This post assesses the regulatory barriers that affect market access and competition in the services sector. South Africa’s OECD Services Trade Restrictiveness Index levels are higher than OECD medians for all industries except road freight and insurance in 2022. Apart from insurance services, all other services sectors covered by the OECD Services Trade Restrictiveness Index have experienced tightening restrictions since 2014.
Below I quote from sections in the OECD report:
- that key services sectors in South Africa such as commercial banking “are mostly affected by burdensome licensing procedures for companies and market distortion due to differential rules applicable to state owned companies.
- Moreover, stringent economy-wide regulations include labour market tests for foreign services suppliers. Foreign investors starting up operations in South Africa must ensure that 60% of total employment is secured for local employees.
- Procedures to register a company are significantly more numerous and longer than best practice. Preferential treatment for local suppliers under the national procurement law, whose objective is to promote entrepreneurship and support small and medium sized enterprises as part of the Broad-Based Black Economic Empowerment policy framework, increases the stringency of the regulations in all sectors.
- Policy changes affecting all services sectors have tightened the regulatory regime in South Africa. These changes include, among others, the introduction of investment screening mechanisms in 2018 and the increase in the number of documents required to obtain a business visa since 2017.”
The OECD STRI benchmarks services market regulations against the global best practice. Based on the qualitative information in the database, composite indices quantify the identified restrictions across five standard policy categories, with values between zero and one. Complete openness to trade and investment gives a score of zero, while being completely closed to foreign services providers yields a score of one.