Johannesburg - Although South Africa has managed to improve its competitiveness in the last year - thanks mostly to ICT - challenges remain in areas such as labour regulations and inefficient government bureaucracy.
The World Economic Forum’s Global Competitiveness Report for 2015/16, published on Wednesday, shows the country has managed to improve its position seven places to come in at 49 out of the 140 countries included in the survey. There are around 195 countries globally, depending on which source is taken as gospel.
South Africa improved its ranking, to reverse its four-year downward trend, thanks largely to increased uptake of ICTs—especially higher Internet bandwidth—and improvements in innovation (up by five places to 38th), says the report, authored by the World Economic Forum’s Klaus Schwab.
The report notes the improvement in innovation now places SA as the sub-Saharan African country that is most innovative.
Kenya, often seen as ahead of SA when it comes to innovation, ranks at 41 in innovation and 99 overall, while Nigeria - another key power in the region, ranks at 124 overall, and at 117 for innovation.
Efficiency
The World Economic Forum also notes that South Africa hosts Africa’s most efficient market, with a ranking at 12, and benefits from a sound goods market, coming in at 38th spot.
These factors, along with strong domestic competition (28th place) and what the WEF says is an efficient transport infrastructure (38th), also aided the country in bolstering its competitiveness ranking.
The Global Competitiveness Report’s competitiveness ranking is based on the WEF’s Global Competitiveness Index, which it developed in 2004.
This index defines competitiveness as the set of institutions, policies and factors that determine the level of productivity of a country.
GCI scores are calculated by drawing together country-level data covering 12 categories – its pillars of competitiveness – that collectively make up a comprehensive picture of a country’s competitiveness. The 12 pillars are: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.
The WEF says SA also benefits from strong institutions (38th), particularly when it comes to property rights - at 24th spot - and an independent legal framework, although the ruling ANC has recently challenged the independence of the judiciary as it over the Omar al-Bashir incident.
More to fix
The WEF notes, however, that SA has several areas of challenge, which includes restrictive labour regulations, inefficient government bureaucracy and inadequate supply of infrastructure.
These were the three items cited by respondents as being the top issues making it difficult to do business. They were followed by policy instability and “inadequately educated workforce”.
Business leaders have recently decried government’s policies - such as new visa rules - as hampering, rather than aiding business.
The lack of suitably qualified staff has also been named as a constraint by the business world.
Crime and theft came in as the sixth-most pressing concern. Figures released on Tuesday showed 17 805 people were murdered in South Africa between last April and the end of March this year. That works out to nearly 49 a day.
The WEF says reducing corruption - with SA scoring in 76th place - and the burden of government regulation (117th) as well as improving the security situation (102nd) would further improve institutions. SA, which has recently seen the return of loadshedding, also needs to “address its inefficient electricity supply, which gives it a mark of 116th.
Its labour market, which the WEF says is “inflexible” ranks it 107th in that category.
“Even more worrisome are health (128th) and the quality of education (120th), where higher secondary enrollment rates will not be enough to create the skills needed for a competitive economy.”
Against our peers
The top performer in the region, which reflects wide regional disparities, is Mauritius at 46th, followed by South Africa, then Rwanda (58th), and Botswana (71st). However, the report notes 15 out of the bottom 20 economies are sub-Saharan African, with Guinea propping up the list last
The other two countries hardest hit by Ebola—Liberia (129th) and Sierra Leone (137th)—also rank low.
Meanwhile, Côte d’Ivoire (91st) and Ethiopia (109th) are this year’s largest improvers: both have strengthened institutions, while Côte d’Ivoire has also improved its financial markets and domestic competition and Ethiopia has made progress in its goods and labor market as well as its business sophistication and innovation.
The WEF notes “sub-Saharan Africa’s solid growth rates—more than 5 percent over the past 15 years—bear witness to the region’s impressive economic potential”.
However, Africa’s levels of productivity remain low.
“The recent fall in resource prices has affected many countries, and the normalisation of US monetary policy may lead to increased investor scrutiny of emerging market risk, undermining growth prospects.
As a result, it says, the region needs to prioritise competitiveness-enhancing reforms.
“The region’s most pressing challenges are weak institutions, poor infrastructure, and insufficient health and education sectors. Improving education and the enabling environment for employment will largely determine whether or not the region will be able to reap the unprecedented growth opportunities of its growing labor force.”
IOL
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