Ghana has retained the same ranking on this year’s Global Competitiveness Index as it did last year. TOMA IMIRHE examines how competitive Ghana’s economy is against the rest of the world.
Just as the controversy generated by the Standard and Poors’ ill-judged downgrading of Ghana’s sovereign credit risk assessment was beginning to fade away, another assessment of Ghana by an international institution – this time the World Economic Forum – is in the news. The forum’s latest edition of its Global Competitiveness Report series ranks Ghana as the 114th most internationally competitive country out of 139 economies assessed.
For a country with aspirations to be a major emerging market economy, in the emergent globalised environment, the latest ranking is not exactly flattering; it means Ghana only did better than 25 countries out of the 139 assessed. Just as importantly, since Ghana’s 114th position for 2010/11 is the same as its ranking for the previous edition, it implies the country has failed to become more competitive since the last report was prepared and published.
Actually though, a deeper analysis of the latest Global Competitiveness Index reveals results that are more charitable to Ghana; in general the country did better with regards to most long term competitiveness indications than it did in terms of its overall ranking (see tables). Ghana ranked 96th with regards to efficiency enhancers, which comprise higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness and market size.
Similarly Ghana ranks 100th with regards to innovation and sophistication factors. Indeed Ghana ranks 97th by business sophistication and 99th by innovation.
Conversely Ghana ranks poorly with regards to basic requirements, at 122nd. But even here, Ghana ranks 67th with regards to the empowerment and performance of its public institutions and 106th with regards to its infrastructure. Indeed it is Ghana’s abysmal 136th place with regards to macroeconomic environment and its 122nd place with regards to health and primary education that pulls it back overall.
Summarises the 2010-2011 Global Competitiveness Report, about Ghana ‘s situation: “Ghana is ranked 114th this year, the same position as last year, although gaining four positions in a constant sample. Ghana continues to display strong public institutions and governance indicators with relatively high government efficiency, particularly by regional standards. Some aspects of the country’s infrastructure are also good by regional standards, particularly ports (ranked 59th). Financial markets are also relatively well developed (ranked 60th). On the other hand education levels continue to lag behind international standards at all levels, labour markets continue to be characterized by inefficiencies and the country is not harnessing new technologies for productivity enhancements (ICT adoption rates are very low). Finally the country is characterized by macroeconomic instability with the government running high deficits and building up significant debt, and with high interest rate spreads pointing to inefficiencies in the financial system.”
Just like with the case of Standard & Poor’s evolution of Ghana, many analysts feel the country has been hard done by, with regards to the assessment of the macro-economy and indeed their criticism of the World Economic Forum mirrors that of Standard and Poors – the figures used are outdated. They point out that if current figures are used – for instance single-digit inflation, an appreciating cedi, rising gross foreign reserves, and a falling fiscal deficit – Ghana would rank significantly higher with regards to macroeconomic environment and thus overall too.
However, the dim view taken by the Global Economic Forum about the country’s marco-economic environment does have its supporters, who argue that the rankings correctly penalize Ghana for having an eight year cycle of poor macroeconomic management, that coincides with general elections at the end of a President’s two term tenor in office.
The debate between the supporters and the opponents of the Global Economic Forum’s assessment of the Ghanaian economy notwithstanding however, since the country’s macroeconomic instability is relatively short term, rather than structural, its dire effect on Ghana’s overall competitiveness will soon pass away, at least for now.
More encouragingly though, Ghana ranks quite highly adjudged by several indicators. The country ranks among the best 50 in the world with regards to: the burden of government regulation; efficiency of legal framework in settling disputes; protection of minority shareholders interests; national savings rate; extent of market dominance; extent and effect of taxation; total tax rate; prevalence of trade barriers; legal rights; and financing through local equity market. Most impressively Ghana ranks as the 3rd best country in the world with regards to female participation in the labour force.
Conversely, Ghana is adjudged to be among the worst countries in the world with regards to several key indicators, particularly concerning the macro-economic environment. The country ranks 129th with regards to government’s budget balance, 136th with regards to inflation and 120th with regards to interest rate spread. Instructively however, the situation has improved considerably concerning all but the last since the latest Global Competitiveness Report was researched.
Much more worrying though are Ghana’s poor rankings with regards to both health and education, two crucial factors both for national economic development and for living standards. Indeed Ghana ranks 122nd out of the 139 countries assessed, with regards to health and primary education. Out of 10 indicators in this category, Ghana is outside the best 100 in all but one of them – quality of primary education – where it ranks 82nd.
Indeed the handling of malaria proves to be an Achilles heel for Ghana; the country ranks 126th out of 130 for both malaria incidence and for the business impact of malaria. The country performs almost as poorly in the areas of HIV prevalence (118th), infant mortality (110th) and life expectancy (117th) as well.
