Durban and KwaZulu-Natal are leading much of the rest of South African when it comes to an attractive social environment and infrastructure. But there’s room for improvement if the region is to tap its true potential as a destination of choice for local and international investors.
That’s the key finding of a comprehensive Durban and KwaZulu-Natal investment location survey, conducted by leading auditing and business advisory firm Deloitte.
The study was compiled with assistance from Durban Investment Promotion and Trade and Investment KwaZulu-Natal. It surveyed board members, CEOs and managing directors from industries and locations across the region.
Local and foreign investors generally look for robust economic growth, attractive infrastructure, sound public finances and good administration, developed financial market, good innovative capacity, a highly skilled workforce and attractive social environment.
The study found that Durban and KZN’s most attractive characteristics for investors are its great social environment and its competitive transportation, utility, property and technology infrastructure.
Investment opportunities
The tourism industry and Durban’s location as a transport and logistics hubs are seen as the main investment opportunities. Construction and manufacturing have been identified as additional investment drivers.
Ruwayda Redfearn (pictured), Office Managing Partner of Deloitte in KZN said, “In terms of overall investment attractiveness, our survey panel rates Durban as less attractive than Cape Town and Johannesburg, but on par with Pretoria and much more attractive than Richards Bay, Port Elizabeth, East London or Pietermaritzburg”.
The Deloitte study found that Durban and KZN is lagging Johannesburg and Gauteng when it comes to factors such as robust economic growth, developed financial market and availability of highly skilled workforce.
The region also lags behind Cape Town and the Western Cape in the area of good innovation capacity and to some extent with regard to sound public finances and good administration.
Financial soundness
Durban performs strongly for financial soundness, municipal compliance and selected service delivery areas. However, replication in other municipalities across KZN is needed to improve overall perceptions.
Durban and KZN also lead other locations in South Africa as a destination of choice for certain investors. The overall picture is encouraging with more than 56 percent of respondents planning to invest in Durban and 60 percent looking to invest in KZN.
Most of these investments will be expanding existing operations or establishing new operations, acquisitions and joint ventures.
Only 28 percent of respondents plan to move some of their operations out of Durban and 25 percent out of KZN. The reasons for such relocations include better growth opportunities, the need to move closer to customers and other more attractive overall factors in the new location.
According to the study, in order to retain and attract new investors, the region will need to tackle deterrents such as areas of poor municipal management and service delivery which do not match up to investor needs and timelines.
Stumbling blocks
Other stumbling blocks flagged by those surveyed were a lack of political stability and clear leadership of late, a deteriorating and incomplete infrastructure in certain parts of KZN, as well as unnecessary red tape and a high level of corruption.
Almost three quarters of respondents think that the focus should be on improving city management and service delivery, while 70 percent wanted improved administration and red tape to be minimised.
While some pockets of excellence in service delivery exist, there is still much room for improvement in the perception of many investors.
Redfearn said that besides these challenges that the municipality and the province are facing, there are also great investment opportunities for investors to take advantage of.
How KZN can compete
The large majority of respondents (81 percent) flagged tourism as one of Durban/KZN’s greatest investment assets. Many respondents believe that Durban’s natural beauty and unrivalled beachfront can easily compete with Cape Town and international locations if it was promoted properly.
Sixty-one percent believe transportation and logistics will be another key investment driver over the next five years and half of all respondents identify construction and manufacturing as growth sectors.
Durban harbour, the King Shaka Aerotropolis, main railway line and major roads will not only benefit tourism, but help to establish Durban/KZN’s true potential as a true gateway into and out of Southern Africa.
This will be essential in light of heightened transportation and logistics competition in KZN with the flourishing ports of Maputo and Beira in Mozambique.
“To increase and maintain the attractiveness and competitiveness of Durban and KZN as investment locations, a more collaborative approach is needed that involves all stakeholders for investment growth,” Redfearn said.
“This includes but is not limited to municipal and provincial governments, investment promotion agencies, business community, media, civil society organisations as well as all citizens.”