LEROI RAPUTSOANE: Recovery plan crucial as SA falls in competitiveness rankings

As if being a country with its back against the wall as it fights the highly contagious Delta variant of the coronavirus is not challenging enough, SA has been hit with something of a double whammy as it sees its competitiveness relative to other countries plummet.

To put the challenge in perspective, SA’s competitiveness dropped six places in 2019-2021, according to the latest World Competitiveness Yearbook (WCY) by the Switzerland-based Institute for Management Development (IMD). The country was ranked 62 out of 64 countries in 2021, from 59th out of 63 the year before and 56th in 2019.

This drop is but one of several statistics that highlight the southward trajectory the country’s economy has followed in recent times. Even so, the latest dip should not be seen as an apocalypse but rather as an opportunity to be true to the expression that out of adversity comes prosperity. The survey results should serve as a rallying call that SA needs to knuckle down and look at ways to push the economic reconstruction and recovery plan.

In 2020, in response to the Covid-19 pandemic, the government released a  reconstruction and recovery plan that seeks to rebuild the economy in a more equitable manner that allows it to meets the needs of all its citizens. The plan strives for an economy that will create enough jobs for all who seek employment, provide a more equitable distribution of income among all South Africans, and generally create a better life for all. The plan’s priorities include a huge infrastructure development programme; an employment stimulus to create and support jobs; immediate steps to achieve energy security; and measures to deepen local industrialisation and African integration.

The question is how SA can propel itself onto a plain where higher economic activity and improved competitiveness can help deliver these outcomes. Productivity SA, a government entity tasked with improving the country’s competitiveness and productivity, sees the starting point as being able to understand the statistics and measurements that are used to rank the country’s performance, and harness strong performance areas while improving weak areas of performance. 

The IMD/WCY publication is the leading annual report on the competitiveness of countries and has been published by IMD since 1989. It benchmarks the performance of 64 countries based on more than 330 criteria. The world competitiveness rankings are drawn from a combination of hard data and an executive opinion survey that is conducted in all of the countries that participate in the survey. Productivity SA is the information partner to the IMD in SA.

The drop in SA’s world competitiveness since the onset of the Covid-19 pandemic is significant in a period of just two years given that the competitiveness of a country, as a long-term measure of a country’s ability to create lasting value for its enterprises and citizens, would typically be expected to change gradually over time. Though SA’s drop in the rankings has been a sustained phenomenon and cannot only be attributed to Covid-19, the pandemic era has certainly presented challenges for SA, as with other countries.

The onset of the pandemic has introduced new and far-reaching difficulties for local economies. These are not limited to the health of national populations but have also had devastating consequences on the ability of countries to facilitate a conducive environment in which enterprises and citizens can derive lasting value. 

Switzerland topped the 2021 world competitiveness rankings, while the countries in West Europe, East Asia and North America continue to score high. It is apparent that though the effects of Covid-19 were global, the responses of individual countries in terms of safeguarding lives while trying to ensure local economies continued to thrive determined the extent of gains and losses experienced by different countries.

While the pandemic did not indiscriminate by country or region, what marked the winners and losers in the developing country environment was the ability of policymakers to ensure local economies continued to be competitive, while simultaneously putting measures in place to limit lasting economic and social damage.

Thus, it was the policy responses to the Covid-19 pandemic that separated countries with regard to their world competitiveness. The core message SA should derive from the rankings is that policy must be geared towards that of highly competitive countries if the country is to achieve outcomes that are on par.

As mentioned above, the country data that is evaluated by the IMD’s WCY is based on more than 330 criteria, which are grouped into four factors — economic performance, government efficiency, business efficiency and infrastructure. The competitiveness factors that have dropped most in SA are government efficiency and business efficiency. Government efficiency dropped 11 places between 2019 and 2021 to 61 out of 64 countries, from 50 the year before, while business efficiency dropped 14 places to 61 out of 50. Economic performance and infrastructure dropped least in comparison over the same period, by two places from 59 to 61, and one place from 60 to 61 respectively.

According to the IMD’s professor Arturo Bris, competitiveness provides the framework to quantify the outcome of dealing with challenges such as international trade and investment, employment, openness and political stability, from a country perspective. Ultimately, it allows the IMD to recognise the factors that facilitate prosperity, and this is how the institute expects its rankings to be used and interpreted, so that competitiveness is both a tool and an objective of economic policy. 

• Dr Raputsoane is chief economist at Productivity SA.