QUALITY OF LAND ADMINISTRATION INDEX Score Nelson Mandela Bay Quality of land administration index (0–30) 15 Reliability of infrastructure index (0–8) 5 Transparency of information index (0–6) 3.5 Geographic coverage index (0–8) 2 Land dispute resolution index (0–8) 4.5 Equal access to property rights index (-2–0) 0 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF REGISTERING PROPERTY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Streamline issuance of rates clearance certificates • Office of the Chief Registrar of Deeds • Municipalities • Improve coordination among stakeholders and consider • Office of the Chief Surveyor-General • Local deeds offices implementing a one-stop shop for property registration • Local surveyor-general's offices • Department of Rural Development and • Reinforce transparency in the land administration system Land Reform • Strengthen protections and resolution mechanisms for land- related issues and disputes • Department of Justice* • Expand geographic coverage * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 154 DOING BUSINESS IN SOUTH AFRICA 2018 ENFORCING CONTRACTS INDICATOR DETAILS Time (days) Cost (% of claim value) Trial and Enforcement of Filing and service judgment judgement Total time Attorney fees Court fees Enforcement fees Total cost 35 496 80 611 19.8% 7.6% 3.0% 30.4% QUALITY OF JUDICIAL PROCESSES INDEX Score Quality of judicial processes index (0–18) 7 Court structure and proceedings (-1–5) 2 Case management (0–6) 2 Court automation (0–4) 0.5 Alternative dispute resolution (0–3) 2.5 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF ENFORCING CONTRACTS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Study magistrates’ court caseloads to identify and eliminate • Office of the Chief Justice • Magistrates’ courts causes of trial delay and consider limiting the frequency and • Department of Justice* Nelson Mandela Bay causes of adjournments • Assess judicial capacity and resources needed to enhance case management and make it effective, especially in lower courts • Consider introducing specialized commercial courts or commercial sections in locations where needed * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 155 TSHWANE (Pretoria) 2015 2018 2015 2018 Dealing with construction permits (rank) 9 9 Registering property (rank) 2 3 Distance to frontier score (0–100) 66.04 66.25 Distance to frontier score (0–100) 60.56 59.39 Procedures (number) 20 20 Procedures (number) 7 7 Time (days) 181 179 Time (days) 30.5 25.5 Cost (% of warehouse value) 2.2 2.2 Cost (% of property value) 6.3 7.6 Building quality control index (0–15) 12 12 Quality of land administration index (0–30) 14.5 15 Getting electricity (rank) 6 7 Enforcing contracts (rank) 3 3 Distance to frontier score (0–100) 51.24 51.24 Distance to frontier score (0–100) 56.14 56.14 Procedures (number) 6 6 Time (days) 527 527 Time (days) 110 110 Cost (% of claim value) 33.1 33.1 Cost (% of income per capita) 408.2 407.0 Quality of judicial processes index (0–18) 7 7 Reliability of supply and transparency of tariffs index (0–8) 0 0 ü Reform making it easier to do business û Change making it more difficult to do business DEALING WITH CONSTRUCTION PERMITS LIST OF PROCEDURES Procedure 5*. Obtain stamp on the plans from Procedure 10*. Submit notification of the Water and Sanitation Department commencement of building work to the Warehouse value: ZAR 3,768,738 ($274,000) municipal authority Agency: Water and Sanitation Department of City of Data as of: May 1, 2018 Tshwane Metropolitan Municipality Agency: Building Control Section of City of Tshwane Time: 2 days Metropolitan Municipality Procedure 1. Obtain geotechnical survey of the Cost: No cost Time: 1 day land plot Cost: No cost Agency: Private firm Procedure 6*. Obtain stamp on the plans from Time: 14 days the Energy Department Procedure 11*. Apply for water and sewage Cost: ZAR 22,695 Agency: Energy and Electricity of City of Tshwane connection Metropolitan Municipality Agency: Water and Sanitation Department of City of Procedure 2*. Obtain topographical survey of Time: 2 days Tshwane Metropolitan Municipality the land plot Cost: No cost Time: 1 day Tshwane Agency: Private firm Cost: ZAR 15,300 (ZAR 10,800 for water connection Time: 14 days Procedure 7. Obtain Site Development Plan + ZAR 4,500 for sewerage connection) Cost: ZAR 15,000 (SDP) approval Agency: Land Use Management Department of City Procedure 12. Receive inspection from the Procedure 3*. Obtain stamp on the plans from of Tshwane Metropolitan Municipality municipal water and sanitation authority the Roads and Stormwater Department Time: 60 days Agency: Water and Sanitation Department of City of Agency: Roads and Stormwater Division of City of Cost: ZAR 9,494 (ZAR 7.3 per square meter) Tshwane Metropolitan Municipality Tshwane Metropolitan Municipality Time: 1 day Time: 2 days Procedure 8. Obtain approval of the building Cost: No cost Cost: No cost plans from the municipal authority Agency: Building Control Section of City of Tshwane Procedure 13. Receive final water connection Procedure 4*. Obtain stamp on the plans from Metropolitan Municipality from the municipal water and sanitation the Fire Department Time: 60 days authority Agency: Fire Safety Section of City of Tshwane Cost: ZAR 19,769 (ZAR 15.2 per square meter) Agency: Water and Sanitation Department of City of Metropolitan Municipality Tshwane Metropolitan Municipality Time: 2 days Time: 30 days Procedure 9. Submit notification of Cost: No cost commencement of building work to the Cost: No cost provincial authority Agency: Department of Labour Time: 1 day Cost: No cost Source: Doing Business database. *Simultaneous with previous procedure 156 DOING BUSINESS IN SOUTH AFRICA 2018 Procedure 14*. Receive inspection of Procedure 17. Submit notification of Procedure 20. Obtain Occupancy Certificate compliance with construction regulations completion of building work to the municipal from the municipal authority Agency: Department of Labour authority Agency: Building Control Section of City of Tshwane Time: 1 day Agency: Building Control Section of City of Tshwane Metropolitan Municipality Cost: No cost Metropolitan Municipality Time: 5 days Time: 1 day Cost: No cost Procedure 15. Receive inspection of all Cost: No cost foundation trenches from the municipal authority Procedure 18. Receive final inspection from the Note: For more details on each procedure, refer to Agency: Building Inspectorate of City of Tshwane municipal authority http://doingbusiness.org/southafrica. Metropolitan Municipality Agency: Building Control Section of City of Tshwane *Simultaneous with previous procedure Time: 1 day Metropolitan Municipality Cost: No cost Time: 1 day Cost: No cost Procedure 