Corruption and labour killing SA’s competitive edge

 ·3 Sep 2014
World lightbulb innovation

The latest competitiveness index by the World Economic Forum paints a bleak image of South Africa’s ability to compete, globally.

Ranked 56th out of 144 countries on the Index, South Africa has slipped 3 spots from 53rd in the 2013 report, ranked the second most competitive country in sub-Saharan Africa (behind Mauritius at 39th).

Mauritius is now a solid 17 places ahead of South Africa.

South Africa’s competitive indicators

While ahead of the sub-Saharan average across almost all indicators, South Africa’s labour market efficiency and health and primary education indicators were ranked below the mean.

South Africa’s strongest performance was in its financial market, where it ranked 7th in the world, as well as its market size, which ranked 25th.

Problematic factors for doing business in the country, according to the WEF, were restrictive labour regulations; an inadequately educated workforce; inefficient government bureaucracy; and widespread corruption.

SA competitiveness map

SA competitiveness map

“South Africa continues its downward trend and falls to 56th place this year, third among the BRICS economies,” the WEF said.

“The perceived wastefulness of government spending, and a more general lack of public trust in politicians remain worrisome, and security continues to be a major area of concern for doing business.”

The country also suffers from social problems related to “extremely high income inequality” and youth unemployment, the WEF noted, with insufficient training and rigid hiring-and-firing practices making it an unappealing destination or business.

Despite placing lower than Mauritius in the overall rankings, South Africa is still seen as the best emerging market economy in Africa, ahead of Egypt and Nigeria.

Sunshine news

South Africa does well on measures of the quality of its institutions (36th), including intellectual property protection (22nd), property rights (20th), the efficiency of its legal framework in challenging and settling disputes (9th and 15th, respectively), and its top-notch accountability of private institutions (2nd).

The country also has an efficient market for goods and services (32nd), and it
does reasonably well in more complex areas such as business sophistication (31st) and innovation (43rd), benefitting from good scientific research institutions (34th) and strong collaboration between universities and the business sector in innovation (31st).

South Africa’s transport infrastructure (32nd) is good by regional standards, although its electricity supply does suffer disruptions (99th), WEF said.

Government remains worrisome

The economic forum highlighted low scores for the diversion of public funds (96th), the
perceived wastefulness of government spending (89th),  and a more general lack of public trust in politicians (90th) remain worrisome.

Building a skilled labor force and creating sufficient employment
also present considerable challenges. The health of the workforce is ranked 132nd out of 144 economies—as a result of high rates of communicable diseases and
poor health indicators more generally.

Higher education and training remains insufficient (86th) and labor market efficiency (113th) is affected by extremely rigid hiring and firing practices (143rd), wage inflexibly (139th), and continuing significant tensions in labor-employer relations (144th), the world body said.

The global top 10

The global top 10 most competitive countries remains unchanged from the 2013/14 report, with Switzerland once again ranked as the world’s leading competitive market.

The Swiss champion is followed by Singapore, the United States, Finland and Germany.

# Country Score
1 Switzerland 5.70
2 Singapore 5.65
3 United States 5.54
4 Finland 5.50
5 Germany 5.49
6 Japan 5.47
7 Hong Kong SAR 5.46
8 Netherlands 5.45
9 United Kingdom 5.41
10 Sweden 5.41

Out of the BRICS nations, China is ranked as the most competitive country at 28th, followed by Russia (53rd), South Africa (56th), Brazil (57th) and finally India (71st).

# Country Score
28 China 4.89
53 Russia 4.37
56 South Africa 4.35
57 Brazil 4.34
71 India 4.21

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SA leads Africa in competitiveness

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