South Africa's international competitiveness drops amid the Covid 19 pandemic


South Africa’s competitiveness dropped 6 places between 2019 and 2021 according to the latest World Competitiveness Yearbook (WCY) by the Swiss based Institute of Management Development (IMD). South Africa’s competitiveness was ranked 62 in 2021, out of 64 countries, from 56 in 2019. In only 1 year, South Africa’s world competitiveness ranking dropped 3 places from 59, out of 63 countries, in 2020.

The IMD WCY is the leading annual report on the competitiveness of countries and has been published by IMD since 1989. It benchmarks the performance of 64 countries based on more than 330 criteria measuring different facets of competitiveness. The world competitiveness rankings are drawn from a combination of hard data and the executive opinion survey in all the countries that participate in the Survey. Productivity South Africa, also known as Productivity SA, is the information partner to the IMD in South Africa.

The drop of South Africa’s world competitiveness since the onset of the Covid 19 pandemic is significant in a period of just 2 years given that the world competitiveness of a country, as long term measure of a country to create lasting value for its enterprises and citizens, should typically change gradually overtime. Although the drop in South Africa’s world competitiveness on IMD WCY rankings is a sustained phenomenon and cannot only be attributed to the Covid 19 pandemic, the pandemic era has presented challenges for South Africa as with other countries. The onset of the Covid 19 pandemic has introduced new and far reaching difficulties for local economies. These challenges are not only limited to health of nations but have also had devastating consequences on the ability of countries to facilitate a conducive environment in which enterprises and citizens can derive lasting value.

The Institute of Management Development (IMD)‘s World Competitiveness Yearbook (WCY) evaluates countries’ data based on more than 330 criteria, as discussed above, which are grouped into 4 factors, that constitute economic performance, government efficiency, business efficiency and infrastructure. As shown n Figure 1. below, the competitiveness factors that dropped most are government efficiency and business efficiency. Government efficiency dropped 11 places between 2019 and 2021 to 61, out of 64 countries, from 50, while business efficiency dropped 14 places to 61 from 50. Economic performance and infrastructure dropped least in comparison in the same period by 2 places from 59 to 61 and 1 place from 60 to 61, respectively.

According to Professor Arturo Bris, IMD, competitiveness provides the framework to quantify the outcome of dealing with the challenges, such as, international trade and investment, employment, the openness, political stability, etc. from a country perspective. Ultimately, it allows the IMD to recognise the factors that facilitate prosperity and this is how the institute expects its rankings to be used and interpreted that competitiveness is both a tool and an objective of economic policy.

The policy responses to the Covid 19 pandemic necessitated, among other measures, widespread lockdowns, which in most cases led to total closures of economic and social activities in quest to limit the spread of the corona virus and to protect lives, resulted in massive loss of jobs and work hours, widespread business closures and bankruptcies, disruption of international tourism and global supply chains as well as overwhelmed health systems which resulted in massive loss of lives and livelihoods. As a result, the current IMD WCY competitiveness rankings reflect, in part, the devastating effects of the Covid 19 pandemic, while the long term weakness of South Africa’s world competitiveness remains.

Governments around the world reacted to the developing challenges presented by the spread of the Covid 19 pandemic by prioritising and reorientating of public funds from the economic imperatives to support and strengthen health and social welfare systems. The Covid 19 pandemic has had serious implications for countries to establish and maintain an environment that empowers businesses to generate sustainable value thereby ensuring long term profitability, ability to generate employment and to ultimately enhance the welfare of their citizens. Switzerland topped the 2021 world competitiveness rankings, while the countries in Western Europe, Eastern Asia and North America regions continue to score high in the rankings.

Productivity South Africa’s Chief Economist, Leroi Raputsoane, argues that, although the effects of Covid 19 pandemic were global, the responses of individual countries in terms of safeguarding lives while making sure that local economies continue to thrive separated the extend of gains and losses experienced by different countries. While Covid 19 pandemic was indiscriminate by country or region, what marked the winners and losers in the developing environment was the ability of policy makers to ensure that the local economies continue to be competitive while limiting the resulting lasting damage. Thus, the policy responses to the Covid 19 pandemic separated countries concerning their world competitiveness.

Consequently, the onset of the Covid 19 pandemic has also presented special challenges for South Africa, a country that is already beset with challenges concerning slow GDP growth, high unemployment as well as high incidences of poverty and inequality. The major challenge for the country, as with many others, was to find a balance between the competing priorities of supporting economic development and safeguarding the health and welfare of citizens.

A reflection on the IMD Report as a country will afford us an opportunity to collectively as stakeholders craft policy and programme interventions to improve the ability of our country as a nation to create and sustain an environment that maintains more value creation for its enterprises and more prosperity for its people. Benchmarking on the performance of the most competitive economies, we have an opportunity to review our Enterprise Competitiveness and Sustainability Programmes and interventions to achieve the objectives of the Economic Reconstruction and Recovery Plan. In this regard, our focus is on two priority areas, namely: Industrialisation of the economy and local production, which include (1) Improving the efficiencies of local producers; (2) Supporting local manufacturing as well as firms and households in distress; and (3) An employment stimulus to create jobs and support livelihoods; and Macro-economic interventions and enablers for economic growth, with a focus on (1) End wastage including enhanced productivity; and (2) Review and integrate government support for formal and informal SMMEs, start-ups and cooperatives. These interventions we believe will assist in unlocking the productivity capability and potential of SMMEs to preserve existing jobs and create productive and decent jobs.


Endnotes

  • Institute of Management Development (IMD). 2021. World Competitiveness Yearbook (WCY). World Competitiveness Centre. Lausanne, Switzerland.
  • See https://www.imd.org/centers/world-competitiveness-center/publications for details on the World Competitiveness Yearbook (WCY) by the Institute of Management Development (IMD).
  • See World Health Organisation (WHO). 2020. Impact of COVID-19 on people's livelihoods, their health and our food systems. News. 13 October., as well as Eduardo Levy Yeyati and Federico Filippini. 2021. Social and economic impact of COVID-19. Report. Global Economy and Development program. Brookings June 8., for detailed discussion on the impact of Covid 19 on economies and livelihoods.