16. Receive inspection of wastewater drainage systems Procedure 19*. Receive inspection from the Agency: Building Inspectorate of City of Tshwane municipal fire authority Metropolitan Municipality Agency: Fire Brigade of City of Tshwane Metropolitan Time: 1 day Municipality Cost: No cost Time: 1 day Cost: No cost BUILDING QUALITY CONTROL INDEX Score Building quality control index (0–15) 12 Quality of building regulations index (0–2) 2 Quality control before construction index (0–1) 1 Quality control during construction index (0–3) 2 Quality control after construction index (0–3) 3 Liability and insurance regimes index (0–2) 0 Professional certifications index (0–4) 4 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. Tshwane POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF DEALING WITH CONSTRUCTION PERMITS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Consider differentiating projects by risk and introducing risk-based • Department of Labour • Land use management/town inspections planning department • Department of Rural Development and • Increase efficiency by improving coordination, consolidating Land Reform • Building control department procedures and implementing electronic platforms • Building inspections department • Introduce stringent liability and insurance regimes for latent defects • South African Bureau of Standards • Roads and stormwater department (SABS) • Involve private-sector professionals in the construction permitting • Utility providers process • National Regulator for Compulsory • Fire department Specifications (NRCS) • Health department • Solid waste department Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 157 GETTING ELECTRICITY LIST OF PROCEDURES Procedure 3. Await utility’s inspection of meter Procedure 5. Open customer account, sign box supply contract and submit proof of payment Name of Utility: Energy and Electricity Division of of security deposit to distribution utility Agency: Energy and Electricity Division of City of City of Tshwane Metropolitan Municipality Tshwane Metropolitan Municipality Agency: Energy and Electricity Division of City of Data as of: May 1, 2018 Time: 9 days Tshwane Metropolitan Municipality Cost: No cost Time: 1 day Procedure 1. Submit an application for Cost: ZAR 7,759 (Equal to the present value of electricity connection to the distribution utility lost interest earnings on the security deposit of and obtain a connection fee estimate Procedure 4. Await completion of external connection works by distribution utility ZAR 102,767, considering that a bank guarantee is Agency: Energy and Electricity Division of City of accepted) Tshwane Metropolitan Municipality Agency: Energy and Electricity Division of City of Tshwane Metropolitan Municipality Time: 30 days Procedure 6. Await final inspection and submit Time: 68 days Cost: No cost (Included in procedure 4) certificate of compliance (COC) for the internal Cost: ZAR 299,007 (ZAR 189,529 for the connection wiring to distribution utility to obtain final fee, including material and labor + ZAR 109,478 for Procedure 2*. Await external site inspection by connection the quota charge, calculated as ZAR 3,155 per kVA distribution utility and considering that the stand has some credits) Agency: Private electrical engineer / consultant / Agency: Energy and Electricity Division of City of contractor Tshwane Metropolitan Municipality Time: 2 days Time: 1 day Cost: No cost Cost: No cost Note: For more details on each procedure, refer to http://doingbusiness.org/southafrica. *Simultaneous with previous procedure RELIABILITY OF SUPPLY AND TRANSPARENCY OF TARIFFS INDEX Score Reliability of supply and transparency of tariffs index (0–8) 0 Total duration and frequency of outages per customer a year (0–3) – Mechanisms for monitoring outages (0–1) 1 Mechanisms for restoring service (0–1) 1 Regulatory monitoring (0–1) 1 Financial deterrents aimed at limiting outages (0–1) 0 Communication of tariffs and tariff changes (0–1) 1 Tshwane Note: Locations that do not use the SAIDI and SAIFI benchmarks to calculate outages are ineligible to score on the reliability of supply and transparency of tariffs index and thus receive 0 points on this indicator component. For more information please refer to the data notes. For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF GETTING ELECTRICITY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Start monitoring the reliability of supply using the SAIDI and SAIFI • National Energy Regulator of South • Municipal distribution utilities methodology Africa (NERSA) • Identify bottlenecks in the internal process to reduce time • Eskom • Make the cost and process of getting electricity more transparent to the customer • Department of Energy • Upgrade geographic information system to eliminate external site inspection • Reduce the burden of the security deposit Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 158 DOING BUSINESS IN SOUTH AFRICA 2018 REGISTERING PROPERTY LIST OF PROCEDURES Procedure 4*. Obtain an electrical compliance Procedure 7. The conveyancer lodges the deed certificate Agency: Deeds Registry of Pretoria Property value: ZAR 3,768,738 ($274,000) Agency: Certified electrician Time: 9 days Data as of: May 1, 2018 Time: 7 days Cost: ZAR 1,275 (For properties valued above Cost: ZAR 1,250 ZAR 2,000,000 and up to ZAR 4,000,000: Procedure 1. The conveyancer conducts a ZAR 1,275) title search and checks encumbrances on the property Procedure 5*. Obtain a transfer duty receipt Agency: Deeds Registry of Pretoria Agency: South African Revenue Service Note: For more details on each procedure, refer to Time: Less than one day (online procedure) Time: 2 days http://doingbusiness.org/southafrica. Cost: No cost (Included in procedure 6) Cost: ZAR 247,561 (ZAR 80,500 plus 11% on value *Simultaneous with previous procedure above ZAR 2,250,000 for a property valued between ZAR 2,250,001 and ZAR 10,000,000) Procedure 2. Obtain a rates clearance certificate Procedure 6. Parties sign all the documentation Agency: City of Tshwane Municipality's Financial at the conveyancer’s office Services Department Agency: Conveyancer's Office Time: 15 days Time: 1 day Cost: ZAR 59 Cost: ZAR 36,581 (For properties valued above ZAR 1,000,000 and up to and including Procedure 3*. The conveyancer prepares and ZAR 5,000,000: ZAR 17,200 for the first collects all the required documentation ZAR 1,000,000 plus ZAR 700 per ZAR 100,000 or Agency: Companies and Intellectual Property part thereof above that) Commission Time: 10 days Cost: No cost (Included in procedure 6) QUALITY OF LAND ADMINISTRATION INDEX Score Quality of land administration index (0–30) 15 Reliability of infrastructure index (0–8) 5 Transparency of information