The education system hardly ranks better. Ghana ranks 125th with regards to primary education enrolment rate, 111th with regards to secondary education enrolment rate, 117th in tertiary education enrolment rate and 104th with regards to Internet access in schools.
Education sector deficiencies are passed through to similar deficiencies in Ghana’s technological grounding. For instance the country ranks 112th with regards to technological absorption at the firm level, and 95th with regards to availability of latest technologies. Ghana ranks 110th in terms of capacity for innovation, 101th in terms of government procurement of advanced technological products, and worst of all, 133rd with regards to corporate spending on research and development. Add to all these a 117th ranking with regards to Internet usage, 113rd ranking in relation to broadband Internet subscriptions, and 104th with regards to Internet bandwidth.
Dissatisfaction over Ghana’s position in the rankings aside, the country can nevertheless use them to identify areas that need to be improved upon, and areas where it has a competitive advantage that can be used to market Ghana to the international community.
For instance the report reveals that the country’s financial markets do not make financial services readily available and even when they do, they are not affordable. Indeed access to financing was identified by those surveyed for the report as far and away the most problematic factor for doing business in Ghana. And even though Ghana scares relatively high marks for infrastructure, respondents to the survey identify inadequate supply of infrastructure as the next biggest problematic area.
Considering the results of the two latest evolutions of Ghana, by international institutions, it appears that the country needs to engage in perception management, so that the foreign investment community retains its interest in Ghana as a foreign direct investment destination, while it sorts out the macro-economic instability challenges.
Africa has experienced impressive growth over the past decade, and has weathered the recent global economic turmoil relatively well. Indeed, coming out of the crisis, the IMF predicts GDP growth of 4.7 percent in 2010 and well above 5 percent for the next few years for sub-Saharan Africa.31Yet an assessment of the competitiveness of African economies raises questions about how sustainable this growth will be over the longer term and highlights areas in need of urgent attention to allow Africa to achieve its full economic potential.
However, despite such concerns, some African countries continue to fare quite well. South Africa and Mauritius remain in the top half of the rankings, and there have been measurable improvements across specific areas in a number of other African countries. On the other hand, there have been some significant declines registered in countries that were previously making strides ahead. More generally, sub-Saharan Africa as a whole lags behind the rest of the world in competitiveness, requiring efforts across many areas to place the region on a firmly sustainable growth and development path going forward.
Here is what the Report says about some major African economies.
South Africa, at 54th overall, remains the highestranked country in sub-Saharan Africa. While it has dropped somewhat in rank since last year, its performance has in fact remained stable and the decline reflects improvements in other countries. South Africa still benefits from the large size of its economy, particularly by regional standards (it is ranked 25th in the market size pillar). It also does well on measures of the quality of institutions and factor allocation, such as intellectual property protection (27th), property rights (29th), the accountability of private institutions (3rd), and goods market efficiency (40th). Particularly impressive is the country’s financial market development (ranked 9th), indicating high confidence in South Africa’s financial markets at a time when trust has been eroded in many other parts of the world. South Africa also does reasonably well in more complex areas such as business sophistication (38th) and innovation (44th), benefiting from good scientific research institutions (ranked 29th) and strong collaboration between universities and the business sector in innovation (ranked 24th).
While a number of attributes therefore make South Africa the most competitive economy in the region, in order to further enhance its competitiveness it will need to address some weaknesses. The country ranks 97th in labor market efficiency, with inflexible hiring and firing practices (135th), a lack of flexibility in wage determination by companies (131st), and poor labor-employer relations (132nd). Efforts must also be made to increase the university enrollment rate of only 15 percent, which places the country 99th overall, in order to better develop the country’s innovation potential. In addition, South Africa’s infrastructure, although good by regional standards, requires upgrading (ranked 63rd) beyond what has been achieved in the preparations for the 2010 World Cup. The poor security situation remains another important obstacle to doing business in South Africa.
The business costs of crime and violence (137th) and the sense that the police are unable to provide protection from crime (104th) do not contribute to an environment that fosters competitiveness. Another major concern remains the health of the workforce, ranked 127th out of 139 countries, the result of high rates of communicable diseases and poor health indicators more generally. Improvements in these areas will enhance South Africa’s productivity and competitiveness.
Mauritius is ranked 55th this year, up two places since last year, and directly following South Africa. The country benefits from strong and transparent public institutions, with clear property rights, strong judicial independence, and an efficient government (ranked 29th). Private institutions are rated as highly accountable and improving (ranked 14th), with effective auditing and accounting standards and strong investor protection. The country’s infrastructure is developed by regional standards, particularly roads, air transport, and fixed telephony.
