September 08, 2019 /08:52AM / By Africa Business /
Header Image Credit: Business Live
Since the 1970s, the World Economic Forum had measured the competitiveness of the world's economies through its Global Competitiveness Report, provoking a frank overview of the performance of nations and spurring a robust debate among policymakers.
By 2004, that research had been synthesised into the Global Competitiveness Index (GCI), a tool which ranks nations alongside their peers based on twelve pillars of competitiveness, from institutions to innovation, and grants them an overall score out of 100.
Last year, WEF introduced a new methodology to the Index which strengthens the importance of "the role of human capital, innovation, resilience and agility" in the context of the technological changes prompted by the Fourth Industrial Revolution. Unfortunately, the new methodology has not dramatically led to an improvement in Africa's performance. With an average score of 46.2, sub-Saharan Africa has the lowest GCI score among all regions, and demonstrates the weakest average regional performance in 10 out of 12 pillars. In only five pillars does the average score exceed 50 - including in labour market (53.8), product market (50.4) and business dynamism (50.1).
Despite years of positive headlines about Africa's economic rise, Thierry Geiger, head of research and benchmarking at the WEF, says that Africa's performance leaves much room for improvement.
"Africa is very diverse but diverse in the bottom of the rankings. You have quite a big spread across African nations, but none of them is up there. Among the 148 economies we cover, if we filter sub-Saharan Africa, you have Mauritius at 49 and then South Africa at 67, barely in the top half of the ranking. You find most sub-Saharan Africa nations beyond the 100 mark, all the way [down] to 148. So it's quite weak in general, and even with the largest countries, if you look at Nigeria (115) South Africa (67) and Angola (137), there is room for improvement."
Nevertheless, regional disparities are evident. Mauritius, sub-Saharan Africa's best performer, is nearly 30 points and over 91 places ahead of Chad. Southern African countries have achieved a relatively higher competitiveness performance (48.0) compared to East Africa (46.8) and West Africa (44.5). In ICT adoption, skills and financial systems, Southern Africa performs on average 8.3, 8.9 and 8.7 points higher than in West Africa.
And yet despite a new methodology that reflects the importance of technological change, a common lesson that can be drawn is that African countries continue to be hobbled by a lack of traditional development - whether basic infrastructure investment, skills development or the performance of institutions. Even a relatively high performer like South Africa is held back by health (43.2, 125th ranked) and security (43.7, 132nd ranked).
"The root causes of slow growth and inability to leverage new opportunities offered by technology continue to be the 'old' developmental issues - institutions, infrastructure and skills. Notably, the disappointing economic performance of most Sub-Saharan African countries is more attributable to weaknesses in these areas than in any others, and the much-vaunted economic leapfrogging will not happen unless these issues are addressed decisively," says the report.
Geiger argues that the basic factors of health, skills, good governance and financial prudence require attention. "Across 12 pillars of competitiveness, on average it is the worst region with major weaknesses in the basic enablers or drivers of competitiveness, including security, rule of law, red tape, corruption. We know that inflation or too much debt shapes the business and investment environment."
Unsustainable levels of public debt are a particular concern, with the average public debt-to-GDP ratio in sub-Saharan Africa increasing from 32.4% in 2014 to 45.9% in 2018. That "raises serious questions about the sustainability of private debt, with impending consequences for the attraction of private investments and the availability of public capital necessary to develop infrastructure, improve the education system and provide social services," according to the report.
Yet despite traditional weaknesses, innovation and the potentially exciting transformations of the Fourth Industrial Revolution can still play their part in the continent's future, according to the report's authors. Kenya is developing into a strong innovation hub comparable to South Africa and Mauritius. Some of the continent's improving metrics "herald the possibility to leapfrog, by more adeptly tapping into digital business models and private sector development," says the report.
Yet with less than half of the adult population connected to the internet and subscriptions to broadband extremely low in most of the region's economies, basic infrastructure and digital skills development need to happen to realise its potential. Geiger says that technology will play an increasingly important role - but warns that it will not be a panacea for all of the continent's woes. "We see double-digit growth in technology use but from such a low base.
We know about Kenya and Rwanda, but when you look at the average of the continent it's still very low and it won't solve all the issues. We know bad governance cannot be undone by technology alone - yes, it helps if you are more efficient and digital, with less room for corruption and more accountability. But you can always find ways to steal from the coffers. We see technology in Africa is not delivering growth and access to services at a scale that would be transformative." Given the relatively muted performance, what positives can African policymakers take from the report? Geiger says that the report provides a useful starting point to assess priorities. "We tell them, here's where you stand, forget about your peers, it's not a race. It's not zero sum. It helps to define priorities.
We do it with humility and start a conversation. We go to [policymakers] with the score, the pillars and the subcategories, and that's when we have meaningful conversations with governments and the private sector. We don't venture into the recommendation space. It's a starting point." Furthermore, Geiger acknowledges that competitiveness is not the be-all and end-all for a country. "We do acknowledge inequality is an issue to be addressed at the same time as growth. Being competitive will not solve the other issues of inequality, or a lack of social mobility. It's part of a broader conversation around good growth and development."
Credit: The post African Competitiveness Lags In WEF Ranking first appeared in The African Business Magazine September, 2019
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