Part 2: Is South Africa globally competitive? Comparison with BRIC and Korean Republic

Last week I wrote about South Africa’s Global Competitiveness (Global Competitiveness Report comparing the world’s top 139 countries) and the fact that our Achilles Heel is our poor performance in the areas of infrastructure, health and primary education, labour market efficiency and technological readiness.

Infrastructure:  63/139

Health and Primary Education:  129/139

Higher Education:  75/139

Labour Market Efficiency:  97/139

Technological Readiness:  76/139

We have recently been welcomed into the BRIC (Brazil, Russia, India and China) cabal of developing nations, which is no mean feat, given our US$ GDP at 32nd and our GDP (PPP) at 25th – (Price Purchasing Parity) when Brazil (10th), Russia (8th), India (4th) and China (2nd) are much bigger economic players than we are.

It may surprise some that countries like Mexico (13th), Turkey (17th), Indonesia (19th) and Saudi Arabia (23rd) were not invited.  South Korea (15th) has a population size identical to ours and was also not invited but I thought it would be useful as part of this comparison, particularly because their DGP was lower than South Africa’s twenty years ago.

The table below reflects how we compare:

* Aggregate Score – Basic Requirements

# Aggregate Score – Efficiency Enhancers

^ Aggregate Score – Innovation Driven

The RED numbers indicate where the countries compared fall outside the top 59 countries in the Premier League as per the World Competitiveness Report, different to the Global Competitiveness Report.

The good news

When it comes to the sophistication of our Financial Market in SA (9) we are a very attractive destination. The component elements are Availability of Financial Services (7), Affordability of Financial Services (43), Financing through local equity markets (7), Ease of access to loans (41), Venture Capital availability (39), Restriction on Capital flows (99), Soundness of Banks (6) and Regulation of Securities Exchange (1).

With a rating of 9 we are well ahead of Brazil (50), Russia (125), India (17), China (57) and South Korea (83).  At 40/139 we are also way ahead of Brazil (114), Russia (123) and India (71) on the rating of Goods Market Efficiency, while being on a par with China (43) and South Korea (38).

Likewise, with Institutions we are at (47) ahead of Brazil (93), Russia (118), India 958) and South Korea at (62).  This is good news and is a sound measure of the sophistication of our private sector.

However, more and more commentators and observers are acknowledging that Infrastructure, Health and Primary Education, Higher Education, Labour Market Efficiency and Technological Readiness are the KEY building blocks for the future improved competitiveness amongst nations.  Combine this with the importance of being outward looking, export driven and one gets a sense of what our future prospects and potential are.

The not so good, but quickly fixable, news

Infrastructure

We are marked down because of Reliability of Electricity Supply (94), Fixed Telephone Lines (98) and Mobile Telephone Subscribers (73).  However, these are readily “fixable” and have largely been addressed.

However if ‘structural’ competitiveness is compared a more positive picture emerges.

As the above table illustrates, in respect of roads, railways, ports and air transport where huge investment is required we perform relatively well, except against South Korea.

The longer-term, but in need of immediate attention, bad news

Health and Primary Education

While most of the measures have to do with Health; Malaria (105), TB (138), HIV/Aids (138), Infant Mortality (109) and Life Expectancy (127) and the business costs associated with these, it is our Quality of Primary Education (125) that is most alarming with Brazil (127), Russia (65), India (98), China (35) and South Korea (31).

Despite the fact that enrolment has improved the failure of teachers to deliver the required levels of literacy and numeracy at Grade 3 and Grade 6 is alarming.  Our target should be a ranking in the top 60 Nations by 2020.

Higher Education

South Korea (1) has the highest level of Tertiary Education enrolment, compare this casino online to South Africa (99) and one gets a measure of the problem.

With the exception of our Management Schools, where we are ranked exceptionally favourably, (no wonder we have so many foreigners attend our business schools!) we are way down the list with the possible exception of Brazil, on all of the key education measures.

When I hear Minister Blade Ndzimande saying, as he did on television last week when being interviewed as part of the e.tv series, “Is South Africa Globally Competitive”, that global rankings are not important – I despair.  Yes, we can talk of the legacy of the past, but until we get our rankings above 60 we will fail in our quest to become more globally competitive.

The unnecessary, but must fix, bad news

Labour Market Efficiency

In our favour is the quality of our Professional Management, and this is important for investors as they know they can rely on professionalism in the management of their investments (and it links back to the excellent rating our business schools receive).

Interestingly, we don’t fare that badly on “rigidity of employment” which has to do with the ability to move workers from one economic activity to another at low cost.  But, when it comes to “co-operation”, “wage determinations” and “hiring and firing practices”, we fare abysmally.

South Africa currently has the highest number of man days lost through strike activity (more than any other of the 139 countries in the Global Competitiveness Report) – at 320 days lost per 1000 employees per annum; with Canada second at 160; Sri Lanka third at 150; Australia fourth at 20; the UK fifth at 19; the USA sixth at 16; Poland seventh at 3; and Germany eighth at 2 days per 1000 employees (Sunday Times 07:07:2011).

I suppose we can derive some cold comfort from the fact that most developing countries have “brain drain” issues.

Nevertheless, we have to find a way of improving these rankings to acceptable levels, somewhere around 60/139.

The fixable, in the relatively short term, bad news

Technological Readiness

Clearly, our ranking is disadvantaged by poor access to bandwidth.  Hopefully, with the arrival of Seacom, this measure will improve.  But it remains of concern that we rank lowest after India on the measure, “Internet Users”, particularly because the internet plays such a pivotal role in modern education practices.

Conclusion

Global Competitiveness, and our ability to compete for the global investment pool against other countries will be a key factor in our ability to reduce unemployment, poverty and our GINI co-efficient.

Oddly, we quite like to compare ourselves with the developed world, the USA, UK and the EU, but as can be seen we have considerable catching up to do with the developing world as championed by Brazil, Russia, India, China (BRIC) and South Korea.

It is time to stop the ‘democratic debates’ we seem to engage endlessly in and stop the ‘global ratings don’t matter’ nonsense.  As a matter of urgency we must start developing an action plan that will enable us to rapidly get moving towards our target to be in the top 60 countries in respect of the above 5 measures by 2020!

And between 25 and 35 out of 139 by 2030 on the consolidated 12 pillars.

Notwithstanding the above, our Vision should remain:

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

  • Next week I will compare South Africa with 6 sub-Saharan countries, including Zimbabwe.

Showing 1 Comment »

  1. Excellent!

    Comment by Minarchist — 1 October 2011 @ 5:51 am

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