While a new report reveals that South Africa still ranks as the top African economy in terms of its potential for business investment, Nigeria is catching up.
Consulting and financial services firm Grant Thornton ranked South Africa in 14th position out of 27 emerging economies worldwide, in its emerging markets opportunity index.
SA moved up one notch from the prior report, but Nigeria moved up as many as nine places to feature in 17th place.
The research brings together a number of key indicators – economic size, population, wealth, involvement in world trade, growth prospects and levels of development.
Top emerging countries
Mainland China remains way out in front at the head of the index, by virtue of its strong economic growth rates and large consumer market. India, in second place, also has a large population and is forecast to grow robustly over the medium term.
Russia is once again in third place, owing to high GDP per capita and strong exports, especially of natural resources.
Brazil moved above Mexico doe to its strong GDP growth rates in 2010-11, while Turkey, Indonesia, Poland, Malaysia and Thailand close out the top 10.
An area where emerging economy businesses believe their respective economies are lacking is key transport and information communications technology (ICT) infrastructure.
20% of emerging economy businesses cite ICT infrastructure as a constraint on growth, compared to just 11% of peers in mature markets.
As Africa’s largest economy, 80% of South African businesses are looking at other parts of the region for investment, the report notes.
The country has a relatively high GDP per capita (US$11,035) but remains a very polarised nation, with an unemployment rate of around 25% according to official estimates.
SA has strong links with mature economies – around a third of exports go to Germany, Japan, the United Kingdom and the United States – and growth has suffered from weakness in these markets. Forecast expansion is expected to accelerate to 4.1% in the period 2013-17.
“A number of socio-economic challenges persist including inequality, crime and unemployment, whilst recent strikes and violent clashes have damaged the key mining sector,” Grant Thornton said.
“World-class ICT infrastructure”
The report notes that in the JSE Limited, SA has a world class securities exchange, the largest in Africa which ranks amongst the top 20 exchanges in the world in terms of market capitalisation.
It also says that that the country has “world-class ICT and transport infrastructure boosted by investment ahead of the 2010 FIFA World Cup”.
“There is no doubt that the violent strikes in the mining sector and the killings in Marikana hurt our country’s reputation as a destination of choice for foreign direct investment and there is pessimism amongst economists about the long-term impact of the contagion of the strikes,” said Deepak Nagar, national chairman, Grant Thornton SA.
“However, our financial systems are sophisticated, robust and well regulated and the economy boasts a world class securities exchange. Moreover the government has identified massive infrastructure projects as key to boosting the country’s economic growth rate and creating employment, and is spending billions of rands on getting the investment ball rolling.