Brand South Africa Research Note

Transcription

1 South Africa In(c) Series Brand South Africa Research Note African market entry strategy World Economic Forum learning Global to listen Competitiveness and Report /18 listening to learn South Africa Dr. Petrus de Kock: General Manager- Research Ms. Leigh-Gail Petersen: Research Manager Mr. Joseph Mokoena - 1 -

2 Table of Contents Context on National Competitiveness... 3 Overview: South Africa s Performance on WEF GCI 2011-/ Analysis of SA s performance per pillar Year-on-Year change

3 Context on National Competitiveness National Competitiveness is not merely about rankings and numbers. As a term it can be defined on a number of levels. It is, for example defined in the following ways by the FutureGov forum (Asia): A country s competitiveness requires a good use of human and natural resources for a country to achieve some goal. In the case of SA one can think of Vision 2030 and associated national human development goals of tackling poverty & unemployment among other key national priorities. The goals that a country chooses are a reflection of the philosophy of the country, but they typically have two things in common: productivity and efficiency. A country can achieve a better competitive position through its ability to introduce productivity and efficiency into its use of these human and natural resources. The competitiveness focus of a country is intended to drive some higher order benefit from improved quality of life to longer life expectancy but the common language for such goals tends to focus on increasing the inflow of capital to the country, in the form of exports or foreign direct investment. For more information - From a South African nation brand point of view, it means that improved national competitiveness can directly contribute to the creation of a competitive national identity, which can in turn impact positively on internal development as well as external perceptions/the reputation of the nation brand. 3

4 Overview: South Africa s Performance on WEF GCI 2011-/18 Brand South Africa South Africa s Performance on WEF GCI 2011-/ /18 Overall 50 52/144 53/148 56/144 49/140 47/138 61/137 Institutions Infrastructure Macro-Economic Environment Health & Primary Education Higher Education & Training Goods & Market Efficiency Labour Market Efficiency Financial Market Development Technological Readiness Market Size Business Sophistication Innovation Source: WEF GCI /18, p.268 Improves Drops Stays the same 4

5 WEF Report Comments In the /18 WEF GCI outlook for South Africa, shows a decline in nine of the twelve pillars and a drastic drop by 14 positions in the overall ranking from 47 in to 61 in. Despite the decline overall South Africa remains one of the most competitive countries in sub-saharan Africa, and among the region s most innovative scoring 39 th ranking in innovation. The country s institutional environment (76 th ), financial markets (44 th ), and goods market efficiency (54 th ) are all ranked weaker than the previous year, partially due to a structural break in the Executive Opinion Survey sample. Health & Primary Education and Labour Market Efficiency improved steadily over a seven-year period. Source: WEF GCI /18, p

6 Health and Primary Education,Labour Market efficiency, and Infrastructure continue to improve, while the Market Size remained the same as the previous period. South Africa has dropped 14 positions from 47 in /17 to 61 out of 137 economies in the /18 annual survey, following on two years where the country made strong progress in the global competitiveness rankings. This year s results is a wake-up to the nation. This decline was also seen in the following pillars of the report for the current year: o Institutions (76/137)- dropped by 36 positions o Macro-economic environment (82/137)- dropped by 3 positions o Higher Education & Training (85/137)- dropped by 8 positions o Goods & Market Efficiency (54/137)- dropped by 26 positions o Financial Market Development (44/137)- dropped by 33 positions o Technological Readiness (54/137)- dropped by 5 positions o Business Sophistication (37/137)- dropped by 7 positions o Innovation (39/137)- dropped by 4 positions 6

7 The following are highlighted as the most problematic factors for doing business: Corruption, crime & theft, including government instability are cited as three most problematic issues for doing business in South Africa. Analysis of SA s performance per pillar Year-on-Year change In the following sections we will identify the sub-indicators in which South Africa improves, drops in ranking, or stays the same. Improves Drops Stays the same 7

