19 October 2009
South Africa is ranked 45th out of 134 countries in the World Economic Forum’s recently released Global Competitiveness Index for 2009/10. While this is the same position it held in 2008/09, the country’s banking system soared in the rankings, from 24th to fifth in the world.
Conducted by the World Economic Forum (WEF) in partnership with leading academics and a global network of research institutes, the index calculates its rankings from publicly available data and an annual poll of over 12 000 business leaders worldwide.
The index is based on 12 “pillars of competitiveness”, namely: institutions; infrastructure; macroeconomic stability; health and primary education; higher education and training; goods market efficiency; labour market efficiency; financial market sophistication; technological readiness; market size; business sophistication; and innovation.
At 45th overall, South Africa remains the highest ranked country in sub-Saharan Africa in 2009/10, with what the WEF describes as “a stable performance compared with last year.
“The country continues to benefit from the large size of its economy, particularly by regional standards (it is ranked 24th in the market size pillar).”
‘Strong confidence in SA’s financial markets’
South Africa’s jump to 5th place overall for its banking system indicates “strong confidence in South Africa’s financial markets at a time when trust has been eroded in many other parts of the world,” the WEF says.
South Africa also does well on such measures as intellectual property protection (24th place overall), accountability of private institutions (5th), and goods market efficiency (35th).
The country does “reasonably well” on more complex measures, such as business sophistication (36th place) and innovation (41st), where it benefited from good scientific research institutions (ranked 29th) and strong collaboration between universities and the business sector in innovation (ranked 25th).
At the same time, the WEF says, South Africa’s competitiveness would be enhanced by tackling “some enduring weaknesses”.
Labour market inefficiency
Chief among these is the country’s labour market efficiency, for which it ranks 90th, dragged down by inflexible hiring and firing practices (125th place), lack of flexibility in wage determination by companies (123rd), and poor labour-employer relations (121st).
A university enrollment rate of only 15 percent (94th place) threatens to undermine SA’s innovative potential, says the WEF. And South Africa’s infrastructure (45th place), although good by regional standards, requires upgrading.
“In this light, the improvements in transport infrastructure related to the 2010 World Cup is a welcome development that should reinforce South Africa’s competitiveness.”
Other important obstacles to doing business in South Africa, says the WEF, is the “poor security situation.
“The business costs of crime and violence (133rd place) and the sense that the police are unable to provide protection from crime (106th) do not contribute to an environment that fosters competitiveness.”
Another major concern remains the health of South Africa’s workforce (127th place), the result of “high rates of communicable diseases and poor health indicators more generally.”
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