Instability and crime blamed for SA’s slide

SA has plummeted in a major ranking of global competitiveness, falling 14 places in the World Economic Forum’s (WEF’s) Competitiveness index as the strength of its institutions and of its financial markets has eroded.

In a context in which controversy around KPMG is mounting and clients are deserting the “big four” audit firm, SA losing its top place in the rankings on the quality of its auditing will be of particular concern.

SA has fallen from number one to number 30 in the WEF rankings of the quality of auditing and reporting standards.

The overall ranking for SA is now 61 out of 137 countries.

The WEF index, which is based in part on a survey of perceptions by global executives, found that corruption, crime and theft and government instability were the most problematic factors for doing business in SA. It is now only third in sub-Saharan Africa —

behind Mauritius and Rwanda. Among other large emerging market peers, India is ranked at number 40.

WEF economist Roberto Crotty said one driver of SA’s decline was certainly the perception of political uncertainty by business leaders in SA, which had reduced confidence.

Another driver was that the WEF had strengthened the survey methodology, which partially explained some of the shifts in ranking.

The latest South African ranking is the lowest since the WEF implemented its current methodology in 2007, when SA’s ranking peaked at 44, and it came after SA had come off its postcrisis low of 52 to reach 47 in 2016. However, in their report, published at midnight on Tuesday, WEF analysts described SA’s economy as being “nearly at a standstill ...”.

WEF spokesman Oliver Cann said SA’s decline was almost across the board in 2017. However, three areas still stood out: its institutions had fallen 36 places to 76 and its financial markets were down 33 places to 44, while its ranking on goods market efficiency had fallen 26 places to 54. Although SA scored high on innovation and the sophistication of its business sector, its score on health and basic education was abysmal, at 131 out of 137 countries.

The one piece of good news is that the score on health has edged up from 123 to 121, although at this level, it is still near the bottom of the table.

SA also fell in the latest World Bank Doing Business rankings published earlier this year, losing two notches to 74 in the Doing Business index.

This index measures countries on the ease of doing business. SA’s rankings on the ease of registering property and of paying taxes was down particularly sharply, but it also lost ground on protecting minority investors — which has traditionally been one of its strengths.

Switzerland topped the WEF’s competitiveness index, with the US in second place.

WEF founder and executive chairman Klaus Schwaub said a general concern was that the world’s financial system had yet to recover from the financial crisis of 2008-09, while another concern was countries’ labour market policies, which were not dealing with the challenges posed by new technology and globalisation.

He said: “Competitiveness is enhanced, not weakened, by degrees of flexibility within the labour force with adequate protection of workers rights.”

SA’S DECLINE IN 2017 WAS ALMOST ACROSS THE BOARD