index (0–6) 3.5 Geographic coverage index (0–8) 2 Land dispute resolution index (0–8) 4.5 Tshwane Equal access to property rights index (-2–0) 0 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF REGISTERING PROPERTY Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Further streamline issuance of rates clearance certificates • Office of the Chief Registrar of Deeds • Municipalities • Improve coordination among stakeholders and consider • Office of the Chief Surveyor-General • Local deeds offices implementing a one-stop shop for property registration • Local surveyor-general's offices • Department of Rural Development and • Reinforce transparency in the land administration system Land Reform • Strengthen protections and resolution mechanisms for land- related issues and disputes • Department of Justice* • Expand geographic coverage * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. LOCATION PROFILES 159 ENFORCING CONTRACTS INDICATOR DETAILS Time (days) Cost (% of claim value) Trial and Enforcement of Filing and service judgment judgement Total time Attorney fees Court fees Enforcement fees Total cost 30 414 83 527 22.5% 7.6% 3.0% 33.1% QUALITY OF JUDICIAL PROCESSES INDEX Score Quality of judicial processes index (0–18) 7 Court structure and proceedings (-1–5) 2 Case management (0–6) 2 Court automation (0–4) 0.5 Alternative dispute resolution (0–3) 2.5 Note: For a list of all component questions and results on this index, refer to the "Details on quality indices" section. POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF ENFORCING CONTRACTS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Study magistrates’ court caseloads to identify and eliminate • Office of the Chief Justice • Magistrates’ courts causes of trial delay and consider limiting the frequency and causes of adjournments • Department of Justice* • Assess judicial capacity and resources needed to enhance case management and make it effective, especially in lower courts • Consider introducing specialized commercial courts or commercial sections in locations where needed * For the purpose of this study, the Department of Justice and Correctional Services is referred to as the Department of Justice. Tshwane Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Source: Doing Business database. 160 DOING BUSINESS IN SOUTH AFRICA 2018 PORT OF CAPE TOWN TRADING ACROSS BORDERS INDICATOR SNAPSHOT Distance to frontier score (0–100) 62.47 Time to export Documentary compliance (hours) 96 Border compliance (hours) 118 Cost to export Documentary compliance (US$) 73 Border compliance (US$) 503 Time to import Documentary compliance (hours) 36 Border compliance (hours) 66 Cost to import Documentary compliance (US$) 73 Border compliance (US$) 676 PORT DETAILS Characteristics Export Import Product HS 08: Edible fruit and nuts;peel of citrus fruit or melons HS 8708: Parts and accessories of motor vehicles Trade partner Netherlands Germany Border Port of Cape Town Port of Cape Town Distance (km) 1,398 1,398 Domestic transport time (hours) 60 60 Domestic transport cost (US$) 1,882 1,882 COMPONENTS OF BORDER COMPLIANCE Export Time to complete (hours) Associated costs (US$) Port of Cape Town Clearance and inspections required by customs authorities 4 141 Clearance and inspections required by agencies other than customs 30 52 Port or border handling 84 310 Import Time to complete (hours) Associated costs (US$) Clearance and inspections required by customs authorities 6 258 Clearance and inspections required by agencies other than customs 0 0 Port or border handling 60 418 Source: Doing Business database. LOCATION PROFILES 161 TRADE DOCUMENTS Export Import • Bill of lading • Bill of lading • Cargo Dues Order • Cargo Dues Order • EUR 1 - Certificate of origin • EUR 1 - Certificate of origin • Commercial invoice • Commercial invoice • Customs Export Declaration (SAD 500) • Customs Import Declaration (SAD 500) • Export certificate • Packing list • Phytosanitary certificate • SOLAS certificate • Packing list • SOLAS certificate POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF TRADING ACROSS BORDERS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Further reduce and streamline documentary requirements • Department of Trade and Industry • Chamber of commerce and and increase the use of electronic transaction systems industry • South African Revenue Service (SARS) • Increase coordination of different agencies with a view to streamlining procedures • Transnet National Ports Authority (TNPA) • Introduce an electronic single window for trade • Transnet Port Terminals (TPT) • Promote regional integration through the effective • International Trade Administration Commission of implementation of border cooperation agreements South Africa (ITAC) • Upgrade trade logistics infrastructure • Ports Regulator of South Africa (PRSA) • Perishable Products Export Control Board (PPECB) • Department of Agriculture, Forestry and Fisheries (DAFF) • South African Police Service (SAPS) • National Regulator for Compulsory Specifications (NRCS) Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Port of Cape Town Source: Doing Business database. 162 DOING BUSINESS IN SOUTH AFRICA 2018 PORT OF DURBAN TRADING ACROSS BORDERS INDICATOR SNAPSHOT Distance to frontier score (0–100) 59.64 Time to export Documentary compliance (hours) 68 Border compliance (hours) 92 Cost to export Documentary compliance (US$) 55 Border compliance (US$) 1,257 Time to import Documentary compliance (hours) 36 Border compliance (hours) 87 Cost to import Documentary compliance (US$) 73 Border compliance (US$) 676 PORT DETAILS Characteristics Export Import HS 87: Vehicles other than railway or tramway Product HS 8708: Parts and accessories of motor vehicles rolling-stock, and parts and accessories thereof Trade partner United States Germany Border Port of Durban Port of Durban Distance (km) 570 570 Domestic transport time (hours) 16 16 Domestic transport cost (US$) 1,100 1,100 COMPONENTS OF BORDER COMPLIANCE Export Time to complete (hours) Associated costs (US$) Clearance and inspections required by customs authorities 4 200 Clearance and inspections required by agencies other than customs 0 0 Port or border handling 88 1,057 Port of Durban Import Time to complete (hours) Associated costs (US$) Clearance and inspections required by customs authorities 6 258 Clearance and inspections required by agencies other than customs 0 0 Port or border handling 81 418 Source: Doing Business database. LOCATION PROFILES 163 TRADE DOCUMENTS Export Import • Bill of lading • Bill of lading • Cargo Dues Order • Cargo Dues Order • AGOA Certificate of origin • EUR 1 - Certificate of origin • Commercial invoice • Commercial invoice • Customs Export Declaration (SAD 