E-toll (Etoll) gantry on the N1. Picture: Chris Collingridge 823

Johannesburg - A new study from Grant Thornton reveals South Africa’s lack of dynamic business growth opportunities places it 54th out of 60 countries.

According to the latest Grant Thornton Global Dynamism Index (GDI), which ranks the business growth environments of 60 leading countries, South Africa has slipped two places in the global rankings from the previous report released two years ago. The rankings look at countries in Europe, the Americas and developing markets.

The GDI combines 22 indicators, including GDP growth, R&D spend, regulatory risk, access to finance and labour productivity, across five growth areas to identify the best business growth environments.

The index, released on Monday, ranks the development of the business growth environments of 60 of the world's largest economies over the past 12 months. It also correlates and compares these results with the perceptions of business leaders from Grant Thornton’s International Business Report (IBR) about operating in different markets.

South Africa fares worst in the labour and human capital indicator, lying second last on the list of 60 countries. This is due to the 25.1 percent unemployment rate and labour productivity growth being measured at negative 0.4 compared to 0.6 in 2012.

“Overall, the South African economy has actually performed in line with the previous study apart from the declines in labour productivity, and a further decline in inward direct investment,” says Ian Scott, CEO at Grant Thornton Cape. “The latter is less of a reflection on South Africa and can be ascribed to the emerging market contagion that has seen global investment shifted from perceived fragile economies.

“However, systemic inhibitors to the country’s business dynamism remain and need to be addressed if we are to realise the potential of what remains one of the most advanced economies on the continent.”

Scott says a lot of work is required to lift South Africa into the top 30 most dynamic economies in the world, which could be achieved by creating a more business-friendly environment.

Singapore, which tops the GDI study, is noted for its robust, broad-based offer to dynamic businesses for its financing environment, and ranking in the top 25 in the economics and growth indicators.

Scott adds it is laudable that South Africa ranks highly for historical advantages such as its corporate tax (12th), the quality of overall financial regulatory system (20th), legal and regulatory risk (32nd). The country lies second for growth in broadband penetration and has also improved its total IT spend to be placed 15th on the list.

“This performance is highly commendable, but we need to seriously look at the factors that are still holding us back,” Scott says. “Some solutions which would certainly bolster our business environment include scrapping exchange controls, easing the business operating environment and addressing the inefficiencies inherent in state-owned enterprises.

“The answers themselves are not overly complicated, but implementing the changes requires a frank and open dialogue between government and business on how we can jointly overcome barriers to efficiency thereby moving the economy forward.

“Creating a more dynamic economy will help address many of the national imperatives such as unemployment, poverty and inequality,” Scott notes.

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Adapted from a press release