SA's Global Competitiveness in Africa - Is our lunch being eaten?

by Steuart Pennington 

Wesley Lynch, CEO, REALMDIGITAL wrote on our blog recently "Another area on which we’ve been pinning our hopes, our clichéd status of "gateway into Africa", has also increasingly left the business lexicon. Countries like Ghana, Kenya, Egypt, Nigeria, Angola and Mozambique have all become darlings of foreign investment – partly because some have rich natural resources, and partly because they’re managing important industry sectors, if not entire economies, with skill. As a result, the world’s love affair with us is in danger of cooling somewhat, but the good news is we can easily do better. One way to make a certain difference is to produce the right skills in the right focus areas."

So I thought I would do some research on SA’s competitiveness in Africa, what better place to start than the recent Global Competitiveness Report 2012/2013 issued in September by the World Economic Forum?

I wanted to establish answers to the following five key questions:

1. Which are the largest consumer markets in Africa?
2. Which African countries are making the greatest strides in improving their competitiveness?
3. How well does SA do against our closest African competitors on the ‘basics’ of Institutions, Infrastructure, Macro-economic environment and Health and Primary Education?
4. How well does SA do against our closest African competitors in the key competitive measures high of:
   • Public Trust of Politicians,
   • Burden of Government Regulation,
   • Transparency of Govt. Policy,
   • Strength of Auditing and Reporting
   • Overall Infrastructure,
   • Quality of Primary Education,
   • Quality of Higher Education,
   • Quality of Maths and Science Education,
   • Procedures to Start a Business,
   • Co-operation in Labour-Employer Relations?
5. Nigeria, Rwanda, Kenya, Tanzania, Ghana and Mozambique, our nearest geographical competitors have a growing number of competitiveness measures that are in the top 50 (Rwanda – in the top 20!). How does SA’s competitiveness compare?

I will answer these questions below, one at a time. There are a number of tables which you will find both revealing and, in many respects, surprising.

As can be seen from Table 1 below there are 10 sub-Saharan countries that have a population in excess of 20 million people. Only three do not feature in the Global Competitiveness Report: the DRC; Cote d’Ivoire and Angola (Angola did in 2011)

Table 1

2. Which African countries are making the greatest strides in improving their competitiveness?

Table 2 below compares the improvement/slippage of those sub-Saharan countries that appear in the Global Competitiveness Report. Some remarkable changes are revealed: Rwanda has moved up 17 positions in three years, and has 16 measures in the top 20 countries of the 144 that are included (just shows what can be done in a short period of time). Ghana, Zambia, Mali, Burkina Faso, Mauritania and Zimbabwe show marginal improvement, the balance some slippage. Interestingly, of the 10 new entrants to the Global Competitiveness Report over the past three years, eight have been African.

Table 2

*New entrants 2012

3. How well does SA do against our closest African competitors on the ‘basics’ of Institutions, Infrastructure, Macro-economic environment and health and Primary Education?

In Table 3: SA, compared to its African competitors does well in the areas of Institutional capacity, Infrastructure, and Macro-economic environment, and so we should given our history and natural resources. But we are falling behind in the areas of Health and Primary Education, and getting worse as our competitors improve.

Table 3

4. How well does SA do against our closest African competitors in the key competitive ‘risk’ measures of:

• Public Trust of Politicians,
• Burden of Government Regulation,
• Transparency of Govt. Policy,
• Strength of Auditing and Reporting
• Overall Infrastructure,
• Quality of Primary Education,
• Quality of Higher Education,
• Quality of Maths and Science Education,
• Procedures to Start a Business,
• Co-operation in Labour-Employer Relations?

"The devil is always in the detail". Of the 110 measures in the Global Competitiveness Report potential investors will probably examine most closely the 10 highlighted above. As can be seen from Table 4, our performance in five of these critical investment criteria is dismal; we rank last with little sign of improvement going forward.

Table 4

RED is where SA comes last.

5. Nigeria, Rwanda, Kenya, Tanzania, Ghana and Mozambique, our nearest geographical competitors have a growing number of competitiveness measures that are in the top 50 (Rwanda – in the top 20!). How does SA’s competitiveness compare?

SO, JUST HOW MUCH OF OUR LUNCH IS BEING EATEN?

When comparing our major sub-Saharan competitors (Tables 5,6,7,8 and 9), I have, with the exception of Rwanda, highlighted the measures where these countries rank in the top 50 countries of the 144 in the Global Competitiveness report (Rwanda, rankings are top 20). Alongside I have indicated how SA is ranked on the same criterion.

It is not a pretty picture.

SA is falling behind in many critical areas of investment interest, as well as in the building blocks of future competitiveness.

Our lunch is being eaten.

Table 5

Table 6

Table 7

Table 8

Table 9

CONCLUSION

There is no doubt that many sub-Saharan countries are VERY focused on attracting international investment as the interest in Africa grows. It is quite clear that they have a ‘vision’ in this regard, and strong leadership to support it. Paramount is the improvement of their global competitiveness rankings. I am told that Rwanda is intent on becoming the Singapore of Africa.

In SA it seems that our global competitiveness ranking is not a government priority. The National Development Plan makes no mention of it. And I hear via the grapevine that there is a condescending approach towards such rankings – ‘Euro-centric and un-African".

So as we slowly become enveloped in the quicksand of directionless leadership, internecine squabbles, deteriorating state capacity, labour unrest, and negative media coverage the investment world is beginning, in Africa, to look elsewhere.

We will only change that with strong leadership, a clearly articulated vision, and a focussed desire to improve our global competitiveness in the areas that matter most to the global investment community. Starting with the critical ‘pillars’ of Education, Health, Labour Relations and State Capacity is essential. They are the four ‘legs’ of a successful nation.

As we said before, our vision should be:

"By 2030 South Africa will be ranked in the top 25 most competitive nations of the world".

Were we bold enough to state this, and back it up with a sound implementation plan, the world (and maybe the rating agencies) would sit up at listen.

And investment confidence would return.

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