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SA’s competitiveness fall reflects relative strength of other emerging economies

24th September 2010

By: Terence Creamer
Creamer Media Editor


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South Africa slipped to 54th position from 45th in the World Economic Forum’s (WEF’s) latest Global Competitiveness Index, but remained the highest ranked country in sub-Saharan Africa – Switzerland continued to top the 2020/11 ranking, followed by Sweden and Singapore.

The US, which ceded its leading position to Switzerland in the 2009/10 index, fell a further two places to fourth, owing to its macroeconomic imbalances, a weakening of public and private institutions and lingering concerns about the state of its financial markets.

The compilers stated that South Africa’s performance had remained “stable” and that the decline reflected improvements in other countries.


Besides China, which rose from 29th to 27th, South Africa ranked higher than two other so-called ‘Bric’ economies, Brazil and Russia. India came in at number 51, having been ranked 49th in the 2009/10 index. Brazil slipped from 56th to 58th, and Russia remained stable at number 63.

In sub-Saharan Africa, South Africa was followed closely by Mauritius (55th), which was followed, in turn, by Namibia (74th), Botswana (76th) and Rwanda (80th).


The country performed well on intellectual property protection (27th), property rights (29th), the accountability of private institutions (3rd), and goods market efficiency (40th). South Africa’s financial market development ranked a creditable 9th.

South Africa performed “reasonably well” in more complex areas, such as business sophistication (38th) and innovation (44th), benefiting from good scientific research institutions (29th) and strong collaboration between universities and the business sector in innovation (24th).

But the authors warned that, for South Africa to further enhance its competitiveness, it would need to address its poor labour market efficiency (97th), inflexible hiring and firing practices (135th), a lack of flexibility in wage determination by companies (131st), and poor labour-employer relations (132nd).

The report follows on one of the most active periods of strike activity in recent times, with industrial action having been taken in a range of sectors, from transport and mining through to healthcare and education.

A protracted public servants strike, which affected schools and hospitals, was suspended in early September to allow for a resumption of talks between government and public- sector unions.

The report argued that efforts would also have to be made to increase the university enrolment rate of only 15%, which placed the country 99th overall.

Further, South Africa’s infrastructure, which ranked 63rd, required upgrading, while the “poor security situation” remained an important obstacle to doing business in South Africa.

“The business costs of crime and violence (137th) and the sense that the police are unable to provide protection against crime (104th) do not contribute to an environment that fosters competitiveness,” the report stated.

Interestingly, the document, which was released in Beijing, China, coincided with the release of improved crime statistics, which showed that South Africa’s murder rate fell to its lowest level since 1995.

The number of people killed per 100 000 dropped to 34,1 for the year to the end of March 2010, from 37,3 in the previous year. However, the total remained high at 16 834. Vehicle hijacking and street robbery fell, as did the number of reported sexual offences, bank robberies and cash-in-transit attacks. But burglaries and commercial crimes increased.

The WEF report argued that another major concern was the health of the South African workforce, where the country ranked 127th out of 139 countries.

“Improvements in these areas will enhance South Africa’s productivity and competitiveness.”

Meanwhile, China continued to move up the rankings along with several other Asian countries, while Germany improved by two places to 5th position.

The Nordic countries continue to be well positioned in the ranking, with Sweden, Finland (7th) and Denmark (9th) among the top ten, and with Norway at 14th.

After falling in the rankings over recent years, the UK improved one position to 12th.

Columbia University’s Xavier Sala-i-Martin, who coauthored the report, said that, amid concerns about the outlook for the global economy, policymakers should “not lose sight of long-term competitiveness fundamentals amid short-term challenges”.

“A competitiveness-supporting economic environment can help national economies to weather business cycle downturns and ensure that the mechanisms enabling solid economic performance going into the future are in place,” Sala-i-Martin said.

Slowing Recovery
Another piece of less-than-welcome news, meanwhile, emerged earlier this month in a report by the Organisation for Economic Cooperation and Development (OECD)

In its latest Interim Economic Assessment, the OECD stated that the slowdown in the pace of the global economic recovery was “more pronounced” than previously anticipated.

However, chief economist Pier Carlo Padoan was still of the view that another downturn was “unlikely”, despite the loss of momentum and increased uncertainty.

The report, which was released in Paris, France, indicated that annual-ised growth in G7 countries could be 1,5% in the second half of 2010, which was lower than the OECD’s May estimate of 1,75%.

While Padoan described the threat of another downturn as small, he acknowledged that it was not yet certain whether the loss of momentum was temporary, or whether it signalled greater underlying weaknesses in private spending at a time when policy support was being removed.

“If the ongoing slowdown is temporary, the appropriate policy response would be to postpone the withdrawal of monetary support for a few months, while maintaining planned budget consolidation to address unsustainable fiscal positions,” he argued.
“On the other hand, if the slowdown reflects longer-lasting forces bearing down on activity, additional monetary stimulus might be warranted in the form of quantitative easing and commitment to close-to-zero policy interest rates for a long period. Where public finances permit, planned fiscal con-solidation could be delayed.”


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