Some pretty worrying numbers from the World Economic Forum’s latest global competitiveness report, which saw ZA slipping a few places down to 56th position. While we shine in various indicators linked to our financial services, we score terribly in terms of labour relations –where we are 144th out of 144 – and in terms of maths and science teaching, again 144th.
An alarm bell or just another bunch of meaningless stats? What do our experts have to say?
Glenn Silverman, Chief Investment Officer at Investment Solutions and author:
As our book ‘Half Way There’ details, SA has been losing ground steadily over time in the WEF Global Competitiveness surveys. The latest release confirms that worrying trend. The world is an increasingly competitive place & SA competes not only with, inter-alia, the Asian tigers, but indeed increasingly with our African neighbours, too. Our book, due for release in SA in October, highlights the areas in which each of the BRICS, SA included, score well and badly – looking at the Top 10 areas of strength & weakness for each. SA ranks number 1 in a number of areas/aspects, primarily around our Financial Services sector, but also ranks amongst the worst globally in other areas, typically relating to education & labour relations. Our book suggests that SA needs, in the simplest terms, to do the following to improve our global competitiveness rankings:
- Protect our areas of strength, namely the Financial Services sector to maintain our current rating, and simultaneously
- Work on our areas of weakness. Where we are ranked worst in the world it would arguably not take much to improve such scores materially, with some concerted/coordinated policy support/initiative
We thus propose setting targets to improve our rankings by say 20 positions every 5 years to ensure/ indicate/monitor our progress.
Mario Pretorius from Telemasters:
Schooling is what got the Prussians ahead in the arms race – the 3R’s made obedient and functional soldiers. The British introduced some compulsory schooling for Industrial Revolution workers. Since then, the last on which kids are formed has not changed much – those who did not fit the obedient, timely and repetitive worker mold are ejected into the economically inconvenient pool. Is ZA schooling still relevant? Yes – to those wanting traditional employment. Yet the structure of no inculcation of Western liberal economic thought with a painful dose of responsibility, accountability and self-reliance that typifies the rural school system will lead to tears, disappointment and a revolution of the wrong kind. The real world is so far removed from the 12 year stint as a youth and a student that the schooling becomes irrelevant, and measurable so. ZA will race to the bottom with no prospect of recovery – money wasted, lives spoilt and opportunities lost for another generation. Unless the schooling ethos of entitlement, solidarity with causes and an expectation of something-for-nothing is stamped out. The race is on – in the wrong direction – for the country’s peace and prosperity.
Prof Raymond Parsons, North West University Business School
The fact that the latest WEF survey of SA’s declining global competitiveness reaffirms what we already know about our economy is not a reason to minimise its message – SA needs to get its act together! The good news is that, as part of the Cabinet’s NDP implementation plan, Minister Jeff Radebe in the Presidency is charged with assessing whether existing and new legislation is compliant with the NDP. It is up to the private sector to use this opportunity to now leverage the latest WEF findings, together with other inputs, to address the specifics of the serious unintended consequences for business confidence of proposals like the ‘protection of investment’ bill and the new visa regulations. On labour relations, where SA scores 144 of 144, we need to see constructive leadership from both employers and trade unions. Finance Minister Nene must be encouraged to craft his mini-budget next month to address what the WEF is saying about the deteriorating macro-economic environment. It is not enough to just throw up one’s hands in despair but to vigorously use every platform to drive home the message that, if we want to enlarge our share of world trade and investment, we have to remain globally competitive. ‘Smart governments encourage smart investment’ rightly comments one leading analyst.
Economist of the Year Ulrich Joubert:
My view is that if we do not get the quality of our training and education system at an improved level, it puts a ceiling on our competitiveness and growth potential in the longer term. We have already lost twenty years and it will take a long period of time before we can expect to see the results of an improved education system. If we do not succeed in providing quality training and education we are going to lose also the advantages in those spheres where we are currently still competitive – like the financial sector. Furthermore it is of utmost importance to adjust our labour dispensation – otherwise we are going to lose more and more jobs in coming years. The trends that I notice indicate to me that we will see a rising trend of unemployment in coming years. First of all due to the lack of training and skills and secondly given the salary and wage increases in excess of inflation but especially in excess of productivity improvements. Thirdly, it is important to limit the state intervention that we have currently in all layers of the economy.
Ian Cruickshanks from the SAIRR:
This is a tragic reminder of the state of inefficiency in parts of the ZA economy, confirming circumstances which emphasise the burden on business – particularly where it interacts with the public sector. ZA will not attract foreign capital until these inefficiencies are removed, and if they are not, the economy will remain in sub-optimal growth, with government unable to deliver the necessary infrastructure for development. In this scenario, and with a distressed world economy, SA will be lucky to grow GDP by more than 1% this year. Meanwhile, job creation on the scale envisaged by President Zuma will remain a pipe dream, with increasing demands for social benefits ratcheting up a higher government budget deficit, which will be increasingly difficult to fund.
Loane Sharp, Economist at the Free Market Foundation:
The latest WEF rankings indicate that South Africa has a vibrant and competitive private sector characterised by excellent governance mechanisms, deep capital markets, and high levels of efficiency and sophistication. On the other hand, South Africa’s public sector is in a state of chaos and its institutional structure is crumbling. Government-provided services such as education and healthcare are exceptionally weak, the labour market is uncompetitive, and the public sector is generally characterized by corruption, wastefulness, and mistrust and uncertainty surrounding laws and regulations. The WEF rankings provide a strong case for introducing private sector management and discipline in the public sector through such vehicles as public/private partnerships (PPPs), targeted deregulation and liberalisation, and selective privatisation.
Mike Schussler from economists.co.za:
I think the fall of SA in the rankings will continue until we address the real problems in the economy – as low interest rates and big deficits are keeping growth afloat. There is no way we will not fall further as our growth rate will again disappoint this year and the financial sector will get another knock after ABIL etc. Education may find improvement, and a few other aspects too, but overall my sense is that SA infrastructure is getting used up, as is the goodwill the country has. It is a problem for us it that things that helped – such as cheap and reliable power and good roads and plentiful water – are slowly coming apart. Companies are seriously looking at other countries for their African head offices – and that may be in Kenya, Nigeria, Ghana etc. The extra rules and regulations, such as the new visa requirements, will pull us down, too. The new BBBEE codes are again hindering – and so too are the new labour laws, which outlaw labour broking for more than three months. SA’s economic performance numbers in growth, inflation, employment etc are also slowly in decline.
The future of this country depends on good education, and we are failing dramatically. And current investor confidence depends on a stable workforce, which is just a dream at the moment. If we fail to compete globally, we fail. Full stop.
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