Competitive yes, but still lagging

SA ranks lower than a decade ago

AFTER a torrid year economically and politically, it comes as something of a surprise to see that SA has jumped two places on the rankings in the World Economic Forum’s global competitiveness survey.

Not that the improvement is not welcome. This is the ranking that measures the factors and institutions that enable (or should enable) a country to compete, and at 47 on the forum’s list of 138 countries, SA evidently has many of the tools and attributes in place to ensure its economy can thrive. But as the forum points out, although SA has shown improvements in the past two years, its ranking is still below the 44th it ranked a decade ago.

And we know that SA’s economy is very far from thriving. With growth at or near zero percent and unemployment at nearly 27%, SA hardly feels as if it is more competitive this year than it was last year. Nor does the export picture support the notion of an effective global competitor — the second quarter GDP data showed exports finally jumped in response to a weaker rand and led economic growth in the quarter. But this was more of a bounce than necessarily a sustainable improvement in SA’s export potential.

Methodology matters and all these global rankings need to be perused carefully for what they say, and what they don’t. But it is worth studying the forum rankings closely to see what SA has going for it and where it fails. And again this year, the pattern is one in which SA emerges as a sophisticated and highly developed economy with a world-class financial sector and financial regulation, as well as decent technology and innovation — but fails dismally on so many things that matter most to the quality of life of its people and its ability to attract investment and sustain economic growth and development.

For the seventh year in a row, SA came top of the rankings for the quality of its auditing standards and that, as the auditing profession has pointed out, is not only impressive but crucial to SA’s ability to attract foreign investment. The number one ranking for local equity market finance surely helps too.

It also ranks particularly highly on financial market development (11th) and is not too shabby either in areas such as innovation, technology and business sophistication.

But once again, SA goes to the bottom of the class when it comes to labour employer relations (138th) and very close to the bottom on almost all the forum’s education and health scores. The forum’s executive opinion survey also reflects the kinds of concerns that are holding back growth and investment, with executives greatly concerned about inefficient government bureaucracy and restrictive labour regulations as well as SA’s “inadequately educated workforce”.

Perhaps, more disturbingly, though SA still does well on the quality of its institutions, its ranking has declined somewhat

SA’s ranking has declined because of shrinking public trust in politicians and favouritism in government decisions

because of shrinking public trust in politicians and favouritism in government decisions — in other words, corruption and cronyism.

It is therefore surprising that SA has climbed the rankings. This is thanks mainly to the strength of our competition authorities, as well as, rather inexplicably, better links between pay and productivity.

There are limits to how long SA can position itself as Africa’s most sophisticated and welldeveloped economy — while simultaneously, its education and health systems fail to produce an adequately skilled, healthy workforce that can be employed in a growing economy.

Indices such as the forum’s have their flaws. But they are a useful global perspective on our strengths and weaknesses, and SA should take heed, working very hard to nurture and maintain the strengths it has while doing a great deal more to combat the weaknesses of an economy that is sliding steadily.