Subject for discussion : South Africa’s latest ranking on the overall
World Economic Forum Global Competitiveness
Index which has seen it drop by two places in the
past year and solutions to improve the situation.
UCDP : Hon IS Mfundisi
Thursday, 1 November 2012
It appears that there are certain areas where the effects of recession are still much felt, but the ranking on Global Competitive Index indicates various other issues. Current fragility of global economy cannot be used as a benchmark tool for domestic performance if we are to seek solutions tailor made for domestic challenges.
Arguably, this year’s deceleration to a large extent reflects the inability of leaders to address the many challenges that were already present last year. Policymakers around the world remain concerned about high unemployment and the social conditions in their countries.
It takes no genius to come with relative conclusions explaining the drop when you look at the set twelve pillars of competitiveness used in determining the index. If for instance we use but a few of the pillars, it becomes easy to see where we have erred as a country. The first one is competitiveness in public and private institutions. We have a great constitution that lays solid legal framework on how institutions should operate. However, in practice we see our public institutions ridden by excessive bureaucratic red tape, dishonesty in tenders, self enrichment, lack of transparency and trustworthiness, crippling lack of service delivery. All of these point to deterioration rather than competitiveness.
The downgrading of the bond rating to Baa1 from A3 was prompted by a “reassessment of a decline in the government’s institutional strength amidst increased source economic stresses” and a more negative investment climate occasioned by a surge of illegal strikes in the mining sector.
Investors’ awareness of the country’s long standing socio-economic challenges, in particular the high unemployment rate and continuing wide income disparities nearly 20 years after the democratic transition, have been heightened following recent developments in the mining sector.
The downgrade sends a message that as a country South Africa as governed by the ANC should remain focused on creating an investment friendly environment that creates jobs.
The Census 2011 results that were released with fanfare on Tuesday, 30 October 2012, indicate that unemployment ranks high on the evils besetting S.A. What do you do with a government which according to the A.G under-spends R357 493 000.00 in the Public Works portfolio for money meant to create jobs through the EPW Programme? This is gross ineptitude that calls for sanctioning and the international standards economic downgrading. The principle is if you can’t hear, you must feel it.
However, the recent allocation towards infrastructural development will surely fare us well when looking at the second pillar, even though that’s likely to be in future and dependant on whether the government delivers on the undertakings it has made with regards to infrastructure. Extensive and efficient infrastructure is critical for ensuring the effective functioning of the economy, as it is an important factor in determining the location of economic activity and the kinds of activities or sectors that can develop in a particular instance.
Effective modes of transport, including quality roads, railroads, ports, and air transport enable entrepreneurs to get their goods and services to market in a secure and timely manner and facilitate the movement of workers to the most suitable jobs. Economies also depend on electricity supplies that are free of interruptions and shortages so that businesses and factories can work unimpeded. We are far from achieving in this area and need to show commitment in it.
Lastly, not all is bleak considering that developed economies like the USA have steadily declined in this index in the past couple of years, which is a reflection of current global challenges. We can however do better than what we are doing currently.