SA Competitiveness inches lower
South Africa has taken a drop in its overall competitiveness. The 2015 Institute for Management Development (IMD) World Competitiveness Yearbook (WCY) shows that South Africa dropped slightly from 52 in 2014 to 53 in 2015, the position it occupied in 2013. The drop in position is attributed to the deteriorating performance in Government Efficiency, and Business Efficiency.
The WCY ranking is an annual report on the competitiveness of selected countries and is recognised internationally as the leading survey of competitiveness between nations. The rankings are drawn from a combination of hard data and the results of an Executive Opinion Survey. Productivity SA is the information partner for the IMD in South Africa. The concept of competitiveness is grounded on two main principles:
1. Businesses can only be competitive if they meet certain international standards;
2. Competitiveness will not be met if the society’s living standards do not improve.
The yearbook rates the ability of 60 industrialised and emerging economies to create and maintain an environment that sustains the competitiveness of enterprises. Country data is evaluated through distinct criteria, grouped into four competitiveness factors, namely: government efficiency, business efficiency, economic performance and infrastructure.
Economic performance has improved by seven places from 56 in 2014 to 49 in 2015. This performance was influenced by improvement in international trade and lowest prices that topped the world rankings.
Government efficiency’s performance dropped further by 5 points in 2015 to 40 after dropping three places from 32 in 2013 to 35 in 2014. According to the WCY report, the poor performance in government efficiency is attributed mainly to the poor performance of public finance, weak institutional framework and business legislation.
Business efficiency’s performance deteriorated further in 2015 after dropping eight places from 43 in 2013 to 51 in 2014. The poor performance was as a result of a drop in productivity and efficiency which put South Africa at the tail end; further deterioration of the labour market conditions, deterioration of management practices, finance plus attitudes and values by business cited to be poor are the main contributors.
Infrastructure has not shown any improvement as it continues to keep 55th position in 2015, the same position it occupied in 2014. Whereas scientific infrastructure show a slight improvement (one position improvement) when education infrastructure occupies the same position (51) in 2015 it occupied in 2014, there was deterioration in the ranking of the delivery of basic infrastructure, technological infrastructure and health and environment infrastructure.
Looking at the deterioration of business efficiency, it starts to paint the picture why South Africa ranking is not improving. IMD says that business efficiency require high productivity in order to thrive and in the absence of that, it is difficult for the economy to be competitive. According to IMD 2015, it has been proved empirically that business efficiency and productivity have been the main drivers of the United States of America’s competitiveness.
The US remains the most competitive economy in 2015 as a result of its strong business efficiency and financial sector, its innovation drive and the effectiveness of its infrastructure. Hong Kong (2) and Singapore (3) move up overtaking Switzerland, which drops to fourth place. Canada (5), Norway (7), Denmark (8), Sweden (9) and Germany (10) remain in the top 10. Luxembourg moves to the top (6) from 11th place in 2014
When economic performance changes from year to year, perceptions are longer-term and shift more gradually. “They can also lead to a virtuous circle of better image and better economic performance. So how executives feel their country is being perceived is a potentially useful guide to future competitiveness developments” (IMD, 2015)