Health standards are also impressive compared with other sub-Saharan African countries. Further, both goods and financial markets are effective in allocating resources (ranked 31st and 29th, respectively).
However, efforts continue to be required in the area of education. Educational enrollment rates remain low at all levels, and the educational system gets mediocre marks for quality. Beyond the educational weaknesses, labor markets could be made more efficient, with stringent hiring and firing laws (74th) and wages that are not flexibly determined (99th), although there have been measurable improvements in the assessment of this area since last year.
Namibia remains in 74th place, the same rank as last year, although up by one place in a constant sample.
The country benefits from a strong institutional environment (ranked 38th). Property rights are well protected (ranked 24th), the judiciary is perceived as independent from undue influence (23rd), and there is strong public trust of politicians (30th). The country’s transport infrastructure is also excellent by regional standards (ranked 35th). Goods (56th) and labor markets (55th) function fairly well, and both have seen improvements since last year.
Financial markets are well developed by international standards (24th), with strong confidence in financial institutions. The country also continues to be characterized by good macroeconomic management, particularly by today’s standards (ranked 40th).
With regard to weaknesses, as in much of the region, Namibia’s health and education indicators are worrisome. The country is ranked a low 113th on the health subpillar, with high infant mortality and low life expectancy—the result in large part of the high rates of communicable diseases. On the educational side, enrollment rates remain low, and the quality of the educational system remains poor, ranked 124th. In addition, Namibia could do more to harness new technologies to improve its productivity levels, with low penetration rates of new technologies such as mobile phones and the Internet.
Although Botswana falls to 76th place, it remains one of the four most competitive economies in the region. Among the country’s strengths are its reliable and legitimate institutions (32nd), ranked 15th worldwide for the efficiency of government spending, 21st for public trust of politicians, and 30th for judicial independence.
Botswana is characterized by extremely low levels of corruption (ranked 32nd overall, on a par with countries such as France and Japan). While still better rated than in a number of industrialized countries, there has been a deterioration in its macroeconomic environment, dropping from 41st to 74th over the past year.
Botswana’s primary weaknesses continue to be related to the country’s human resources base. Educational enrollment rates at all levels remain low by international standards (ranked 111th, 88th, and 114th for primary, secondary, and tertiary enrollment, respectively), and the quality of the educational system receives mediocre marks. Yet it is clear that by far the biggest obstacle facing Botswana in its efforts to improve its competitiveness remains the health situation in the country. The rates of diseases remain very high (the rates of HIV, malaria, and tuberculosis are ranked 110th, 100th, and 135th, respectively), although on a positive note these rates are for the most part coming down. Continuing to improve the health and education levels of the workforce remain the key priorities for improving Botswana’s competitiveness.
Rwanda enters the GCI for the first time this year at 80th position, among the top five countries in the sub-Saharan African region. As do the other comparatively successful African countries, Rwanda benefits from strong and well-functioning institutions, with very low levels of corruption (certainly related to the government’s non-tolerance policy) and an excellent security environment. Labor markets are highly efficient, financial markets are relatively well developed, and Rwanda is characterized by a high capacity for innovation for a country at its stage of development. The greatest challenges facing Rwanda in improving its competitiveness are the state of the country’s infrastructure (especially electricity and telephony), low secondary and university enrollment rates, and the poor health of its workforce (life expectancy is only 50 years, placing the country 130th on this indicator).
Kenya (ranked 106th overall) has fallen four places this year, not counting the new countries that have entered the Index above it. Kenya’s key strengths continue to be found in the more complex areas measured by the GCI. For example, Kenya’s innovative capacity is ranked an impressive 56th, with high company spending on R&D and good scientific research institutions collaborating well with the business sector in research activities. Supporting this innovative potential is an educational system that—although educating a relatively small proportion of the population compared with most other countries—gets relatively good marks for quality (56th) as well as for on-the-job training (58th). The economy is also supported by financial markets that are well developed by international standards (27th) and a relatively efficient labor market (46th).
On the other hand, Kenya’s overall competitiveness is held back by a number of factors. Health is an area of serious concern (ranked 122nd), with a high prevalence of communicable diseases contributing to the low life expectancy of just over 54 years and reducing the productivity of the workforce. Further, there has been a continued weakening in the assessment of its institutional environment, with large and increasing concerns about corruption and aspects of government efficiency.
The security situation in Kenya is also worrisome, particularly crime and violence (124th), the potential of terrorism (133rd), and the prevalence of organized crime (123rd). It is hoped that the reforms in the context of the new constitution will bring about improvements in several of these areas.
