Politics push down ranking of SA’s institutions

THE World Economic Forum’s (WEF’s) Global Competitiveness index, an annual assessment of the factors driving productivity and prosperity in countries, shows a decline in the country’s institutional rankings.

Institutions, long regarded as an area of strength for SA, slipped two places to 40 as the issue of political uncertainty raised its head again.

According to the index, there was low public trust in politicians and a lot of “favouritism” in decision-making by officials.

“Institutional quality has diminished, with increased political uncertainty, less transparency,

Overall, the country moved up two places to 47 out of the 138 countries

some security concerns and business leaders having less trust in politicians,” says the WEF’s Global Competitiveness Report released on Wednesday.

Politics, most notably developments between the Hawks and Finance Minister Pravin Gordhan, have often been the reason behind rand weakness. Allegations of the capture of state-owned enterprises are increasing.

Business Unity SA (Busa) CEO Khanyisile Kweyama said on Tuesday that the organisation recognised that perceptions of political uncertainty, lack of policy alignment, conflicting messages from different government departments and the ANC contributed to economic uncertainty and undermined the prospects for investment and confidence in the economy.

“Busa is concerned that the political environment, and particularly its impact on the economy, is constraining the effectiveness” of private sector initiatives such as the development of small and medium enterprises and a youth internship programme, Kweyama said.

Despite the political challenges identified by the WEF, the country registered marginal improvements in almost all aspects of competitiveness, such as enhanced local and international competition, better use of talent in terms of how pay reflects productivity, and “a small but important upgrade” in the quality of education, with primary school enrolment passing 97%, the report shows.

Overall, the country moved up two places to 47 out of the 138 countries on the index. An improvement in goods and labour market efficiencies helped support the rankings, the WEF says.

The labour market was held back by inflexibility of wage determination and weak hiring and firing practices (135th out of 138 countries) although both showed

The financial market remained a source of great strength, up one place

minor signs of improvement, the report shows.

SA was at the bottom (138th) in the ranking for co-operation in labour-employer relations.

The financial market remained a source of great strength, up one place to 11, helped by SA coming first out of 138 countries for financing through local equity market.

Despite this, a number of shortcomings may limit South African competitiveness going forward, including a stalling in infrastructure development, the WEF says.

Although SA’s two-place gain was the second consecutive year of improvement and the highest position since 2010, on a 10-year time horizon the country is less competitive compared with its international peers than it was in 2007, when it ranked 44th.

Compared with its Brics counterparts, there was some sign of convergence. China remained top at 28, while India surged 16 places to 39.

With Russia and SA moving up two places, to 43 and 47 respectively, only Brazil declined, falling six places to 81.