500) • Customs Import Declaration (SAD 500) • Landing order • Packing list • Packing list • SOLAS certificate • SOLAS certificate POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF TRADING ACROSS BORDERS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Further reduce and streamline documentary requirements • Department of Trade and Industry • Chamber of commerce and and increase the use of electronic transaction systems industry • South African Revenue Service (SARS) • Increase coordination of different agencies with a view to streamlining procedures • Transnet National Ports Authority (TNPA) • Introduce an electronic single window for trade • Transnet Port Terminals (TPT) • Promote regional integration through the effective • International Trade Administration Commission of implementation of border cooperation agreements South Africa (ITAC) • Upgrade trade logistics infrastructure • Ports Regulator of South Africa (PRSA) • Perishable Products Export Control Board (PPECB) • Department of Agriculture, Forestry and Fisheries (DAFF) • South African Police Service (SAPS) • National Regulator for Compulsory Specifications (NRCS) Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Port of Durban Source: Doing Business database. 164 DOING BUSINESS IN SOUTH AFRICA 2018 PORT OF PORT ELIZABETH TRADING ACROSS BORDERS INDICATOR SNAPSHOT Distance to frontier score (0–100) 69.25 Time to export Documentary compliance (hours) 68 Border compliance (hours) 80 Cost to export Documentary compliance (US$) 55 Border compliance (US$) 451 Time to import Documentary compliance (hours) 36 Border compliance (hours) 54 Cost to import Documentary compliance (US$) 73 Border compliance (US$) 676 PORT DETAILS Characteristics Export Import HS 84: Nuclear reactors, boilers, machinery and Product HS 8708: Parts and accessories of motor vehicles mechanical appliances; parts thereof Trade partner Germany Germany Border Port of Port Elizabeth Port of Port Elizabeth Distance (km) 1,061 1,061 Domestic transport time (hours) 24 24 Domestic transport cost (US$) 1,350 1,350 COMPONENTS OF BORDER COMPLIANCE Export Time to complete (hours) Associated costs (US$) Clearance and inspections required by customs authorities 4 200 Clearance and inspections required by agencies other than customs 0 0 Port or border handling 76 251 Import Time to complete (hours) Associated costs (US$) Clearance and inspections required by customs authorities 6 258 Clearance and inspections required by agencies other than customs 0 0 Port of Port Elizabeth Port or border handling 48 418 Source: Doing Business database. LOCATION PROFILES 165 TRADE DOCUMENTS Export Import • Bill of lading • Bill of lading • Cargo Dues Order • Cargo Dues Order • EUR 1 - Certificate of origin • EUR 1 - Certificate of origin • Commercial invoice • Commercial invoice • Customs Export Declaration (SAD 500) • Customs Import Declaration (SAD 500) • Packing list • Packing list • SOLAS certificate • SOLAS certificate POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF TRADING ACROSS BORDERS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Further reduce and streamline documentary requirements • Department of Trade and Industry • Chamber of commerce and and increase the use of electronic transaction systems industry • South African Revenue Service (SARS) • Increase coordination of different agencies with a view to streamlining procedures • Transnet National Ports Authority (TNPA) • Introduce an electronic single window for trade • Transnet Port Terminals (TPT) • Promote regional integration through the effective • International Trade Administration Commission of implementation of border cooperation agreements South Africa (ITAC) • Upgrade trade logistics infrastructure • Ports Regulator of South Africa (PRSA) • Perishable Products Export Control Board (PPECB) • Department of Agriculture, Forestry and Fisheries (DAFF) • South African Police Service (SAPS) • National Regulator for Compulsory Specifications (NRCS) Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Port of Port Elizabeth Source: Doing Business database. 166 DOING BUSINESS IN SOUTH AFRICA 2018 PORT OF NGQURA TRADING ACROSS BORDERS INDICATOR SNAPSHOT Distance to frontier score (0–100) 68.93 Time to export Documentary compliance (hours) 68 Border compliance (hours) 84 Cost to export Documentary compliance (US$) 55 Border compliance (US$) 451 Time to import Documentary compliance (hours) 36 Border compliance (hours) 54 Cost to import Documentary compliance (US$) 73 Border compliance (US$) 676 PORT DETAILS Characteristics Export Import HS 84: Nuclear reactors, boilers, machinery and Product HS 8708: Parts and accessories of motor vehicles mechanical appliances; parts thereof Trade partner United States Germany Border Port of Ngqura Port of Ngqura Distance (km) 1,043 1,043 Domestic transport time (hours) 24 24 Domestic transport cost (US$) 1,350 1,350 COMPONENTS OF BORDER COMPLIANCE Export Time to complete (hours) Associated costs (US$) Clearance and inspections required by customs authorities 4 200 Clearance and inspections required by agencies other than customs 0 0 Port or border handling 80 251 Import Time to complete (hours) Associated costs (US$) Clearance and inspections required by customs authorities 6 258 Clearance and inspections required by agencies other than customs 0 0 Port or border handling 48 418 Port of Ngqura Source: Doing Business database. LOCATION PROFILES 167 TRADE DOCUMENTS Export Import • Bill of lading • Bill of lading • Cargo Dues Order • Cargo Dues Order • Certificate of origin • EUR 1 - Certificate of origin • Commercial invoice • Commercial invoice • Customs Export Declaration (SAD 500) • Customs Import Declaration (SAD 500) • Packing list • Packing list • SOLAS certificate • SOLAS certificate POLICY RECOMMENDATIONS TO IMPROVE THE EASE OF TRADING ACROSS BORDERS Relevant departments, agencies and other stakeholders Regulatory area National level Local level • Further reduce and streamline documentary requirements • Department of Trade and Industry • Chamber of commerce and and increase the use of electronic transaction systems industry • South African Revenue Service (SARS) • Increase coordination of different agencies with a view to streamlining procedures • Transnet National Ports Authority (TNPA) • Introduce an electronic single window for trade • Transnet Port Terminals (TPT) • Promote regional integration through the effective • International Trade Administration Commission of implementation of border cooperation agreements South Africa (ITAC) • Upgrade trade logistics infrastructure • Ports Regulator of South Africa (PRSA) • Perishable Products Export Control Board (PPECB) • Department of Agriculture, Forestry and Fisheries (DAFF) • South African Police Service (SAPS) • National Regulator for Compulsory Specifications (NRCS) Note: All recommendations are detailed in the "What can be improved?" section of the corresponding indicator chapter. Port of Ngqura Source: Doing Business database. 