Tanzania is ranked 113th, falling by nine positions in a constant sample of countries included last year. The country’s performance remains quite stable and the change in rank is mainly related to other countries improving more quickly. Tanzania benefits from public institutions characterized by reasonable public trust of politicians (ranked 62nd) and relative evenhandedness in the government’s dealings with the private sector (ranked 50th). In addition, some aspects of the labor markets lend themselves to efficiency, such as the high female participation in the labor force (ranked 6th) and reasonable taxation and redundancy costs.
However, there are many areas that must be addressed in order to make Tanzania competitive. Infrastructure in the country is underdeveloped (ranked 128th), with poor-quality roads, ports, and electricity supply and few telephone lines. And although primary education enrollment is commendably high, providing universal access (13th), enrollment rates at the secondary and university levels are among the lowest in the world (ranked 131st and 136th, respectively). In addition, the quality of the educational system requires upgrading. This relates to another area of concern, which is the low level of technological readiness in Tanzania (ranked 131st), with very low uptake of ICTs such as the Internet and mobile telephony. In addition, the basic health of the workforce is a serious concern; the country is ranked 119th in this area, with poor health indicators and high levels of diseases such as malaria, tuberculosis, and HIV.
Ghana is ranked 114th this year, the same position as last year, although gaining four positions in a constant sample. Ghana continues to display strong public institutions and governance indicators with relatively high government efficiency, particularly by regional standards.
Some aspects of the country’s infrastructure are also good by regional standards, particularly ports (ranked 59th).
Financial markets are also relatively well developed (ranked 60th). On the other hand, education levels continue to lag behind international standards at all levels, labor markets continue to be characterized by inefficiencies, and the country is not harnessing new technologies for productivity enhancements (ICT adoption rates are very low).
Finally, the country is characterized by macroeconomic instability, with the government running high fiscal deficits and building up significant debt, and with high interest rate spreads pointing to inefficiencies in the financial system.
Nigeria has plunged in the rankings this year to 127th position, the result of a weakening across many aspects of the Index, most notably in the assessment of the institutional environment and the country’s macroeconomic stability. Indeed, while the macroeconomic environment was previously the country’s greatest strength, its ranking has gone from 20th last year all the way down to 97th this year. A large fiscal surplus has turned to deficit, the interest rate spread has increased measurably, and the country credit rating places Nigeria 91st out of all countries covered. There has also been a measurable weakening in measures of Nigeria’s institutional environment, ranked 121st, down from 102nd last year. There are significant and increasing concerns about the protection of property rights, ethics and corruption, undue influence, and government inefficiencies. Private institutions also receive a worsening assessment, with poor corporate ethics (125th) and weak auditing and reporting standards (130th) of particular concern. The security situation in the country continues to be dire (ranked 123rd). Additionally, Nigeria receives poor assessments for its infrastructure (135th) as well as its health and primary education levels (137th). In addition, the country is not harnessing the latest technologies for productivity enhancements, as demonstrated by its low rates of ICT penetration.
While the situation is therefore difficult, it is important to note that Nigeria also has a number of strengths on which to build its competitiveness. The country benefits from a relatively large market (30th) providing its companies with opportunities for economies of scale, as well as businesses that are sophisticated by regional standards (76th), with some cluster development companies that tend to hire professional managers and delegate decision-making authority within the organization.
Zimbabwe continues to be among the lowestranked countries included in the GCI, ranked fourth to last at 136th overall, although there have been some improvements in individual areas. The assessment of public institutions, while still weak, has improved measurably, increasing from 125th last year to 113th this year.
Specific areas of improvement are ethics and corruption (up from 122nd to 103rd), government inefficiency (up from 124th to 105th), and the security situation (up from 85th to 66th). On the other hand, some major concerns linger with regard to the protection of property rights (ranked 136th) and undue influence (126th), where Zimbabwe continues to be among the lowestranked countries. And despite efforts to improve its macroeconomic environment—including the dollarization of its economy in early 2009, which brought down inflation and interest rates—the situation continues to be bad enough to place Zimbabwe last out of all countries in this pillar (139th). Weaknesses in other areas include health (ranked 135th in the health subpillar), low educational enrollment rates, and official markets that continue to function with difficulty (particularly with regard to goods and labor markets, ranked 130th and 129th, respectively).