8 Pillar 1 Institutions SA performance -/18 1 st Pillar: Institutions Institutions overall Property Rights Intellectual Property Protection Diversion Of Public Funds Public Trust In Politicians Irregular Payments And Bribes Judicial Independence Favouritism In Decisions Of Government Officials Wastefulness Of Government Spending Burden Of Government Regulation Efficiency Of Legal Framework In Settling Disputes Efficiency Of Legal Framework In Challenging Regs Transparency Of Government Policymaking Business Costs Of Terrorism Business Costs Of Crime And Violence Organised Crime Reliability Of Police Services Ethical Behaviour Of Firms Strength Of Auditing And Reporting Standards Efficacy Of Corporate Boards Protection Of Minority Shareholders Interests Strength Of Investor Protection, 0-10 (Best)

9 South Africa s competitiveness has dropped to 76 in the ranking for Institutions. The sub-pillars indicate a common thread in articulating the challenges that Institutions are currently facing in terms of Ethical Behaviour of Firms (36 to 72), Strength of Auditing & Reporting Standards (1 to 30), and, Protection of Minority Shareholders Interest s (1 to 30). The drop in the sub-pillars are supported by recent news, which highlights a decline in the confidence of auditing firms and their adherence to ethical standards. However, there is a positive outlook on the Burden of Government Regulation which has seen an increase in ranking from 106 in the previous year to 89 in the current year. Pillar 2 Infrastructure SA performance /18 2 nd Pillar : Infrastructure Infrastructure overall Quality of overall Infrastructure Quality of roads Quality of Railroad Infrastructure Quality of Port Infrastructure Quality of air transport infrastructure Available airline seat km/week, millions* Quality of electricity supply Mobile telephone subscriptions/ 100 pop* Fixed telephone lines/ 100 pop* Advanced infrastructure is an important factor of economic growth and competitiveness as it contextualises the location of economic action and the kinds of activities and sectors that can develop a country (WEF, : 6). South Africa s infrastructure pillar ranks 61 st this year, an improvement from 64 th last year. From a continental perspective, infrastructure has historically been a key competitiveness factor for South Africa, and shows the amount of attention given by Government to stimulate economic growth through Infrastructure. However, a closer look at the subcategories reveals a drop in the Quality of the overall infrastructure from 59 to 72, including the quality of roads (50) and railroads (47). The quality of ports remains the same and a positive increase in the quality of electricity supply as the result of extra power-plants being rolled out throughout South Africa. 9

10 Pillar 3: Macro-Economic Environment SA performance /18 3rd pillar: Macroeconomic Environment Macroeconomic environment overall Government Budget Balance, %GDP* Gross National Savings, %GDP* Inflation, Annual % Change* General Government Debt, % GDP* Country Credit Rating, (Best)* South Africa s pillar of macroeconomic environment declines from 79 to 82. Inflation as an annual percentage change has worsened in comparison to the previous year, ranked at 105. The executive opinions who participated in the survey rated the country s credit rating the same as the previous year at 63; additionally, they rated General Government Debt to have improved from 73 to 69- which proves that they do not view our country as gloom and doom as interventions to contain government debt seems to be effective. Pillar 4: Health and Primary Education SA performance /18 4 th pillar: Health and Primary Education Rank 138 Health and Primary Education overall Malaria Cases/100,000 Pop.* Business Impact of Malaria Tuberculosis Cases/100,000 Pop.* Business Impact of Tuberculosis HIV Prevalence, % Adult Pop.* Business Impact of HIV/AIDS Infant Mortality, Deaths/1,000 Live Births* Life Expectancy, Years* Quality of Primary Education Primary Education Enrolment, Net %*