168 DOING BUSINESS IN SOUTH AFRICA 2018 DETAILS ON THE QUALITY INDICES DEALING WITH CONSTRUCTION PERMITS—BUILDING QUALITY CONTROL INDEX Buffalo City 8 locations in South Africa Question Answer Score Answer Score Building quality control index (0–15) 11 12 Quality of building regulations index (0–2) 2 2 In what way are the building regulations (including Available online; To be purchased. 1 Available online; To be purchased. 1 the building code) or any regulations dealing with construction permits made available? (0–1) Which requirements for obtaining a building permit List of required documents; Fees to be 1 List of required documents; Fees to be 1 are clearly specified by the building regulations or paid; Required pre-approvals. paid; Required pre-approvals. by any accessible website, brochure or pamphlet? (0–1) Quality control before construction index (0–1) 1 1 Who is part of the committee or team that reviews Licensed engineer. 1 Licensed engineer. 1 and approves building permit applications in the relevant permit-issuing agency? (0–1) Quality control during construction index (0–3) 1 2 What types of inspections (if any) are required by Inspections by government agency and 1 Inspections by government agency and 1 law to be carried out during construction? (0–2) in-house engineer; Phased inspections. in-house engineer; Phased inspections. Do legally mandated inspections occur in practice Mandatory inspections do not always 0 Mandatory inspections are always 1 during construction? (0–1) occur in practice. done in practice. Quality control after construction index (0–3) 3 3 Is there a final inspection required by law to verify Yes, final inspection is done by 2 Yes, final inspection is done by 2 that the building was built in accordance with the government agency and in-house government agency and in-house approved plans and regulations? (0–2) supervising engineer submits a final supervising engineer submits a final report. report. Do legally mandated final inspections occur in Final inspection always occurs in 1 Final inspection always occurs in 1 practice? (0–1) practice. practice. Liability and insurance regimes index (0–2) 0 0 Which parties (if any) are held liable by law for No party is held liable under the law. 0 No party is held liable under the law. 0 structural flaws or problems in the building once it is in use? (0–1) Which parties (if any) are required by law to obtain No party is required by law to obtain 0 No party is required by law to obtain 0 an insurance policy to cover possible structural insurance. insurance. flaws or problems in the building once it is in use? (0–1) Professional certifications index (0–4) 4 4 What are the qualification requirements for the Minimum number of years of 2 Minimum number of years of 2 professional responsible for verifying that the experience; University degree in experience; University degree in architectural plans or drawings are in compliance architecture or engineering; Being architecture or engineering; Being with existing building regulations? (0–2) a registered architect or engineer; a registered architect or engineer; Passing a certification exam. Passing a certification exam. What are the qualification requirements for the Minimum number of years of 2 Minimum number of years of 2 professional who supervises the construction on the experience; University degree experience; University degree ground? (0–2) in engineering, construction or in engineering, construction or construction management; Being construction management; Being a registered architect or engineer; a registered architect or engineer; Passing a certification exam. Passing a certification exam. Source: Doing Business database. LOCATION PROFILES 169 GETTING ELECTRICITY—RELIABILITY OF SUPPLY AND TRANSPARENCY OF TARIFFS INDEX 6 locations in Cape Town eThekwini Johannesburg South Africa Reliability of supply and transparency of tariffs index (0–8) 6 4 4 0 Total duration and frequency of outages per customer a year (0–3) 2 0 0 — System average interruption duration index (SAIDI) 3.5 37.9 44.0 — System average interruption frequency index (SAIFI) 0.9 2.5 6.5 — What is the minimum outage time (in minutes) that the utility considers for 5.0 5.0 5.0 — the calculation of SAIDI/SAIFI Mechanisms for monitoring outages (0–1) 1 1 1 1 Does the distribution utility use automated tools to monitor outages? Yes Yes Yes Yes Mechanisms for restoring service (0–1) 1 1 1 1 Does the distribution utility use automated tools to restore service? Yes Yes Yes Yes Regulatory monitoring (0–1) 1 1 1 1 Does a regulator—that is, an entity separate from the utility—monitor the Yes Yes Yes Yes utility’s performance on reliability of supply? Financial deterrents aimed at limiting outages (0–1) 0 0 0 0 Does the utility either pay compensation to customers or face fines by the No No No No regulator (or both) if outages exceed a certain cap? Communication of tariffs and tariff changes (0–1) 1 1 1 1 Are effective tariffs available online? Yes Yes Yes Yes Are customers notified of a change in tariff ahead of the billing cycle? Yes Yes Yes Yes Source: Doing Business database. Note: Locations that do not use the SAIDI and SAIFI benchmarks to calculate outages are ineligible to score on the reliability of supply and transparency of tariffs index and thus receive 0 points on this indicator component. 170 DOING BUSINESS IN SOUTH AFRICA 2018 REGISTERING PROPERTY—QUALITY OF LAND ADMINISTRATION INDEX 9 locations in South Africa Question Answer Score Quality of the land administration index (0–30) 15 Reliability of infrastructure index (0–8) 5 In what format are the majority of title or deed records kept—in a paper format or in a computerized format (scanned Computer/scanned 1 or fully digital)? (0–2) Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions and the like)? (0–1) Yes 1 In what format are the majority of maps of land plots kept—in a paper format or in a computerized format (scanned or Computer/scanned 1 fully digital)? (0–2) Is there an electronic database for recording boundaries, checking plans and providing cadastral information Yes 1 (geographic information system)? (0–1) Is the information recorded by the immovable property registration agency and the cadastral or mapping agency kept in Separate databases 0 a single database, in different but linked databases or in separate databases? (0–1) Do the immovable property registration agency and cadastral or mapping agency use the same identification