Global Competitiveness Index
Rank Score
(out of 139) (1 – 7)
GCI 2010–2011.......................................... 114 …….3.6
GCI 2009–2010 (out of 133)................................ 114 ........3.4
GCI 2008–2009 (out of 134)................................ 102 ........3.6
Basic requirements............................................. 122 ........3.5
1st pillar: Institutions ........................................... 67 ........3.9
2nd pillar: Infrastructure........................................ 106 ........2.9
Just as the controversy generated by the Standard and Poors’ ill-judged downgrading of Ghana’s sovereign credit risk assessment was beginning to fade away, another assessment of Ghana by an international institution – this time the World Economic Forum – is in the news. The forum’s latest edition of its Global Competitiveness Report series ranks Ghana as the 114th most internationally competitive country out of 139 economies assessed.
For a country with aspirations to be a major emerging market economy, in the emergent globalised environment, the latest ranking is not exactly flattering; it means Ghana only did better than 25 countries out of the 139 assessed. Just as importantly, since Ghana’s 114th position for 2010/11 is the same as its ranking for the previous edition, it implies the country has failed to become more competitive since the last report was prepared and published.
Actually though, a deeper analysis of the latest Global Competitiveness Index reveals results that are more charitable to Ghana; in general the country did better with regards to most long term competitiveness indications than it did in terms of its overall ranking (see tables). Ghana ranked 96th with regards to efficiency enhancers, which comprise higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness and market size.
Similarly Ghana ranks 100th with regards to innovation and sophistication factors. Indeed Ghana ranks 97th by business sophistication and 99th by innovation.
Conversely Ghana ranks poorly with regards to basic requirements, at 122nd. But even here, Ghana ranks 67th with regards to the empowerment and performance of its public institutions and 106th with regards to its infrastructure. Indeed it is Ghana’s abysmal 136th place with regards to macroeconomic environment and its 122nd place with regards to health and primary education that pulls it back overall.
Summarises the 2010-2011 Global Competitiveness Report, about Ghana ‘s situation: “Ghana is ranked 114th this year, the same position as last year, although gaining four positions in a constant sample. Ghana continues to display strong public institutions and governance indicators with relatively high government efficiency, particularly by regional standards. Some aspects of the country’s infrastructure are also good by regional standards, particularly ports (ranked 59th). Financial markets are also relatively well developed (ranked 60th). On the other hand education levels continue to lag behind international standards at all levels, labour markets continue to be characterized by inefficiencies and the country is not harnessing new technologies for productivity enhancements (ICT adoption rates are very low). Finally the country is characterized by macroeconomic instability with the government running high deficits and building up significant debt, and with high interest rate spreads pointing to inefficiencies in the financial system.”
Just like with the case of Standard & Poor’s evolution of Ghana, many analysts feel the country has been hard done by, with regards to the assessment of the macro-economy and indeed their criticism of the World Economic Forum mirrors that of Standard and Poors – the figures used are outdated. They point out that if current figures are used – for instance single-digit inflation, an appreciating cedi, rising gross foreign reserves, and a falling fiscal deficit – Ghana would rank significantly higher with regards to macroeconomic environment and thus overall too.
However, the dim view taken by the Global Economic Forum about the country’s marco-economic environment does have its supporters, who argue that the rankings correctly penalize Ghana for having an eight year cycle of poor macroeconomic management, that coincides with general elections at the end of a President’s two term tenor in office.
The debate between the supporters and the opponents of the Global Economic Forum’s assessment of the Ghanaian economy notwithstanding however, since the country’s macroeconomic instability is relatively short term, rather than structural, its dire effect on Ghana’s overall competitiveness will soon pass away, at least for now.
More encouragingly though, Ghana ranks quite highly adjudged by several indicators. The country ranks among the best 50 in the world with regards to: the burden of government regulation; efficiency of legal framework in settling disputes; protection of minority shareholders interests; national savings rate; extent of market dominance; extent and effect of taxation; total tax rate; prevalence of trade barriers; legal rights; and financing through local equity market. Most impressively Ghana ranks as the 3rd best country in the world with regards to female participation in the labour force.
Conversely, Ghana is adjudged to be among the worst countries in the world with regards to several key indicators, particularly concerning the macro-economic environment. The country ranks 129th with regards to government’s budget balance, 136th with regards to inflation and 120th with regards to interest rate spread. Instructively however, the situation has improved considerably concerning all but the last since the latest Global Competitiveness Report was researched.
Much more worrying though are Ghana’s poor rankings with regards to both health and education, two crucial factors both for national economic development and for living standards. Indeed Ghana ranks 122nd out of the 139 countries assessed, with regards to health and primary education. Out of 10 indicators in this category, Ghana is outside the best 100 in all but one of them – quality of primary education – where it ranks 82nd.
Indeed the handling of malaria proves to be an Achilles heel for Ghana; the country ranks 126th out of 130 for both malaria incidence and for the business impact of malaria. The country performs almost as poorly in the areas of HIV prevalence (118th), infant mortality (110th) and life expectancy (117th) as well.
