South Africa has the best-regulated securities exchange in the world. Amidst a flood of bad news from the country over the last few months, the financial sector seemed eager to seize on any statistic that showed things were not so bad after all. The World Economic Forum (WEF) Global Competitiveness Survey ranks 144 countries on a variety of economic indicators and it is no mean feat that South Africa emerged first with regards to auditing and reporting standards of its securities exchange. The country was ranked second globally in relation to how shareholders’ interests are managed and the soundness of its banks, and third with respect to its ability to raise funds through the equity markets. In a world economy that has been seriously affected by the failure of financial institutions, strong performances in these key indicators are an important component of a competitive economy. However, regulation of financial markets does not equate to economic performance. South Africa has the lowest percentage economic growth of the Brazil, Russia, India, China (BRICs) group of countries. The South African financial sector, and indeed the government itself may benefit from a closer reading of the WEF report, which with nearly a hundred indicators of competitiveness provides an apt summary of the fundamental problems whcih are at the heart of South Africa’s sluggish economic growth, and may be for some time to come.
It’s obvious that South Africa’s inclusion in the BRICs group was a decision made for political reasons rather than economic ones. Any one of a collection of emerging economies like Mexico, Turkey or Indonesia far exceed South Africa in terms of the sheer size of their economies and growth achieved. But South Africa is seen as representing the continent of Africa in a forum that is as much about exercising political clout on the global stage as it is about promoting trade and development between the respective members. South Africa’s membership of the group, inasmuch as it gives the country a stage on which to exercise it’s political leadership, also provides a spotlight on it’s economic performance and that of the Southern Africa Development Community (SADC) region in general.In what seems at times like a desperate grasp for a positive story, the news of African economic growth is regular fare and a welcome relief from the usual stream of stories of war, famine and political strife. There’s no doubt that the image of Africa portrayed by the western media needs to change and does not reflect the reality of some countries. The figures of growth for some African countries are good – but many of these figures represent growth on the basis of commodity price increases and not long term structural improvements or sustainable changes in economic performance. It’s pertinent to remember that the WEF report does not even measure performance in 9 African countries.
The WEF report looks at 12 main pillars of competitiveness. While South Africa scored highly in the competitiveness of its financial institutions, the report makes clear that these 12 pillars are interdependent and tend to reinforce each other. Like many complex systems, economic performance can be affected by seemingly minor factors. Small problems in key areas can have large effects on economic growth even if a country is highly competitive in many other areas. South Africa performs worst in the cost to business of crime and violence (134th), labour market efficiency (113th) and 143rd with respect to hiring and firing labour practices and perhaps unsurprisingly in the context of recent violent strikes, and 144th out of 144 countries in terms of labour-employer relations. A survey included in the WEF report shows that significant problems remain with an inadequately educated workforce, inefficient government bureaucracy and an inadequate telecommunication infrastructure – infrastructure that seems doomed to be in government control forever. Most governments in the region control commercial access to Internet connectivity leaving commercial providers struggling with huge demand as they are forced to use inadequate government connections to the outside world.
South Africa’s overall ranking is 52 out of the 144 countries mentioned but regionally it is surrounded by Zimbabwe (132), Moçambique (138) and Zambia (102) near the bottom and Botswana (79) and Namibia (92) near the top. A quick calculation of the average ranking of all SADC countries shows that they would rank at 111 if taken as a country in their own right. To put this in perspective, this is the same ranking as Liberia – hardly a shining example of economic success. The rankings provide a clear outline of the major problems and South Africa would do well to concentrate on promoting regional economic growth within SADC if it is not to rely forever on it’s moral authority to be a member of BRICS and the performance of it’s financial regulators to claim economic success. Regional integration within SADC is painfully slow to develop and constitutes a series of stop-start proposals that do little to facilitate the movement of money or people in the region. Driving a car from Nairobi to Cape Town, for example, still requires a pile of documents at least an inch thick. Navigating the individual country rules about reflectors, fire extinguishers, signs and stickers is so complex that one is almost inevitably going to fall foul of the law on the journey. Tourists trying to see Botswana’s wildlife and the Victoria Falls (which are 80km apart) require such a complex and expensive series of visas and permits that many choose one or the other when they visit the region. If Africa is to be seen as an important player in the emerging new world order, it needs to grow economically and to do this it needs to be globally competitive. The message from the WEF report is simple: educate your people, get rid of the red tape, integrate regionally into a large economic bloc and get on top of crime and corruption.