South Africa’s competitive advantage in the developing world

When the United Nations Development Programme (UNDP) published its Human Development Report in 2013, it contained powerful insights about the increasingly important role developing countries, such as South Africa and Brazil, are playing in the 21st century.

A WEF finding notes that South Africa’s infrastructure is the best developed in the region. (Image: SA Tourism)

Miller Matola, CEO of Brand South Africa

The South (developing nations and emerging markets) are responsible for half the world’s economic output according to the United Nations Development Programme (UNDP). To illustrate the shift in global economic power, the UNDP points out that the combined GDP of eight developing countries – Argentina, Brazil, China, India, Indonesia, Mexico, South Africa and Turkey – equals the GDP of the United States. The implication, in the opinion of the UNDP, is that developing and emerging markets have become major drivers of economic growth and forces of change in the developing world.

These changes have made South Africa an important economy in the changing global, and by extension geopolitical, climate. That South Africa is able to benefit is down to policy decisions guided by long-term socioeconomic vision of the government.

Our success, in terms of its global perception and rankings in key influential indices – such as the World Economic Forum Global Competitiveness Report, the World Bank Ease of Doing Business Index, the World Economic Forum Travel and Tourism Index – could set a benchmark for other emerging countries to follow.

Ongoing improvement

A study of these research reports show a pattern of South Africa matching and outperforming other peer developing countries. These indices – in critical areas of national competency – are important indicators to utilise in the process of positioning South Africa as a reliable trade partner, and attractive investment destination.

As South Africa heads towards celebrating 20 years of democracy, the country occupies an increasingly strong position globally. We remain a developing nation, a work in progress. However this continuing improvement is attributable to strong and highly focused policies that support the country’s regional and global aspirations.

In the context of developing nations, global economic indicators highlight South Africa’s unique competitive strengths. These are being leveraged to good effect to enhance the country’s standing in the global marketplace. The country’s competitiveness, when measured against other developing nations, and inclusion in the Brics grouping is testament to this.

Ease of doing business

The most recent World Economic Forum’s Global Competitiveness Index ranks the country’s financial services sector, banks and stock exchange as the top global performers, while the country places 15th globally for the quality of its air transport infrastructure.

Furthermore, South Africa, if compared to the other Brics nations, comes first in five of the 10 criteria the World Bank uses to assess ease of doing business:

  • starting a business,
  • dealing with construction permits,
  • getting credit,
  • protecting investors,
  • and paying taxes.

These indices are reassuring to foreign direct investors and instils confidence that the country is open for business. Investors are reassured that the country offers business-friendly environment where new trade, investment, and related economic interactions can be fostered.

The 2013 World Bank Ease of Doing Business Index recognizes the government’s commitment to creating a business friendly environment. South Africa ranks first among Brics nations in six critical criteria. As a nation that offers several competitive advantages, an open business environment is an important feature to utilise as a selling point for South Africa as a business destination. The country can make a strong business case to attract trade partners, investment, and clients from fellow Brics members.

New government policies introduced now make starting a business in the country easier than ever, by implementing new company law that eliminates the requirement to reserve a company name and simplifies the incorporation documents. South Africa has also made transferring property less costly and more efficient by reducing the transfer duty and introducing electronic filing.

Government policy addresses the need to decrease the time, cost, and red tape companies have to deal with to get products to port and shipped to international markets. (Image: Clive Reid)

In addition, a new reorganisation process has been introduced to facilitate the rehabilitation of financially distressed companies. South Africa has also improved its performance on the trading across borders rank. In the same World Bank Index, South Africa has significantly improved its rankings (by 29 positions), due to the roll-out of government policy that addresses the need to decrease the time, cost, and red tape companies have to deal with to get products to port and shipped to international markets.

Travel and tourism

South Africa is also praised for its government policies, rules and regulations relating to travel and tourism, and their conduciveness to the sector’s development. The country now ranks 29th out of 140 countries globally in the World Economic Forum’s Travel and Tourism Index, indicating that it has been making steady improvements in this area over the past few assessments.

South Africa ranks third in the Sub-Saharan Africa region after Seychelles (first) and Mauritius (second). Other WEF findings indicate South Africa as high as 17th place for its natural resources, and 58th for cultural resources. This, according to WEF, is due primarily to the country’s many World Heritage sites, rich fauna, creative industries, and the many international fairs and exhibitions hosted. The latter can be interpreted as a strong selling point for the country, with communications implications.

The wealth of cultural experiences South Africa can offer, adds to its tourism appeal. (Image: SA Tourism)

A further positive finding WEF indicates is that South Africa’s infrastructure is well developed for the region, directly supporting the growth of the travel and tourism trade, with air transport infrastructure ranked 43rd, and a particularly good assessment of railroad quality (46th) and road quality (42nd).

The golden thread that ties together and underpins all of these world ranking achievements is the strength and innovative nature of its government policies.  from the National Development Plan to the National Infrastructure Plan. Such strong government policy making, embodied in the National Development Plan and the National Infrastructure Plan, and implementation sends a clear message to the world that South Africa is open for business and is a destination of choice for investment, based on solid and trusted fundamentals.

This is a strategic, best practice approach that could be replicated for the benefit of fellow emerging market countries around the world.

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