number Yes 1 for properties? (0–1) Transparency of information index (0–6) 3.5 Who is able to obtain information on land ownership at the agency in charge of immovable property registration? (0–1) Anyone who pays the official fee 1 Is the list of documents that are required to complete any type of property transaction made publicly available—and if No 0 so, how? (0–0.5) Is the applicable fee schedule for any property transaction at the agency in charge of immovable property registration Yes, online 0.5 made publicly available—and if so, how? (0–0.5) Does the agency in charge of immovable property registration commit to delivering a legally binding document that proves Yes, on public boards 0.5 property ownership within a specific time frame—and if so, how does it communicate the service standard? (0–0.5)? Is there a specific and separate mechanism for filing complaints about a problem that occurred at the agency in charge No 0 of immovable property registration? (0–1) Are there publicly available official statistics tracking the number of transactions at the immovable property registration No 0 agency? (0–0.5) Who is able to consult maps of land plots? (0–0.5) Freely accessible by anyone 0.5 Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? (0–0.5) Yes, online 0.5 Does the cadastral or mapping agency commit to delivering an updated map within a specific time frame—and if so, Yes, online 0.5 how does it communicate the service standard? (0–0.5) Is there a specific and separate mechanism for filing complaints about a problem that occurred at the cadastral or No 0 mapping agency? (0–0.5) Geographic coverage index (0–8) 2 Are all privately held land plots in the economy formally registered at the immovable property registry? (0–2) No 0 Are all privately held land plots in the city formally registered at the immovable property registry? (0–2) No 0 Are all privately held land plots in the economy mapped? (0–2) No 0 Are all privately held land plots in the city mapped? (0–2) Yes 2 Land dispute resolution index (0–8) 4.5 Does the law require that all property sale transactions be registered at the immovable property registry to make them Yes 1.5 opposable to third parties? (0–1.5) Is the system of immovable property registration subject to a state or private guarantee? (0–0.5) No 0 Is there a specific compensation mechanism to cover for losses incurred by parties who engaged in good faith in a No 0 property transaction based on erroneous information certified by the immovable property registry? (0–0.5) Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., checking Yes (Conveyancer and Registrar) 0.5 the compliance of contracts with requirements of the law)? (0–0.5) Does the legal system require verification of the identity of the parties to a property transaction? (0–0.5) Yes (Conveyancer and Registrar) 0.5 Is there a national database to verify the accuracy of identity documents? (0–1) Yes 1 How long does it take on average to obtain a decision from the first-instance court for a standard land dispute between Between 2 and 3 years 1 two local businesses over tenure rights of a property worth NGN 26,969,050 (without appeal)? (0–3) Are there any statistics on the number of land disputes in the first instance? (0–0.5) No 0 Equal access to property rights index (-2–0) 0 Do unmarried men and unmarried women have equal ownership rights to property? Yes 0 Do married men and married women have equal ownership rights to property? Yes 0 Source: Doing Business database. LOCATION PROFILES 171 ENFORCING CONTRACTS—QUALITY OF JUDICIAL PROCESSES INDEX 9 locations in South Africa Question Answer Score Quality of judicial processes index (0–18) 7 Court structure and proceedings (-1–5) 2 Is there a court or division of a court dedicated solely to hearing commercial cases? (0-1.5) No 0 Small claims court (0–1.5) 1.5 a. Is there a small claims court or a fast-track procedure for small claims? Yes b. If yes, is self-representation allowed? Yes Is pretrial attachment available? (0–1) No 0 Are new cases assigned randomly to judges? (0–1) Yes, manually 0.5 Does a woman's testimony carry the same evidentiary weight in court as a man's? (-1–0) Yes 0 Case management (0–6) 2 Time standards (0–1) 1 a. Are there laws setting overall time standards for key court events in a civil case? Yes b. If yes, are the time standards set for at least three court events? Yes c. Are these time standards respected in more than 50% of cases? Yes Adjournments (0–1) 0 a. Does the law regulate the maximum number of adjournments that can be granted? No b. Are adjournments limited to unforeseen and exceptional circumstances? No c. If rules on adjournments exist, are they respected in more than 50% of cases? No Can two of the following four reports be generated about the competent court: (i) time to disposition report; No 0 (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? (0–1) Is a pretrial conference among the case management techniques used before the competent court? (0–1) Yes 1 Are there any electronic case management tools in place within the competent court for use by judges? (0–1) No 0 Are there any electronic case management tools in place within the competent court for use by lawyers? (0–1) No 0 Court automation (0–4) 0.5 Can the initial complaint be filed electronically through a dedicated platform within the competent court? (0–1) No 0 Is it possible to carry out service of process electronically for claims filed before the competent court? (0–1) No 0 Can court fees be paid electronically within the competent court? (0–1) No 0 Publication of judgments (0–1) 0.5 a. Are judgments rendered in commercial cases at all levels made available to the general public through No publication in official gazettes, in newspapers or on the internet or court website? b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the Yes general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0–3) 2.5 Arbitration (0–1.5) 1.5 a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section of the Yes 0.5 applicable code of civil procedure encompassing substantially all its aspects? b. Are there any commercial disputes—aside from those that deal with public order or public policy—that cannot No 0.5 be submitted to arbitration? c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes 0.5 Mediation/Conciliation (0–1.5) 1 a. Is voluntary mediation or conciliation available? Yes 0.5 b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or section of the Yes 0.5 applicable code of civil procedure encompassing substantially all their aspects? c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or conciliation is No 0 successful, a refund of court filing fees, income tax credits or the like)? Source: Doing Business database. 