Were it not for the relative good performance of South Africa’s private sector, the slippage by 14 places on the WEF’s World Competitiveness Index would have been much much worse. And there is strong evidence that Jacob Zuma, Malusi Gigaba and Mosebenzi Zwane each pulled their weight in efforts to contribute to lower rankings on some of the indicators…
The World Economic Forum rates competitiveness in terms of “the set of institutions, policies, and factors that determine the level of productivity of an economy” and effectively sets the level of prosperity a country can achieve. The Global Competitiveness Index (GCI) uses 114 indicators grouped into 12 categories; institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation. In 2007 when the index only dealt with nine categories, South Africa was ranked 42nd: now it is in position 61.
Figure 1 indicates how SA has slipped back in the ten years of the Zuma regime. The green circular line indicates the median ranking. In 2007 (black line) SA scores in 8 of the 9 categories placed the country in the top half (inside the green line) with 3 of these positioned in the top 25% of countries (inside the orange line). Only in Health and Primary services SA ranked outside the top half of countries. By 2017 SA’s position has deteriorated substantially (now 11 categories): this deterioration was so big that SA achieved only one category ranking in the top 25%, registered a first bottom 25% category score with 45% of category scores already in the less competitive bottom league.
In reality, the country’s score is still higher than what recent performances warrant. Consider two examples:
- In the category Health & Primary Education is an indicator “Primary education enrollment rate” for which SA is in position 50. The rolling out of schools was a major accomplishment of the first ten years after 1994. This relatively high score on old achievements soften the dismal position of 116th out of 137 countries for the “quality of primary education” indicator. In fact, high attendance of dismal education is investment in future slippage and one can only wonder whether the damage done by SADTU is much less than what staying at home with home tuition would be?
- In the Higher education & training category SA is now in position 54 for “Secondary education enrolment rate”: a high rating due to early democracy legacy, not current performance. On performance indicators SA is ranked in position 128 (only nine countries are worse off) for “quality of math and science education” and position 114 for “quality of secondary and tertiary education”.
In several of the categories there are indicators dealing with public sector as well as private sector issues. By categorising the 144 indicators into (inter alia) a few clusters for both the public and private sectors, it is evident the inability of the ANC Government to ensure quality and efficient services is the main cause for SA losing its capacity to compete on the world stage.
The following few examples would suffice:
- Taking 10 indicators that are clearly dealing with the business sector’s capacity and performance (Soundness of banks, Corporate governance, Cluster development, Company spending on R&D, Intensity of local competition, Regulation of security exchanges, Financing through local equity markets, Ease of access to loans, Extent of marketing, Innovation capacity) an average ranking of 37 is achieved.
Compare this with the following:
- Government’s inability to combat crime results in a dismal ranking in position 124. The unreliability of the police service contributes to unabated organised crime and a high business cost of crimes, scuttling the attempts of SA businesses to compete effectively.
- On public sector finance, 5 indicators yield an average ranking in position 102. Were it not for Treasury’s and Pravin Gordhan’s anti-spending budget (that achieved a ranking of 81st for balanced budgets), SA would have achieved an even more dismal ranking in position 108 with “Efficiency in government spending” (position 103), “Irregular payments and bribes” (position 91), “Diversion of public funds” (position 106) and “Favouritism in public decisions” putting SA in the company of the worst ten countries worldwide.
Concerning the “Favouritism in public decisions” the WEF cannot be unaware of:
- President Zuma’s insistence on Dudu Myeni as chair of SAA’s Board of Directors;
- The President’s deployment decisions regarding Shaun Abrahams, Nomgcobo Jiba, and his juggling to ensure Brian Molefe pops up in places with plunder potential;
- Malusi Gigaba’s facilitation of quick residence permits for the Guptas; and
- Mosebenzi Zwane’s arm-wrestling to pressure Glencore into a forced sale to the Guptas so that they could pump capital out of Eskom (Guptas pulled levers of State to grab Glencore’s Optimum).
These were clearly dedicated efforts contributing to a dismal ranking for SA on this indicator.
It is true that the rankings of the private sector have also deteriorated from being firmly in the top 25% of countries in 2007 to now playing in the top league of the second tier of countries. That is primarily due to an enterprise unfriendly climate in South Africa: one not only plagued by Government corruption and Government’s incapacity to render the most basic services properly: protecting its citizens and institutions from crime and rendering quality education for the massive taxpayer contribution that is wasted on dysfunctional schools and incapable teachers.
The unfriendly enterprise environment is actively being pursued by inter alia Sector Charters and Government’s unwillingness to revisit the inflexible labour situation despite evidence after evidence about the strangling effect this has on job creation.
PS Apart from the private sector, the independence of the Judiciary is also a drag on Government’s pursuance of the road to ruin. SA was ranked 36th – way down from position 21 in 2007… (See also my previous blog: South Africa: from Flavour of the Month to a Bad Taste in the Mouth…)