1. Assessment of the Investment Climate Assessment (ICA) of Durban 2015 Presentation of Preliminary Results November 2015

2. Contents Background to the study The Durban Investment Climate Assessment Preliminary Findings: o Responses from ALL Businesses o Sector Specific Findings o Regional Specific Findings Recommendations 1

3. BACKGROUND [CONTEXT WITHIN WHICH THE ICA WAS UNDERTAKEN] 2

4. City Growth Trends 3 mediocre growth rates

5. Source: Stats SA 4 Sustained High Unemployment

6. Business/Investor Confidence 5

7. 6 Weakening Rand Levels

8. 7 Uncertain Electricity Supply

9. 8 Consumer/Buyer Confidence

10. 9 Global GDP Trends

11. Source: UNCTAD World Investment Report, 2015. 10 Global FDI Trends

12. Source: World Bank, 2015. 11 Global FDI Inflows

13. Sector Employment Trends Source: eThekwini Municipality 12

14. The Durban Investment Climate Assessment 13

15. The Study Area Source: eThekwini Annual Report, 2013/14. 14

16. Profile of eThekwini Regions 1. eThekwini IDP 2014/2015 2. eThekwini Best Practice City Commission (BPCC) Office. 3. Companies registered with the Durban Chamber of Commerce & Industry. 15

17. The Survey Population by Region 16

18. The Survey Population by Sector 17

19. The Survey Responses By Region 18

20. The Survey Responses By Sector 19

21. Survey Responses By Size of Business 20

22. Survey Responses by Ownership 21

23. PRELIMINARY FINDINGS - RESPONSES FROM ALL BUSINESSES - 22

24. Key Responses from All Sectors Key macro-economic issues – Electricity supply – Low Economic Growth/Sales – Weak exchange rates Institutional/City Issues – Low/No business assistance from City – None/Don’t Know about R&D Support – Excessive Red Tape/Bureaucracy – Long turn-around times [Plan, Electricity, Permits, Zoning] 23

25. Key Responses from All Sectors Factors affecting investment decisions – Cost of doing business – Uncertainty in electricity supply – Market growth – Unpredictable electricity prices – Availability of incentives Investment Trends – Past & Future investments predominantly <R20ml – Key sectors – Automotive and Property Development – Established local firms more likely to invest outside of Dbn. than foreign firms 24

26. Macroeconomic Factors 25

27. Market Prospects of Local Companies 26 1-2% growth

28. Level of Competition in the Market 27

29. Level of Transparency in the Market 28

30. Supplier and Distribution Networks 29

31. Assistance from the Municipality 30 Limited Outreach Programmes to the medium and large firms to promote the Business Support solutions offered; Require an Outreach Strategy to publicise the city’s Business Support.

32. Use of R&D Services 31 Limited Outreach Programmes to the medium and large firms to promote the R&D support offered. City to form Partnerships with Provincial and Pvt R&D agencies and publicise services to local businesses.

33. Levels of Bureaucracy & Red tape 32

34. Turnaround Times Responses from ALL Companies (%) 33

35. 34 Bureaucracy & Turnaround Times

36. 35 BEST PRACTICE

37. 36 BEST PRACTICE

38. 37 BEST PRACTICE

39. 38 BEST PRACTICE

40. 39 BEST PRACTICE

41. Factors Affecting Investment Decisions 40

42. Past Investment Trends in Durban 41

43. Future Planned Investments 42

44. Future Investment Value by Sector 43 Target Sectors for business support: Automotive, Property Development Target Sectors for BR&E: Manufacturing, Maritime & Tourism Figures dependent on surveys received

45. Future Investment Value: Local vs. Foreign Owned Companies 44 Equal Investment Facilitation Focus to be given to domestic and foreign companies

46. Cost of Electricity 45

47. Cost of Labour 46

48. Cost of Property Rates and Taxes 47 High rates on undeveloped vacant land Higher rates on hospitality sector than manufacturing

