South Africa has been ranked 53rd this year in the World Economic Forum’s The Global Competitiveness Report 2013-2014, which assesses the competitiveness landscape of 148 economies, providing insight into the drivers of their productivity and prosperity.
Sub-Saharan Africa as a whole continues its impressive growth rate of close to 5% in 2012 (with similar projections for the next two years), providing something of a silver lining in an otherwise uncertain global economy.
Indeed, only emerging Asia registers higher growth. Growth has largely taken place on the backs of strong investment, favourable commodity prices, and a prudent macroeconomic stance.
There are, however, some regional variations, and in fact, in terms of underlying competitiveness, sub-Saharan Africa continues to reflect one of significant regional variations in the GCI, ranging from Mauritius (overtaking South Africa and coming in at 45th this year) to the lowest ranked Chad at 148th.
Economies with closer ties to advanced economies, such as South Africa, have not yet returned to pre-crisis growth rates.
More generally, sub-Saharan Africa as a whole trails the rest of the world in competitiveness, requiring efforts across many areas to place the region on a firmly sustainable growth and development path going forward.
The region continues to register a profound infrastructure deficit. In addition, sub-Saharan Africa overall continues to underperform significantly in providing health and basic education (only Mauritius and Seychelles rank in the upper half of the rankings). Higher education and training also need to be further developed.
The region’s poor performance across all basic requirements for competitiveness stands in stark contrast to its comparatively stronger performance in market efficiency, where particularly the region’s middle-income economies fare relatively well (South Africa, Mauritius, and Kenya rank in the top 20% in financial market development).
Moving forward, technological uptake continues to remain weak, with only three economies (South Africa, Mauritius, and Seychelles) featuring in the top half of the overall GCI rankings on this pillar.
However, South Africa this year overtook Brazil, to place second among the BRICS (Brazil, Russia, India, China and South Africa) countries.
The country does well on measures of the quality of its institutions (41st), including intellectual property protection (18th), property rights (20th), and in the efficiency of the legal framework in challenging and settling disputes (13th and 12th, respectively). The high accountability of its private institutions (2nd) further supports the institutional framework.
Furthermore, South Africa’s financial market development remains impressive at 3rd place. The country also has an efficient market for goods and services (28th), and it does reasonably well in more complex areas such as business sophistication (35th) and innovation (39th).
But the country’s strong ties to advanced economies, notably the euro area, make it more vulnerable to their economic slowdown and likely have contributed to the deterioration of fiscal indicators, and our performance in the macroeconomic environment has dropped sharply (from 69th to 95th).
Low scores for the diversion of public funds (99th), the perceived wastefulness of government spending (79th), and a more general lack of public trust in politicians (98th) remain worrisome, and security continues to be a major area of concern for doing business (at 109th).
Building a skilled labour force and creating sufficient employment also present considerable challenges. The health of the workforce is ranked 133rd out of 148 economies – the result of high rates of communicable diseases and poor health indicators more generally.
The quality of the educational system is very poor (146th), with low primary and tertiary enrolment rates.
Labour market efficiency is poor (116th), hiring and firing practices are extremely rigid (147th), companies cannot set wages flexibly (144th), and significant tensions in labour-employer relations exist (148th).
The EF believes that raising educational standards and making the labour market more efficient will thus be critical in view of the country’s high unemployment rate of over 20%, with the rate of youth unemployment estimated at close to 50%.