The education system hardly ranks better. Ghana ranks 125th with regards to primary education enrolment rate, 111th with regards to secondary education enrolment rate, 117th in tertiary education enrolment rate and 104th with regards to Internet access in schools.
Education sector deficiencies are passed through to similar deficiencies in Ghana’s technological grounding. For instance the country ranks 112th with regards to technological absorption at the firm level, and 95th with regards to availability of latest technologies. Ghana ranks 110th in terms of capacity for innovation, 101th in terms of government procurement of advanced technological products, and worst of all, 133rd with regards to corporate spending on research and development. Add to all these a 117th ranking with regards to Internet usage, 113rd ranking in relation to broadband Internet subscriptions, and 104th with regards to Internet bandwidth.
Dissatisfaction over Ghana’s position in the rankings aside, the country can nevertheless use them to identify areas that need to be improved upon, and areas where it has a competitive advantage that can be used to market Ghana to the international community.
For instance the report reveals that the country’s financial markets do not make financial services readily available and even when they do, they are not affordable. Indeed access to financing was identified by those surveyed for the report as far and away the most problematic factor for doing business in Ghana. And even though Ghana scares relatively high marks for infrastructure, respondents to the survey identify inadequate supply of infrastructure as the next biggest problematic area.
Considering the results of the two latest evolutions of Ghana, by international institutions, it appears that the country needs to engage in perception management, so that the foreign investment community retains its interest in Ghana as a foreign direct investment destination, while it sorts out the macro-economic instability challenges.
Africa has experienced impressive growth over the past decade, and has weathered the recent global economic turmoil relatively well. Indeed, coming out of the crisis, the IMF predicts GDP growth of 4.7 percent in 2010 and well above 5 percent for the next few years for sub-Saharan Africa.31Yet an assessment of the competitiveness of African economies raises questions about how sustainable this growth will be over the longer term and highlights areas in need of urgent attention to allow Africa to achieve its full economic potential.
However, despite such concerns, some African countries continue to fare quite well. South Africa and Mauritius remain in the top half of the rankings, and there have been measurable improvements across specific areas in a number of other African countries. On the other hand, there have been some significant declines registered in countries that were previously making strides ahead. More generally, sub-Saharan Africa as a whole lags behind the rest of the world in competitiveness, requiring efforts across many areas to place the region on a firmly sustainable growth and development path going forward.
Here is what the Report says about some major African economies.
South Africa, at 54th overall, remains the highestranked country in sub-Saharan Africa. While it has dropped somewhat in rank since last year, its performance has in fact remained stable and the decline reflects improvements in other countries. South Africa still benefits from the large size of its economy, particularly by regional standards (it is ranked 25th in the market size pillar). It also does well on measures of the quality of institutions and factor allocation, such as intellectual property protection (27th), property rights (29th), the accountability of private institutions (3rd), and goods market efficiency (40th). Particularly impressive is the country’s financial market development (ranked 9th), indicating high confidence in South Africa’s financial markets at a time when trust has been eroded in many other parts of the world. South Africa also does reasonably well in more complex areas such as business sophistication (38th) and innovation (44th), benefiting from good scientific research institutions (ranked 29th) and strong collaboration between universities and the business sector in innovation (ranked 24th).
While a number of attributes therefore make South Africa the most competitive economy in the region, in order to further enhance its competitiveness it will need to address some weaknesses. The country ranks 97th in labor market efficiency, with inflexible hiring and firing practices (135th), a lack of flexibility in wage determination by companies (131st), and poor labor-employer relations (132nd). Efforts must also be made to increase the university enrollment rate of only 15 percent, which places the country 99th overall, in order to better develop the country’s innovation potential. In addition, South Africa’s infrastructure, although good by regional standards, requires upgrading (ranked 63rd) beyond what has been achieved in the preparations for the 2010 World Cup. The poor security situation remains another important obstacle to doing business in South Africa.
The business costs of crime and violence (137th) and the sense that the police are unable to provide protection from crime (104th) do not contribute to an environment that fosters competitiveness. Another major concern remains the health of the workforce, ranked 127th out of 139 countries, the result of high rates of communicable diseases and poor health indicators more generally. Improvements in these areas will enhance South Africa’s productivity and competitiveness.
Mauritius is ranked 55th this year, up two places since last year, and directly following South Africa. The country benefits from strong and transparent public institutions, with clear property rights, strong judicial independence, and an efficient government (ranked 29th). Private institutions are rated as highly accountable and improving (ranked 14th), with effective auditing and accounting standards and strong investor protection. The country’s infrastructure is developed by regional standards, particularly roads, air transport, and fixed telephony.
