11 things businesses hate about South Africa

 ·9 Jun 2015
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South Africa has continued its slide down the Global Competitiveness Index thanks to poor levels of education and bad labour policies which scare businesses away.

This is according the World Economic Forum’s (WEF) Global Competitiveness Index for 2015, which assesses the competitiveness landscape of 144 economies, providing insight into the drivers of their productivity and prosperity.

The Index and accompanying report is the most comprehensive assessment of national competitiveness worldwide, according to the WEF.

Poor health, poor education and worsening labour conditions in the country South Africa have continued to drag the country down the index, despite it offering one of the most mature and secure investment markets in the world.

South Africa has slipped to 56th out of 144 countries across the world in 2015, down from 53rd position in 2014, and from 52nd position in 2013.

It costs three times more to export goods in South Africa than it does in China

Despite the drop, South Africa still remains the second most competitive market on the African continent, behind Mauritius.

However, the gap between Africa’s number one and number two competitive economies has widened, as Mauritius has actually climbed the index to 39th, from 45th in 2014.

The report specifically points out that trade costs are one of the biggest factors hitting competitiveness in most countries on the continent compared to other developing emerging markets.

For example, while South Africa has the lowest trade costs on the continent, to export a standard 20-foot container still costs three times more in the country than in an economy such as China.

Looking at the BRICS economies, South Africa ranks above India (71st) and Brazil (57th), but under Russia (53rd) and China (28th).

Top 15 most competitive countries in Africa

Africa Global Country Score
1 39 Mauritius 4.52
2 56 South Africa 4.35
3 62 Rwanda 4.27
4 72 Morocco 4.21
5 74 Botswana 4.15
6 79 Algeria 4.08
7 87 Tunisia 3.96
8 88 Namibia 3.96
9 90 Kenya 3.93
10 92 Seychelles 3.91
11 96 Zambia 3.86
12 106 Gabon 3.74
13 107 Lesotho 3.73
14 111 Ghana 3.71
15 112 Senegal 3.70

South Africa’s global competitive performance

South Africa performs very well in communications, distribution, insurance, and other commercial services, but is average or below average in other sub sectors, the report said.

South Africa’s strongest points are in the financial sector, where it ranks 7th for financial market development out of the 144 countries across the world covered by the WEF report.

South Africa topped the rankings for the strength of its auditing and reporting standards, as well as for the regulation of security exchanges. It ranked 2nd in the world for protection of minority shareholders’ interests, and 3rd for the efficacy of corporate boards.

It also ranks relatively highly in terms of its capacity for innovation (37th overall), particularly in terms of business sophistication (31st).

However, competitive indicators which act against the country include poor levels of health and primary education (132nd) and an ineffecient labour market (113th), which drag on competitiveness.

South Africa’s quality of maths and science education is ranked as the worst in the world

Specifically, South Africa ranked 133rd for the quality of primary education in the country, and the quality of the education system as a whole (including higher education) was ranked 140th. The quality of math and science education was rated the worst in the world, at 144th.

The only indicator to match the country’s last-place maths and science was co-operation in labour-employer relations, where the country was again ranked as the worst.

Hiring and firing practices were ranked 143rd, and flexibility in wage determination and pay and productivity were also major weak points at 139th and 136th, respectively.

The WEF identified the top 11 factors (ranked by score), which are the most problematic for doing business in the country, according to business leaders across the world. This shows that labour and education – as well as government corruption and inefficiency are the biggest concerns for business.

11 things businesses hate about South Africa

  1. Restrictive labor regulations – 19.8
  2. Inadequately educated workforce – 16.9
  3. Inefficient government bureaucracy – 14.8
  4. Corruption – 11.0
  5. Inadequate supply of infrastructure – 9.8
  6. Policy instability – 7.4
  7. Poor work ethic in national labor force – 5.2
  8. Insufficient capacity to innovate – 3.0
  9. Crime and theft – 2.5
  10. Access to financing – 2.2
  11. Foreign currency regulations – 2.1

Scores were determined by asking business leaders across the world to select the five most problematic issues for doing business in the country, and to rank them between 1 (most problematic) and 5. The scores show the responses weighted according to their rankings.

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