SOUTH AFRICA’s GLOBAL COMPETITIVENESS – MORE SLIPPAGE
By Steuart Pennington
In the 16 years that I have been populating www.sagoodnews.co.za with ‘positive and informed’ articles and facts – and in the 600 or so presentations that I have done on SA around the world – I have always been able to refer to the World Economic Forum’s Global Competitiveness Report (WEF-GCR) and the surprising number of measures where we are WORLD BEATER’S.
The WEF-GCR 2018 report evaluates the world’s 140 largest economies, as measured by GDP, and compares their competitiveness across 12 pillars using +/- 120 measures.
SA has never ranked lower that 56th (2014). In fact subsequent years saw us improve to 49th (2015) and then 47th (2016).
This year we slipped to 67th (2018) – the lowest ever. (It breaks my heart ☹)
The devil is always in the detail
WEF economist Roberto Crotti explains, “The latest report uses a new methodology based on the rapid transformation of the global economy due to the fourth industrial revolution. We have used a considerable number of new measures, having said that, compared with the previous methodology the picture would look much the same. But, many of the factors that will have the greatest impact in driving competitiveness in SA in the future have not been the focus of major policy decisions in the past.”
South Africa ranks 67th globally—with a score of 60.8—and attains the second spot in Sub-Saharan Africa. Among its strengths, South Africa is home to a large market size (68.4), good infrastructure (68.6) and a well-developed financial system (82.1, 18th). More specifically, South Africa’s financial sector offers a relatively balanced access to various sources of finance, including credit (100.0, 11th), venture capital (33.0, 63rd), equity (100.0, 2nd) and insurance (100.0, 3rd). In addition, South Africa’s innovation capability is relatively advanced (44.3, 46th), although limited by insufficient research and development (37.5).
Among its weaknesses, South Africa’s performances on the Health pillar (43.2, 125th) and Security (43.7, 132nd) sub-pillar are among the worst in the world. Driven by high incidence of communicable diseases and high rate of homicides (34 per hundred population, 135th), these factors are major challenges for the economic and human development of the country.
Low ICT adoption (46.1, 85th) is another important restraint on South Africa’s competitiveness. Only 54% of the adult population has access to the internet, and only 70 out of 100 people have subscribed to mobile-broadband services (66th). Similarly, the digital skills (116th) and critical thinking skills (78th) of the current workforce are inadequate for the progress of a successful economy in the Fourth Industrial Revolution.
So where do we do best and worst?
|Measure – Best (Top 20 country)||2018|
|Market Capitalization % GDP||2|
|Insurance Premiums % GDP||3|
|Cost of starting a business % GNI per capita||4|
|Road connectivity index||5|
|Mobile cellular telephone subscriptions /100 pop||9|
|Conflict of interest regulation||11|
|Domestic credit to private sector % GDP||11|
|Labour tax rate %||14|
|Internal labour mobility||20|
|Measure – Worst (Bottom 20 country)||2018|
|Healthy life expectancy||124|
|Corporation in labour-employer relations||136|
|Flexibility of wage determination||133|
|Time to start a business – days||128|
Crotti goes on to say “Successful economies in the 4IR (4th Industrial Revolution) era need to:
- Be resilient, building buffers and economic mechanisms to prevent financial crises or mass unemployment and to respond to external shocks.
- Be agile, embracing change rather than resisting it. Companies, public policy-makers and workers should be able to quickly adapt how they operate and to take advantage of the opportunities to produce goods or provide services in new ways.
- Build an innovation ecosystem where innovation is incentivized at all levels and all stakeholders contribute to create the best conditions for new ideas to emerge, to be financed and commercialized as new products and services.
- Adopt a human-centric approach to economic development. This means recognizing that human capital is essential for generating prosperity and that any policy that adversely affects human factors’ potential will reduce economic growth in the long run. As a consequence, policy-making will have to ensure that the speed of change and the introduction of new technologies ultimately translate into better living conditions.
THE SURVEY 2018 IN NUMBERS
The 2018 edition captured the views of 16,658 business executives in 140 economies between January and April 2018
In South Africa we had 145 Respondents (last year 170) from Business Leadership South Africa and Business Unity South Africa.
Clearly the legacy of the Zuma era has taken its toll. We used to excel in the measures of auditing and reporting (was 2nd now 55th); soundness of the banking system (was 2nd now 62nd); efficacy of legal framework (was 9th now 40th); and property rights (was 20th now 97th).
Pleasingly we do quite well on a number of new measures; social capital (37th); freedom of the press (26th); efficiency of product clearing process (34th); worker’s rights (25th); gross domestic product PPP $billions (30th); insolvency regulatory framework (24th); willingness to delegate authority (34th); Scientific publications (34th)
Business Day’s Sunita Menon concludes “According to the report, SA’s greatest competitive advantages are its financial system (ranked 18th), market size (35th) and innovation (46th).
However, the country should improve in areas including health (125th), institutions (69th) and business dynamism (56th). While SA has been commended for its strong institutions by the credit rating agencies and does well in terms of social capital and budget transparency, the report says the government could be more future-oriented.
SA only lags behind Mauritius in sub-Saharan Africa. In terms of the Brics nations, SA beats India and Brazil but trails far behind Russia and China.
The US claimed the top spot for the first time in a decade.