Health standards are also impressive compared with other sub-Saharan African countries. Further, both goods and financial markets are effective in allocating resources (ranked 31st and 29th, respectively).
However, efforts continue to be required in the area of education. Educational enrollment rates remain low at all levels, and the educational system gets mediocre marks for quality. Beyond the educational weaknesses, labor markets could be made more efficient, with stringent hiring and firing laws (74th) and wages that are not flexibly determined (99th), although there have been measurable improvements in the assessment of this area since last year.
Namibia remains in 74th place, the same rank as last year, although up by one place in a constant sample.
The country benefits from a strong institutional environment (ranked 38th). Property rights are well protected (ranked 24th), the judiciary is perceived as independent from undue influence (23rd), and there is strong public trust of politicians (30th). The country’s transport infrastructure is also excellent by regional standards (ranked 35th). Goods (56th) and labor markets (55th) function fairly well, and both have seen improvements since last year.
Financial markets are well developed by international standards (24th), with strong confidence in financial institutions. The country also continues to be characterized by good macroeconomic management, particularly by today’s standards (ranked 40th).
With regard to weaknesses, as in much of the region, Namibia’s health and education indicators are worrisome. The country is ranked a low 113th on the health subpillar, with high infant mortality and low life expectancy—the result in large part of the high rates of communicable diseases. On the educational side, enrollment rates remain low, and the quality of the educational system remains poor, ranked 124th. In addition, Namibia could do more to harness new technologies to improve its productivity levels, with low penetration rates of new technologies such as mobile phones and the Internet.
Although Botswana falls to 76th place, it remains one of the four most competitive economies in the region. Among the country’s strengths are its reliable and legitimate institutions (32nd), ranked 15th worldwide for the efficiency of government spending, 21st for public trust of politicians, and 30th for judicial independence.
Botswana is characterized by extremely low levels of corruption (ranked 32nd overall, on a par with countries such as France and Japan). While still better rated than in a number of industrialized countries, there has been a deterioration in its macroeconomic environment, dropping from 41st to 74th over the past year.
Botswana’s primary weaknesses continue to be related to the country’s human resources base. Educational enrollment rates at all levels remain low by international standards (ranked 111th, 88th, and 114th for primary, secondary, and tertiary enrollment, respectively), and the quality of the educational system receives mediocre marks. Yet it is clear that by far the biggest obstacle facing Botswana in its efforts to improve its competitiveness remains the health situation in the country. The rates of diseases remain very high (the rates of HIV, malaria, and tuberculosis are ranked 110th, 100th, and 135th, respectively), although on a positive note these rates are for the most part coming down. Continuing to improve the health and education levels of the workforce remain the key priorities for improving Botswana’s competitiveness.
Rwanda enters the GCI for the first time this year at 80th position, among the top five countries in the sub-Saharan African region. As do the other comparatively successful African countries, Rwanda benefits from strong and well-functioning institutions, with very low levels of corruption (certainly related to the government’s non-tolerance policy) and an excellent security environment. Labor markets are highly efficient, financial markets are relatively well developed, and Rwanda is characterized by a high capacity for innovation for a country at its stage of development. The greatest challenges facing Rwanda in improving its competitiveness are the state of the country’s infrastructure (especially electricity and telephony), low secondary and university enrollment rates, and the poor health of its workforce (life expectancy is only 50 years, placing the country 130th on this indicator).
Kenya (ranked 106th overall) has fallen four places this year, not counting the new countries that have entered the Index above it. Kenya’s key strengths continue to be found in the more complex areas measured by the GCI. For example, Kenya’s innovative capacity is ranked an impressive 56th, with high company spending on R&D and good scientific research institutions collaborating well with the business sector in research activities. Supporting this innovative potential is an educational system that—although educating a relatively small proportion of the population compared with most other countries—gets relatively good marks for quality (56th) as well as for on-the-job training (58th). The economy is also supported by financial markets that are well developed by international standards (27th) and a relatively efficient labor market (46th).
On the other hand, Kenya’s overall competitiveness is held back by a number of factors. Health is an area of serious concern (ranked 122nd), with a high prevalence of communicable diseases contributing to the low life expectancy of just over 54 years and reducing the productivity of the workforce. Further, there has been a continued weakening in the assessment of its institutional environment, with large and increasing concerns about corruption and aspects of government efficiency.
The security situation in Kenya is also worrisome, particularly crime and violence (124th), the potential of terrorism (133rd), and the prevalence of organized crime (123rd). It is hoped that the reforms in the context of the new constitution will bring about improvements in several of these areas.