49. City/Branch Office Competitiveness 48 Competitive on water, property prices and overall cost of doing business Business Performance linked to Market Size

50. City/Branch Office Competitiveness 49 Competitive on water, property prices and overall cost of doing business Business Performance linked to Market Size

51. Availability of Investment Incentives 50 Poor awareness of investment incentives probably due to poor marketing by the City Inner-City Development Incentives were welcome and utilized

52. Influence of Incentives on Decision Making 51

53. Local Utility Capacity 52 Johannesburg/Cape Town branches less prone to outages due to agreements with resp. city Require early warning (SMS) facility prior to outages (Manufacturing) Support with standby generation costs Agreements with strategic sectors/big business on outage of last resort.

54. Future Infrastructure Needs 53 Road upgrades in Outer West (Giba Gorge, Stockville Rd, R103) and Umbogintwini/South Gate (Moss Kolnick) Effluent Management in south (Umbogintwini)

55. 54 Future Infrastructure Needs Road upgrades in Outer West (Giba Gorge, Stockville Rd, R103) and Umbogintwini/South Gate (Moss Kolnick) Effluent Management in south (Umbogintwini)

56. Integration with Global Value Chains 55 Key investment opportunities in manufacturing (textiles, chemicals), automotive (R&D, key components) Key Market opportunities manufacturing (beverages – W. Africa), Auto Value Chain (imports) generally affected by negative (R/$)exchange rate

57. Distribution of Suppliers 56 Soya: Argentina, Malt: World, Automotive Components: Japan, Thailand, EU HDPE – Europe, Packaging: China, Peat/Agri. Additives: East Asia, Textile: China, India, Bangladesh, Chemicals: Brazil

58. Distribution of Customers 57 Chemicals: Malaysia, Europe Textiles: Southern Africa Auto: World Maritime: World

59. PRELIMINARY FINDINGS - SECTOR SPECIFIC FINDINGS- 58

60. 59 ALL SECTORS: FUTURE MARKET TRENDS/FORECAST (% RESPONSE)

61. 60 ALL SECTORS: LEVEL OF COMPETITION (% RESPONSE) Competition mainly from imports

62. 61 ALL SECTORS: LEVEL OF TRANSPARENCY (% RESPONSE)

63. 62 ALL SECTORS: MUNICIPAL BUSINESS SUPPORT SERVICES (% RESPONSE)

64. 63 ALL SECTORS: BUREAUCRACY/RED TAPE (% RESPONSE)

65. PRELIMINARY FINDINGS - REGION SPECIFIC FINDINGS- 64

66. 65 ALL REGIONS: FUTURE MARKET TRENDS/FORECAST (% RESPONSE)

67. 66 ALL REGIONS: LEVEL OF COMPETITION (% RESPONSE)

68. 67 ALL REGIONS: LEVEL OF TRANSPARENCY (% RESPONSE)

69. 68 ALL REGIONS: MUNICIPAL BUSINESS SUPPORT SERVICES (% RESPONSE)

70. 69 ALL REGIONS: BUREAUCRACY/RED TAPE (% RESPONSE)

71. 70 ALL REGIONS: INFRASTRUCTURE REQUIREMENTS (% RESPONSE)

72. RECOMMENDATIONS 71

73. Preliminary Recommendations Improved outreach programme to medium and large businesses: promote business support options, incentives, key customer engagements, receive feedback on burning issues, etc. Investigate and unplug bottlenecks in the planning, zoning and business licensing Units (utilise e-government solutions) Develop solutions for better management and communication of electricity outages (Apps); Manage crime and grime in tourist and business corridors (ICC-Beach, Victoria Embankment, Warwick Junction, uShaka Marine – Sun Coast Pavillion; Economic Growth Strategies to deal with Investment Promotion & Facilitation, Trade Support, BR&E, Education & Skills Development, Improvements to Lifestyle infrastructure,) Annual/Online Investment Climate Surveys against specific KPIs; and Publication of Survey Results and improvements achieved against the KPI’s;

74. Desired Scenario 73 higher growth rates

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