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SOUTH AFRICA’S 2007 STANDING IN WORLD COMPETITIVENESS
The release of the 2007 IMD World Competitiveness Yearbook of which Productivity SA is a partner institute reveals a drop in South Africa’s rankings from 38th position to 50th position out of 55 countries. The Yearbook analyses and ranks the ability of nations to create and maintain an environment which sustains the competitiveness of enterprises.
The rankings, which are drawn from a combination of hard data, and the result of the Executive Opinion Survey, are based on 323 criteria in four main competitiveness factors namely economic performance, government efficiency, business efficiency and infrastructure.
Economic Performance
This is a macro-economic evaluation of the domestic economy looking at issues like domestic economy, international trade, international investment, employment and prices. Lessons to be drawn from South Africa’s performance against this factor come from the strong showing in terms of cost of living (7th), amount of exports over imports, direct investment flows, real GDP growth and growing tourism, which are consistent with the efforts of the country to reach 6% growth rates, half unemployment and poverty. South Africa’s economic performance competitiveness factor position dropped from 40th in 2006 to 54th in 2007. Weaknesses affecting economic performance is the high unemployment rate currently at 25.5% (down from 26.7% last year) and low GDP per capita.
Government Efficiency
This factor measures the extent to which government policies are conducive to competitiveness and looks at public finance, fiscal policy, institutional and societal framework, and business legislation. The government efficiency factor declined from 25th position in 2006 to 35th position in 2007. Strengths regarding the government efficiency include effective personal income tax rates as a percentage of GDP per capita ranked 2nd and employer social security contributions 3rd, government subsidies as the percentage of GDP to private and public companies 15th and the consistency of government policy direction ranked 16th. Weaknesses indicate that improvements are needed in terms of discrimination hindering economic development at 55th , personal security and private property protection 54th, exchange rate stability 53rd and labour regulations which hinder business activities 51st.
Business Efficiency
Business Efficiency is a factor that measures the extent to which enterprises are performing in an innovative, profitable and responsible manner and measures productivity and efficiency, labour market, finance, management practices and attitudes and values. The latest figures show that the country’s business efficiency remained steady at the 32nd ranking. Productivity and efficiency has increased from a 2006 ranking of 56 to 44 this year. This factor is further strengthened by the 4th ranking of stock market capitalization as percentage of GDP and adequate financing to companies from stock markets ranking 17th, while problems are experienced with skilled labour 55th, the brain drain 55th, and the availability of finance skills and competent senior managers ranking 52nd and 51st respectively.
Infrastructure
This main factor measures the extent to which basic, technological, scientific, and human resources meet the needs of business. The 2007 results reveal that the infrastructure factors declined from 52nd position to 55th,. The country’s infrastructure strengths come from electricity costs for industrial clients which is ranked 1st; total public expenditure on education 14th , total health expenditure as percentage of GDP 20th, while problems are experienced in terms of life expectancy at birth at 55th, in tandem with Internet costs for twenty hours dial-up per month; health problems and availability of qualified engineers.
General
The country’s greatest areas of improvement are direct investment flows both inward and abroad, the government budget surplus/deficit as percentage of GDP, the number of mobile telephone subscribers per thousand inhabitants, urbanization to cities and high tech exports. While the most declines come from the brain drain, problems with the availability of qualified engineers; lack of interest by the youth in science; regulation intensity which restrain the ability of companies to compete and an increase in bribing and corruption and also the scarcity of skilled labour.
South Africa’s challenges for 2007 include increasing the economic growth rate to more than 4.5% per annum, reducing unemployment to under 15%, halving the level of poverty to 1/6 in households, increasing competitiveness and exports, and promoting the acquisition of priority skills for the benefit of the broader economy. In light of this, the country’s economy has grown at a rate of 4.5% over the past two years, and productivity has increased by 3.5% over the current period. Investment in the economy, by both the public and private sectors has been increasing at about 11%, with overall public sector infrastructure spending increasing by an annual average of 15,8%. In addition, fixed investment as a percentage of Gross Domestic Product – at about 18,4% – is at its highest since 1991. The number of employed people has been developed increasing at about half-a-million a year in the past 3 years, and the economy has created some one-and-half million jobs. In addition, government’s JIPSA interventions have been created to meet skill demands in the engineering and construction fields.
The overall results in the 2007 edition of the IMD’s World Competitiveness Yearbook highlight a big global shake-up in economic and business power. Other emerging nations are quickly catching up in competitiveness. Of the 55 economies ranked, the US is still ranked number 1, closely followed by Singapore and Hong Kong. However 40 economies are now increasing or maintaining their competitiveness compared to the US - in other words " closing the gap". China, Russia, India, the Slowak Replubic, Estonia, Sweden, Austria, Denmark, Switzerland and Hong Kong have exhibited strong competitiveness improvements in recent years. This reflects a shift in economic and business power where China, Russia and India have collectively stacked up more than $1,700bn in foreign currency reserves. Local companies from South–East Asia, India, China, Russia and the Gulf countries are purchasing industrial assets all over the globe. On the other hand, only 15 countries like South Africa, Indonesia, Italy, Argentina, Brazil, Mexico, Turkey and France are losing ground compared to the top league.
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