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South Africa’s Competitiveness Within a BRICS Context

Up one position, China ranks 28th (up 14 places from 2007) on the 2015 in the Global Competitiveness Index (GCI) 2014-2015 and continues to lead the BRICS economies by a wide margin—well ahead of Russia (53rd), South Africa (56th), Brazil (57th), and India (71st). Dropping for the sixth consecutive edition, India is down 11 on 2014 out of 144 economies and is the lowest ranked among the BRICS economies. India’s slide in the competitiveness rankings began in 2009, when its economy was still growing at 8.5 percent (it even grew by 10.3 percent in 2010). South Africa has also performed worse than the previous year’s ranking.

Although South Africa registered a satisfactory performance in areas such as the financial market development quality of its institutions, intellectual property protection, property rights, the efficiency of its legal framework in challenging and settling disputes and its top-notch accountability of private institution, it continues its downward trend and falls to 56th place in 2015, third among the BRICS economies (Brazil, Russian and India and China). WEF data point to more difficulties in all channels of obtaining finance this year. South Africa also has an efficient market for goods and services and it does reasonably well in more complex areas such as business sophistication and innovation, benefitting from good scientific research institutions and strong collaboration between universities and the business sector in innovation. It also has a solid transport infrastructure by regional standards, but its electricity supply does suffer disruptions.

Strengths Challenges
  • Financial market development quality of its institutions
  • Intellectual property protection
  • Property rights
  • Efficiency of its legal framework in challenging and settling disputes
  • Top-notch accountability of private institution
  • efficient market for goods and services
  • Performing well in business sophistication and innovation
  • Good scientific research institutions
  • Strong collaboration between universities and business sector in innovation
  • Solid transport infrastructure by regional standards
  • Vulnerable to the economic slowdown of advanced economies
  • Diversion of public funds
  • Perceived wastefulness of government spending
  • General lack of public trust in politicians
  • security
  • Building a skilled labour force
  • Creating sufficient employment
  • Health of the workforce
  • Insufficient higher education / training
  • Labour market efficiency
  • Rigid hiring and firing practices
  • Wage inflexibly
  • Continuing significant tensions in labour employer relations
  • Difficulties in all channels of obtaining finance
  • Insecurity re electricity supply

Challenges include the downside of its strong ties to advanced economies, notably the euro area, which has made it more vulnerable to the economic slowdown of those economies. These ties are likely to have contributed to the deterioration of fiscal indicators: its performance in the macroeconomic environment—having dropped sharply in the previous year—remains at 89th out of 144. Low scores for the diversion of public funds, the perceived wastefulness of government spending and a more general lack of public trust in politicians remain worrisome, and security continues to be a major area of concern for doing business. Building a skilled labour force and creating sufficient employment also present considerable challenges. The health of the workforce is ranked 132nd out of 144 economies—as a result of high rates of communicable diseases and poor health indicators more generally. Higher education and training remains insufficient and labour market efficiency is affected by extremely rigid hiring and firing practices, wage inflexibly, and continuing significant tensions in labour-employer relations. Raising education standards and making its labour market more efficient will thus be critical in view of the country’s high unemployment rate of over 20 percent, with its youth unemployment rate estimated at over 50 percent.