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Part 1: Is South Africa globally competitive? The devil is in the detail

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By Steuart Pennington, Author.

 

It is a complicated subject so I thought I would try to simplify the topic by cutting to the quick.

The Devil is in the Detail

There are two Competitiveness Reports that rank the competitiveness of nations:

1. The World Competitiveness Report

This report, produced by the IMD Business School in Switzerland, ranks the world’s top performing countries, the so-called “Premier League” of 59 nations.  South Africa ranks 52nd, down from 44th in 2010 and 38 a few years ago. Basically, this report looks at five consolidated measures:

  • Overall competitiveness
  • Economic Performance
  • Government Efficiency
  • Business Efficiency
  • Infrastructure

2. The Global Competitiveness Report

This report, produced by the World Economic Forum in Switzerland, ranks the world’s top 139 countries as measured by $US GDP.  South Africa ranks 54th down from 46th in 2010.  It is freely available on the web, and looks at 12 measures which I will deal with in some detail, below.

But this is not to say that there aren’t other research reports which rank South Africa, there are hundreds and you can find out just about anything in terms of South Africa’s performance (check out our FAST FACTS on www.sagoodnews.co.za).

Context

There are 230 countries in the world, only 80 have a population in excess of 10 million.  60 countries are considered to be in the “Premier League”, 120 in the second division and 50 are considered to be “Failed States”.

South Africa has the 32nd largest economy in the world in $US GDP terms and the 25th largest in $US GDP measured in terms of Purchasing Power Parity.  We have the 25th biggest population (0.7% of the world’s total population) and we are the 25th largest geographically with Johannesburg being the 87th largest city in the world.  Our GDP per capita is ranked 76th at $US 10 000 which is the same as the world average.

So, given the size of our population and our economy, in terms of global competitiveness rankings we should be ranked in the range of 25th to 35th, but we are ranked 52nd.  For example, Germany has the 5th biggest economy and is ranked the 5th most competitive.

Australia has the 14th biggest economy and is ranked the 16th most competitive.  However, China with the 3rd biggest economy is ranked 27th most competitive and India with the 12th largest economy is ranked 51st most competitive.

How, then, are these rankings calculated, and how does SA perform?

The Global Competitiveness Report looks at 12 “pillars”, these are grouped into 3 sub-indices.  I have shown, below, how South Africa does in all of these:

Diving into the Detail

Our overall ranking is substantially set back by 5 of the pillars, marked in red, above.  In the remaining 7 pillars, marked in green, we perform relatively well.  So, let’s deal with the areas where we perform poorly.

 (i) Infrastructure

The major reason for our average ranking (63/139) is NOT because we don’t have enough infrastructure, we do.  Our rail network is the 11th biggest in the world in absolute terms, our road network is the 17th biggest and our air travel the 25th biggest.  Our poor ranking is based on maintenance.  Our major slippage in this category is also in the area of electricity supply (98) which is rather historic (hopefully!).  Poor infrastructure maintenance is easily fixable.

(ii) Health and Primary Education

The major reason for this very poor ranking (our worst) is because TB (138), HIV (136), Infant Mortality (109), Life Expectancy (127) and Quality of Primary Education (125) are all poor.  Other countries with similar problems are making better progress than we are.  It is of particular concern that our Primary Education is still so poor.

We have made great progress with access and enrolment (most schools have fresh water, sanitation and electricity and nearly 100% of eligible children are enrolled in schools) but our teachers, our headmasters, our teacher unions and our government departments have much to answer for.  They should be brought to book sooner rather than later.

(iii) Higher Education

We do relatively well in enrollment (41), the quality of our management schools (21), availability of research and training services (49) and staff training (26).  However, we fall down on tertiary enrollment (99), quality of the educational system (130), quality of maths and science education (137) and internet access in schools (100).

Only 30% of those who enter primary school end up entering some form of tertiary education.  This has to do with the “system” as outlined in (ii) above.  85% of our schools have access to electricity, compared to 30% 16 years ago, so sorting out internet access should be relatively do-able.