Tanzania is ranked 113th, falling by nine positions in a constant sample of countries included last year. The country’s performance remains quite stable and the change in rank is mainly related to other countries improving more quickly. Tanzania benefits from public institutions characterized by reasonable public trust of politicians (ranked 62nd) and relative evenhandedness in the government’s dealings with the private sector (ranked 50th). In addition, some aspects of the labor markets lend themselves to efficiency, such as the high female participation in the labor force (ranked 6th) and reasonable taxation and redundancy costs.
However, there are many areas that must be addressed in order to make Tanzania competitive. Infrastructure in the country is underdeveloped (ranked 128th), with poor-quality roads, ports, and electricity supply and few telephone lines. And although primary education enrollment is commendably high, providing universal access (13th), enrollment rates at the secondary and university levels are among the lowest in the world (ranked 131st and 136th, respectively). In addition, the quality of the educational system requires upgrading. This relates to another area of concern, which is the low level of technological readiness in Tanzania (ranked 131st), with very low uptake of ICTs such as the Internet and mobile telephony. In addition, the basic health of the workforce is a serious concern; the country is ranked 119th in this area, with poor health indicators and high levels of diseases such as malaria, tuberculosis, and HIV.
Ghana is ranked 114th this year, the same position as last year, although gaining four positions in a constant sample. Ghana continues to display strong public institutions and governance indicators with relatively high government efficiency, particularly by regional standards.
Some aspects of the country’s infrastructure are also good by regional standards, particularly ports (ranked 59th).
Financial markets are also relatively well developed (ranked 60th). On the other hand, education levels continue to lag behind international standards at all levels, labor markets continue to be characterized by inefficiencies, and the country is not harnessing new technologies for productivity enhancements (ICT adoption rates are very low).
Finally, the country is characterized by macroeconomic instability, with the government running high fiscal deficits and building up significant debt, and with high interest rate spreads pointing to inefficiencies in the financial system.
Nigeria has plunged in the rankings this year to 127th position, the result of a weakening across many aspects of the Index, most notably in the assessment of the institutional environment and the country’s macroeconomic stability. Indeed, while the macroeconomic environment was previously the country’s greatest strength, its ranking has gone from 20th last year all the way down to 97th this year. A large fiscal surplus has turned to deficit, the interest rate spread has increased measurably, and the country credit rating places Nigeria 91st out of all countries covered. There has also been a measurable weakening in measures of Nigeria’s institutional environment, ranked 121st, down from 102nd last year. There are significant and increasing concerns about the protection of property rights, ethics and corruption, undue influence, and government inefficiencies. Private institutions also receive a worsening assessment, with poor corporate ethics (125th) and weak auditing and reporting standards (130th) of particular concern. The security situation in the country continues to be dire (ranked 123rd). Additionally, Nigeria receives poor assessments for its infrastructure (135th) as well as its health and primary education levels (137th). In addition, the country is not harnessing the latest technologies for productivity enhancements, as demonstrated by its low rates of ICT penetration.
While the situation is therefore difficult, it is important to note that Nigeria also has a number of strengths on which to build its competitiveness. The country benefits from a relatively large market (30th) providing its companies with opportunities for economies of scale, as well as businesses that are sophisticated by regional standards (76th), with some cluster development companies that tend to hire professional managers and delegate decision-making authority within the organization.
Zimbabwe continues to be among the lowestranked countries included in the GCI, ranked fourth to last at 136th overall, although there have been some improvements in individual areas. The assessment of public institutions, while still weak, has improved measurably, increasing from 125th last year to 113th this year.
Specific areas of improvement are ethics and corruption (up from 122nd to 103rd), government inefficiency (up from 124th to 105th), and the security situation (up from 85th to 66th). On the other hand, some major concerns linger with regard to the protection of property rights (ranked 136th) and undue influence (126th), where Zimbabwe continues to be among the lowestranked countries. And despite efforts to improve its macroeconomic environment—including the dollarization of its economy in early 2009, which brought down inflation and interest rates—the situation continues to be bad enough to place Zimbabwe last out of all countries in this pillar (139th). Weaknesses in other areas include health (ranked 135th in the health subpillar), low educational enrollment rates, and official markets that continue to function with difficulty (particularly with regard to goods and labor markets, ranked 130th and 129th, respectively).
Global Competitiveness Index
Rank Score
(out of 139) (1 – 7)
GCI 2010–2011.......................................... 114 …….3.6
GCI 2009–2010 (out of 133)................................ 114 ........3.4
GCI 2008–2009 (out of 134)................................ 102 ........3.6
Basic requirements............................................. 122 ........3.5
1st pillar: Institutions ........................................... 67 ........3.9
2nd pillar: Infrastructure........................................ 106 ........2.9
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