South Africa is the highest-ranked African country and third-placed among the BRICS economies in the World Economic Forum’s (WEF’s) latest Global Competitiveness Index, ranking 52nd out of 144 countries surveyed while placing third overall for financial market development.
Published on Tuesday, the annual Global Competitiveness Report was first released in 1979 and has since evolved into the prime authority on relative competitiveness among most of the world’s nations.
South Africa (52nd) and Mauritius (54th) continue to lead the competitiveness rankings by African countries, followed by Rwanda (63rd), Morocco (70th), Seychelles (76th) and Botswana (79th).
China (29th) continues to lead the BRICS group of influential emerging market economies, followed by Brazil (48th), South Africa (52nd), India (59th) and Russia (67th).
Switzerland tops the overall rankings for the fourth year running, followed by Singapore, Finland, Sweden, Netherlands, Germany, the United Kingdom, United States, Hong Kong and Japan completing the list of the top 10 most competitive economies.
According to the report, South Africa benefits from the relatively large size of its economy, particularly by regional standards, ranking 25th overall for market size.
It also scores well for the quality of its institutions, ranking strongly for strength of auditing and reporting standards (1st), efficacy of corporate boards (1st), protection of minority shareholders’ interests (2nd), efficiency of legal framework (17th), intellectual property protection (20th), property rights (26th), and judicial independence (27th).
Particularly impressive, according to the report, is the country’s financial market development, for which it ranks 3rd overall, “indicating high confidence in South Africa’s financial markets at a time when trust is returning only slowly in many other parts of the world”.
Contributing to this assessment was South Africa’s high rankings for regulation of securities exchanges (1st), soundness of banks (2nd), availability of financial services (2nd), and financing through the local equity market (3rd).
South Africa also shows up well for business sophistication, ranking 38th overall, and innovation, ranking 42nd overall – benefiting in the latter case from good scientific research institutions (34th) and strong collaboration between universities and the business sector in innovation (30th).
At the same time, the report identifies weaknesses which South Africa will have to address in order to further enhance its competitiveness.
South Africa ranked 63rd overall for infrastructure, and even though this was good by regional standards, it would require upgrading, according to the report. This is something the country has already embarked on, with President Jacob Zuma announcing a massive state-led infrastructure drive in his State of the Nation address in February.
The country ranks 113th for labour market efficiency, thanks in large part to “rigid hiring and firing practices (143rd), a lack of flexibility in wage determination by companies (140th), and significant tensions in labour-employer relations (144th)”.
The country can also develop its innovation potential by increasing its university enrollment rate, the WEF says, adding: “Combined efforts in these areas will be critical in view of the country’s high unemployment rate of almost 25 percent in the second quarter of 2012.”
Other concerns raised by the WEF report include the security situation and the health of the country’s workforce.
On Africa more widely, the report notes the region’s impressive growth over the last decade.
“Registering growth rates of over 5 percent in the past two years, the region continues to exceed the global average and to exhibit a favorable economic outlook,” the WEF states. “Indeed, the region has bounced back rapidly from the global economic crisis, when GDP growth dropped to 2.8 percent in 2009.”
In recent years, according to the report, the region has been improving its competitiveness in specific areas, such as educational attainment and goods market efficiency, “but a persistent infrastructure deficit and health concerns continue to be significant bottlenecks.”
As a whole, Africa continues to lag behind the rest of the world in competitiveness, “requiring efforts across many areas to place the region on a firmly sustainable growth and development path going forward”.