11 South Africa continues its five-year upward trend in health and primary education (ranked 135 th in and now ranks 121 st ). It has a healthier workforce than last year, having improved its Health and Primary Education pillar by another eleven positions between and. The indicators in the table of Pillar Four below demonstrate improved or consistent performance in all but four subcategories (i.e. Malaria Cases; Business Impact of Malaria; Tuberculosis Primary Education Enrolment). That said, Infant Mortality and Life Expectancy has seen an improvement year-on-year. Pillar 5: Higher Education and Training SA performance /18 5 th pillar: Higher education and Training Higher Education and Training overall Secondary Education Enrolment, Gross %* Tertiary Education Enrolment, Gross %* Quality of The Education System Quality of Math And Science Education Quality of Management Schools Internet Access At Schools Availability of Research And Training Services Extent of Staff Training The quality of a country s higher education and training is the backbone and durability of a country s core value. Quality education at secondary and tertiary education levels is vital in generating a pool of well- educated workers, able to adapt and perform in rapidly changing environments. South Africa s ranking in the fifth pillar has declined by eight positions in its overall ranking. The Quality of Management Schools (45), Availability of Research and Training Services (54), and Extent of Staff Training (39) have all seen a drop in ranking in the current year. The decline alerts us to the importance of on-the-job training and the need to emphasise the role research plays within the country s outlook. Despite the decline in the aforementioned sub-pillars, we see an improvement in four of the sub-pillars which speak to enrolment and quality of the education system. This shows that government interventions which have been 11

12 implemented to encourage learners to select maths and science as subject s bares to the year-on-year upward movement. Pillar 6: Goods and Market Efficiency SA performance /18 6 th pillar: Goods Market Efficiency Rank//144 Goods Market Efficiency overall Intensity of Local Competition Extent of Market Dominance Effectiveness of Anti-Monopoly Policy Effect of taxation on incentives to invest Total Tax Rate, % Profits* No. Procedures To Start A Business* No. Days To Start A Business* Agricultural Policy Costs Prevalence of non-tariff Barriers Trade Tariffs, % Duty* Prevalence of Foreign Ownership Business Impact Of Rules On FDI Burden of Customs Procedures Imports As A Percentage of GDP* Degree of Customer Orientation Buyer Sophistication As one of the key performance areas of the country from a historical perspective, the continued drop in performance in the 6 th pillar of Goods and Market Efficiency is noteworthy and will certainly affect country reputation. South Africa dropped from 28 th in to 54 th in. Barriers to doing business is hindering the prospect of a healthy domestic and foreign market competitiveness for South Africa with decline in almost all of the sub-pillars expect three which remained the same as the previous year. 12

13 Pillar 7: Labour Market Efficiency SA performance /18 7 th pillar: Labour Market Efficiency Rank/ 148 Labour Market Efficiency overall Cooperation in Labour-Employer Relations Flexibility of Wage Determination Hiring and Firing Practices Redundancy Costs, Weeks of Salary* Effect of Taxation on Incentives to Work Pay And Productivity Reliance on Professional Management Country Capacity to Retain Talent Country Capacity To Attract Talent Women in Labour Force, Ratio to Men* As depicted in the table above, South Africa s labour market efficiency, improved steadily since, ranked at 93 in the current year. Despite the serious challenges faced when it comes competing with other nations in this particular pillar, the country s rank is pushed up by solid performance in four subcategories: Cooperation in Labour-Employer Relations (137), Flexibility of Wage Determination, (132) Hiring and Firing Practices (125), and Redundancy Costs (27). There are, however, points of regression in six subcategories which speaks to retention and attraction of talent. Labour markets ought to be flexible enough to be able to shift people from one labour market to another, quickly and with minimal costs and social disruptions or the market s rigidity will continue to be among the important causes of high youth unemployment and discourage people to perform best in their jobs. 13

14 Pillar 8: Financial Market Development SA performance -/18 8 th pillar: Financial Market Development Financial Market Development overall Availability of Financial Services Affordability of Financial Services Financing Through Local Equity Market Ease of Access to Loans Venture Capital Availability Soundness of Banks Regulation of Securities Exchanges Legal Rights Index, 0-10 (Best)* Financial market development has seen the biggest regression within its ranking in the current year from 11 to 44; and on all sub-pillars, particularly, Financing Through Local Equity Market (1 to 25), Soundness of Banks (2 to 37), Availability of Financial Services (2 to 32) and Regulation of Securities Exchanges (3 to 46). This decline has been affected by uncertainty as can be seen in the dramatic drop in performance in this indicator. Pillar 9: Technological Readiness SA performance 20117/18 9 th pillar: Technological Readiness Technological Readiness overall Availability of Latest Technologies Firm-Level Technology Absorption FDI and Technology Transfer Individuals Using Internet, %* Fixed Broadband Internet Subscriptions/100 Pop.* Int l Internet Bandwidth, Kb/S Per User*