172 DOING BUSINESS IN SOUTH AFRICA 2018 Acknowledgments Doing Business in South Africa 2018 was Shunmugam and Mariline Vieira pro- (whose team was led by Mark Mfikoe produced by the Global Indicators Group vided valuable support at different stages and included Tembe Mwemba), IBP of the Development Economics Vice of the project. Indira Chand designed Construction Consultants, Johannesburg Presidency of the World Bank Group. and led the communication campaign in (whose team was led by Nigel Forfar The team was led by Ana Santillana and collaboration with Zandile Ratshitanga, and included Stella Hoffman), the South Moussa Traoré. It included Luiza Lacerda Rayna Zhang and the Sub-Saharan Africa African Association of Freight Forwarders Bogado, Diane Davoine, Alan Golding, regional communications team. The (whose team included Johan Marais), Juliette Herault, Carlos I. Mejía, Monique webpage (http://www.doingbusiness.org Wright Rose-Innes (whose team was led Pelloux Patron and Maria Camila Roberts /southafrica) was developed by Varun by Richard Maddern and included Eliana and received continued support from Carli Doiphode, Akash Pradhan, Kamalesh de Camillis, Luanne Davies, Ravi Morar Bunding-Venter, Amina Khaled El Zayat Sengaonkar and Geoffrey Shott. The and Nikita Pillay) and XA International and John Gabriel Goddard throughout report was edited by Janelle Conaway Trade Advisors (whose team was led implementation of the study. The study and designed by Luis Liceaga. by Donald MacKay and included Minize was prepared under the guidance of Haron). Ingrid Ashwin, of The Wordstock Mierta Capaul and Pilar Salgado Otónel. The study was requested by the National Company, organized and coordinated key Treasury of the Republic of South Africa events during the implementation of the The team is grateful for the valuable as part of the Cities Support Programme study. comments provided by colleagues across (CSP)—a national initiative that pro- the World Bank Group. Gemechu Aga, vides a range of support mechanisms More than 300 architects, builders, Austin Kilroy and Michelle Gomes Souto to South Africa’s eight metropolitan construction experts, lawyers, convey- reviewed the full text. Experts in each of municipalities and the broader intergov- ancers, electrical contractors, utility the five indicator areas measured were ernmental environment, to strengthen providers, freight forwarders, customs consulted during the drafting process: economic development and growth. brokers, logistics companies and public Jean Arlet, Mayra Alfaro de Morán, María The project was implemented in col- officials contributed to the Doing Business Antonia Quesada Gámez, Maksym laboration with the CSP team compris- in South Africa 2018 report. The project Iavorskyi, Joyce Ibrahim, Inés Zabalbeitia ing David Savage (Program Manager), team extends its special thanks to the Múgica, Nayda Almodovar Reteguis, Roland Hunter (Economic Development national and local government officials Silvia Carolina Lopez Rocha, Jayashree Component Lead) and Shirley Robinson who participated in the project and Srinivasan, Marilyne Florence Mafoboue (Senior Technical Advisor). The South who made valuable comments dur- Youbi and Alessio Zanelli. African Cities Network also participated ing the consultation and data review in the project and its implementation period. Additionally, the team thanks the Paul Noumba Um (World Bank Country through a team led by Geci Karuri Sebina Department of Trade and Industry, the Director) and Rita Ramalho (Senior (Executive Director of Programmes). Department of Justice and Correctional Manager, Global Indicators Group) Services, Eskom, the National Energy provided guidance and leadership. The project was implemented as part Regulator of South Africa, the Office of David Bridgman, Antoni Albert Nogues of the World Bank Urban Technical the Chief Registrar of Deeds, the Office Comas, Ruth Connick, Kobina Daniel, Assistance Program and funded by the of the Chief Surveyor-General, the South Marie Delion, Sébastien Dessus, Laura State Secretariat for Economic Affairs of African Revenue Service and Transnet Diniz, Nuno Mendes Dos Santos, Sateh Switzerland, SECO. National Ports Authority for their col- Chafic El-Arnaout, Wayde Flowerday, laboration on this study. Julio Fuster, Cemile Hacibeyoglu, Marek Data collection was carried out in col- Hanusch, Jemima Harley, Nokuthula laboration with African Response (whose The names of those contributors wishing Pearlygate Mathobela, Pelayo Gonzalez- team was led by Mamapudi Nkgadima to be acknowledged are listed on the Escalada Mena, Chrissie Kamwendo, and Jan Wegelin and included Nombuso following pages and online at http:// Trimor Mici, Madalina Papahagi, Erika Mbatha and Gerard Naidoo), the Electrical www.doingbusiness.org/southafrica. Prinsloo, Tommaso Rooms, Clare Contractors’ Association of South Africa ACKNOWLEDGMENTS 173 PRIVATE SECTOR Fernando Bolota Independent Power Industries Arilia Du Plessis Smit Sewgoolam Inc. Barry Davis Kwikelec Electrical Henning Dafel HD Constructions CONTRIBUTORS George Canha Ravi Morar James Mather Johann Koch Independent Power Industries Wright Rose-Innes Inc. Mather Electrical JK Designs BUFFALO CITY Michael G. Taberer Sathish Telukram Yolandie Rivas Bartho Saayman C & C Electrical Independent Power Industries MANGAUNG PBK Attorneys Keyper Saayman Johande Ehlers Andre Bronkhorst Shaun Balshaw Hennie Kuyper Samantha Vockerodt Bronks Elektries Drake Flemmer & Joubert Scholtz Inc. Shaun Balshaw Keyper Saayman Orsmond Attorneys Marnus Van Der Merwe Gert Van Der Walt Elroy Jone/Julian Filander Teuni Erasmus Marnus Van Der Merwe GP Prostar Electrical Watts Up Electrical Macintosh Cross & Ian Andrew Theophilus Gravett Schoeman Inc. Architectural Technologist Farquharson Attorneys Adriaan Jean Vermaas Shakira Ahmed Ru Marto Honey & Partners Inc. Ruan Botha Themba Maseko IDC Architects Marto Lafitte & Associates Inc. VDT Attorneys Inc. Marvin Odendaal Phatsoane Henney Attorneys PORT OF CAPE TOWN Nochosi Makwabe Theo Kleinhans Marto Lafitte & Associates Inc. Clifford Evans Impendulo Design Architects Margaretha Jacoba Terblanche Berry & Donaldson Emmanuel Olatoye Rossouw & Conradie Inc. Kevin Van Heusden Theo Ehlers KB Electrical Olat Olat Philip Jakobus Van Heerden Bidvest Panalpina Logistics Eliana De Camillis Swift Electrical Yolande Jooste Goglobal Niehaus McMahon Inc. Wright Rose-Innes Inc. Braam Greeff Graeme Carrington Truspace Michael Walwyn Andrew Marshall Nexlog (Pty) Ltd On Site Electrical Wright Rose-Innes Inc. MSUNDUZI Raven Wampach Paula De Azevedo Savino Del Bene Smith Tabata/East London eTHEKWINI Mark Blomeyer Attorneys Association Carol Mcdonald Blomeyeres Electrical Cox Yeats