The quality of the “system” and the poor maths and science performance however, is partly due to our legacy and partly due to poor commitment to radical reform on the part of government.  We need strong and informed leadership in education.

(iv) Labour Market Efficiency

Again, we do exceptionally well in Reliance on Professional Management (19), but we fail badly on the labour indices: Co-operation in labour/employer relations (132), flexibility of wage determination (131), hiring and firing practices (135) and pay and productivity (112).

The world of work is changing, young people are on the move, entrepreneurship abounds, new jobs are being invented, flexibility is paramount and yet SA is locked into an inflexible, bureaucratic, one-sided nightmare Actually, that’s on best online slots . in the labour environment.

Again, if improving our global competitiveness is paramount the tri-partite parties (government, business and civil society) must meet with the objective of producing a modern, flexible, relevant labour relations environment.  Government needs to give strong direction in this regard.

(v) Technological Readiness

We do relatively well in FDI and technology transfer (37), firm-level technology absorption (35) and availability of latest technologies (51), but we do badly in Internet Users (105) and Internet Bandwidth (106).

With the arrival of extra bandwidth in SA this should be a relatively easy problem to fix.  Right now we are falling behind much of the rest of the world in this regard.  Being technologically backward is like trying to march an army on empty stomachs, eventually it will fall over.

Getting Better, Getting Worse

While our overall performance has slipped in both the World Competitiveness Report and the Global Competitiveness Report we have made some remarkable improvements and we have some unfortunate slippages:

The pattern is clear – cronyism, cadre deployment and corruption have taken their toll.  Combine that with mixed messaging and our relegation to the second division appears imminent.

Mixed Messaging

Our biggest single problem though is not the ranking referred to above (every country has their issues), it is the mixed and confused messages we are currently sending out to the world.  Instead of encouraging investor confidence we are systematically and methodically undermining it.

Instead of focussing single-mindedly on improving our global competitiveness we are indifferent to our possible relegation to the second division.  Instead of our political leadership rallying their business and civil society partners to sing from the same hymn sheet there seems to be a view that sending out mixed and confused messages is a democratic virtue.  Quite simply, it is madness.

Conclusion

A number of points emerge from the above.

First, these pillars are not independent of each other, they tend to reinforce each other – a weakness in one pillar will negatively impact another and the overall ranking.  Secondly, our decline is not only a reflection of deteriorating circumstances “back home”, but rather that other countries are making progress faster than we are.

Nevertheless it must be clear to all who read this document that when it comes to virtually all the economic indicators we are in the top 10% of nations.  When it comes to the strength and efficiency of our democratic institutions we are in the top 20% of nations.  Even in respect of most of the pillars of government performance we are in the top 20% of nations.

Our mixed messaging, our leadership indifference and our social pillars are what let us down; In health, education, labour/management relations, crime, unemployment and poverty we take a beating.

Vision 2030

Having read the National Planning Commission’s diagnostic report I would make a plea to get one thing right, make our Vision 2030 statement compellingly simple, something we can all relate to.  This is my suggestion:

“By 2030 South Africa will be ranked in the top 25 most competitive nations of the world”.

If we strive for this as a nation hopefully the clumsy politics of trying to ensure all-encompassing popular buy-in will be minimised.  I’m not for one minute suggesting that the process won’t be complex and require considerable consultation, negotiation and research, but the outcome must be compellingly simple.  In South Africa we do have the propensity to complicate things in the interests of expediency and political correctness (remember the DOE “pledge” – it didn’t get off first base).

Let’s not make the same mistake when it comes to our Vision 2030.

  • Next week I will deal with SA’s competitiveness relative to that of Brazil, India, China, Russia and South Korea.
  • The following week I will deal with SA’s competitiveness relative to the rapidly emerging sub-Saharan countries – our neighbours.

Pic: Andrew Ashton