15 Mobile Broadband Subscriptions/100 Pop.* The ability of firms and businesses to compete and prosper has much to do with technology. This year, the country has seen a decline in Technological Readiness overall from 49 to 54. This decline is seen in all sub-pillars except Int l Internet Bandwidth improving from 21 to 11. This speaks to South Africa needing a wakeup call to invest more into technology driven initiatives to be on par with the advancement in other nations. Pillar 10: Market Size SA performance /18 10 th pillar: Market Size Rank/14 8 Rank/14 4 Market Size overall Domestic market size index, 1 7 (best)* Foreign market size index, 1 7 (best)* GDP (PPP$ billions)* Exports as a percentage of GDP* Our overall market size remains competitive at 30/137 this year. With a high Foreign Market Size indicator, it may be argued that South Africa relies too heavily on foreign direct investment (FDI) and export demands as a substitute for domestic demand. To develop a more independent and sustainable economy, South Africa ought to improve the stability of its macroeconomic environment. Pillar 11: Business Sophistication SA performance /18 11 th pillar: Business Sophistication 15 Business Sophistication overall Local Supplier Quantity Local Supplier Quality State of Cluster Development

16 Nature of Competitive Advantage Value Chain Breadth Control of International Distribution Production Process Sophistication Extent of Marketing Willingness to Delegate Authority A firm leader by global standards, South Africa s Business Sophistication pillar remains highly competitive, making its business practices conducive to higher efficiency in the production of goods and services. Our ranking, however, has declined from the previous year, moving from 30 th to 37 th between and. The State of Cluster Development, Nature of Competitive Advantage, Value Chain Breadth, and Willingness to Delegate Authority indicators are the strengths that lie within this pillar, demonstrated in the table above. Pillar 12: Innovation SA performance 20117/8 12 th pillar: Innovation Innovation overall Capacity for Innovation Quality of Scientific Research Institutions Company Spending on R&D University-Industry Collaboration In R&D Gov t Procurement of Advanced Tech 57 Products Availability of Scientists and Engineers PCT Patents, Applications/Million Pop.*

17 People s lives can be largely enhanced by technological and non- technological innovation (the latter referring to the 11 th Pillar of the GCI). We can have improving institutions, developed infrastructure and efficient labour markets, but without innovation, these can eventually run into waning returns. South Africa s Innovation Pillar has however declined since last year - from ranking 35 th to 39 th. Categories highlighted as the most problematic, now sees an improvement in: Gov t Procurement of Advanced Tech Products (99-57); Availability of Scientists and Engineers ( ); Innovation is important not only for transforming the manner in which things are done, but to also open a greater range of possibilities and to inspire new ways. Brand South Africa s Research Notes, Research Reports and Web Analyses communicate findings from Brand South Africa research, related panel discussions and analyses of global performance indices. The publications are intended to elicit comments, contribute to debate, and inform stakeholders about trends and issues that impact on South Africa s reputation and overall competitiveness. Views expressed in Research Notes, Reports and Analyses are those of the author(s) and do not necessarily represent those of Brand South Africa, or the Government of the Republic of South Africa. Every precaution is taken to ensure the accuracy of information. However, Brand South Africa shall not be liable to any person for inaccurate information or opinions contained herein. Contacts Dr Petrus de Kock General Manager Research - petrusd@brandsouthafrica.com Ms Leigh-Gail Petersen Research Manager leigh@brandsouthafrica.com Mr Joseph Mokoena- Researcher- josephm@brandsouthafrica.com 17