PORT OF DURBAN Squire Smith and Laurie Inc. Mike Griffen Jeremy Hathorn Blomeyeres Electrical Bidvest Panalpina Gary Stirk FGG Architects Stirk Yazbek Justin Browne Savino Del Bene Rajen Jugdeo Kallideen E R Browne Inc. Johan Raubenheimer I C Meer, Kallideen & Co. Zimsa Construction Joshua Deoparsad PORT OF NGQURA Logan Naidu Electro Technical Agencies Bidvest Panalpina Logistics KPD Electrical CAPE TOWN Kevin Bingham Hellmann Logistics Allimuthoo Muruven FGG Architects Albin Wagner LC Lighting & Electrical CC Craig Jacobs Bisset Boehmke Mcblain Attorneys Grant Williams Imperial Sasfin Logistics Joey Konan Hay & Scott Attorneys Danie Van Zyl Stevelek Electrical John Lawlor Danelek CC Jacques Dormehl JWL Global Maritime Solutions Bafana Dube Rock Power Electrical Danie Du Preez DC Electrical Three Core Electrical Rene Fitzgerald Safe Working Practice PORT OF PORT ELIZABETH Roann Gerber Cedric Paul Botha DC Electrical JOHANNESBURG Jaco Van Der Merwe Bidvest Panalpina Logistics Mark Strydom Tatham Wilkes Attorneys Mohau Romeo Tsusi Adaptive Energy Consulting Graeme Lennie Herold Gie Attorneys Tatham Wilkes Attorneys Graeme Simon Cretney Gabs Pather Alive Architecture Manquoba Khuboni Jakupa Architects and Thubalethu Architects TSHAWNE Urban Designers Nicole Sauli-Koren L. Sidney Lefaso Gert Cloete BBM Inc. Jan Olivier Tomane Moteane Architects C4 Electrical Janco Electrical Mathew Tong Ian Patterson-Roberts Dale Snyman Electrozone Electrical Grant Hill Tomlinsonmnguni James Inc. Cilliers & Reynders Inc. Miller Bosman Le Roux Hill Inc. Litsa Skylakis Jenna Freeguard Hannes Grobler Litsa Skylakis Attorneys Nico Johan Le Roux Tomlinsonmnguni James Inc. Cilliers & Reynders Inc. Miller Bosman Le Roux Hill Inc. Grant Seady Pat Dewes Browynne Mouton Madonse Consulting Engineers Charles Moore Venns Macintosh Cross & Proton Electric Peter Lingenfelder Farquharson Attorneys MMC Construction Thomas Vollmer Barend Daniel Esterhuysen NELSON MANDELA BAY Rawlin Wales Caryn Myers Neil Esterhuysen & Associates Inc. Anda Maqanda Myers Attorneys Llewellyin September AM Group Bradey Theron South Africa Board of Sheriffs Giuseppina Amore Neil Esterhuysen & Associates Inc. BDLS Attorneys Myers Attorneys Jasper Blokland Moses Nobeni Dawid Bester Neil Esterhuysen & Associates Inc. Van Der Merwe Nomonde Gxilishe Ca Du Toit Electrical Misezewski Architects Myers Attorneys Sabeir Ismail Herman Bekker Sheriff Henry Williams Goldbert & De Villies Inc. EKURHULENI Private Consultant Barry Kok Moses Masvosva Graham Clarke 50 HZ Electrical Heather Dodd Electrical & Plumbing Graham Clarke Electrical Savage + Dodd Architects Marnus Botes Jean-Paul Zietsman Joubert Galpin Searle Dippenaar and Lapage I. Adimoolum Hub Architects Sheriff 174 DOING BUSINESS IN SOUTH AFRICA 2018 PUBLIC SECTOR eTHEKWINI Ntsikelelo N.E. Tyu Mangaung Metropolitan Claire Norton CONTRIBUTORS City of eThekwini Municipality Metropolitan Municipality BUFFALO CITY Daniels Pentasaib MSUNDUZI Nomatamsanqa Sipuka City of eThekwini Clive Anthony Buffalo City Metropolitan Metropolitan Municipality Msunduzi Metropolitan Municipality Municipality Gabriel Motilal Nzondelelo Mbongo City of eThekwini George Lebelo Buffalo City Metropolitan Metropolitan Municipality Msunduzi Metropolitan Municipality Municipality Marcel Keuter Siyabonga Kakaza City of eThekwini Lindokuhle Mahlaba Buffalo City Metropolitan Metropolitan Municipality Msunduzi Metropolitan Municipality Municipality Musa Mbhele Zamuxolo Nyamza City of eThekwini Radha Gounden Buffalo City Metropolitan Metropolitan Municipality Msunduzi Metropolitan Municipality Municipality Rajesh Raghubar Jéan Smit City of eThekwini Electricity Department of Buffalo Metropolitan Municipality NELSON MANDELA BAY City Metropolitan Municipality Tracy Hutton Mthulisi Msimanga Francois Goosen City of eThekwini Nelson Mandela Bay Magistrates’ Court East London Metropolitan Municipality Metropolitan Municipality Khululekile Feliti Avarn Kooblal Pumza Gwabeni Magistrates’ Court East London eThekwini Electricity Nelson Mandela Bay Metropolitan Municipality Bonsani Radebe CAPE TOWN eThekwini Electricity Schalk Potgieter Nelson Mandela Bay Cheryl Walters Jay Kalichwan Metropolitan Municipality City of Cape Town eThekwini Electricity Metropolitan Municipality Yonke Gesha Livien Naidoo Nelson Mandela Bay Jaco Van Der Westhuizen eThekwini Electricity Metropolitan Municipality City of Cape Town Metropolitan Municipality Roy Wienand eThekwini Electricity PORT OF CAPE TOWN Pieter Koekemoer City of Cape Town Henson Msongweni Metropolitan Municipality JOHANNESBURG Nicholas Madlebe Pieter Terblance Heather Trumble City of Cape Town Building Development Management Petrus Mouers Metropolitan Municipality of City of Johannesburg Zingiza Kwedana Trevor Blake Laban Naidoo City of Cape Town Building Development Management Metropolitan Municipality of City of Johannesburg PORT OF PORT ELIZABETH Hugh Cole Patt Mazibuko Tshifhiwa Kenneth Mulaudzi Electricity Generation and Building Development Management South African Revenue Distribution Department of City of Johannesburg Service (SARS) of City of Cape Town Metropolitan Municipality Jacques Maart City of Johannesburg TSHAWNE Ismail Jefferies Augustine Makgata Electricity Generation and Dickie Govender City Power City of Tshwane Metropolitan Distribution Department Municipality of City of Cape Town Metropolitan Municipality Patrick O’halloram City Power Samuel Chepape City of Tshwane Metropolitan Leslie John Recontre Municipality Electricity Generation and Riaan Swanepoel Distribution Department City Power Tsholofelo Makgwa of City of Cape Town City of Tshwane Metropolitan Sipho Gamede Metropolitan Municipality Municipality City Power Peter Jaeger Tony Whittaker Electricity Generation and NATIONAL DEPARTMENTS City Power Distribution Department of City of Cape Town Pieter Du Rand Gina Zanti Metropolitan Municipality Chief Director Court Services Development Planning Land Use Development Management Rajendh Salig EKURHULENI Office of the Chief Surveyor-General Baby-Girl Chuene MANGAUNG Reggie Hammond City of Ekurhuleni Sabata Mofokeng Office of the Chief Surveyor-General Metropolitan Municipality Mangaung Metropolitan Municipality Thomas Baloyi Modise Maimane Office of the Chief Surveyor-General City of Ekurhuleni Bheki S. Mthembu Metropolitan Municipality Mangaung Metropolitan Municipality Otsile Maseng City of Ekurhuleni Broderick Chiloane Metropolitan Municipality Mangaung Metropolitan Municipality www.doingbusiness.org/southafrica Schweizerische Eidgenossenschaft Confédération suisse Confederazione Svizzera Confederaziun svizra Swiss Confederation Federal Department of Economic Affairs, Education and Research EAER State Secretariat for Economic Affairs SECO