SA’s WEF ranking advances while business confidence rises

The World Economic Forum (WEF) has released its 2019 Global Competitiveness Index that looks broadly at how competitive an economy is through the prism of 12 pillars: institutions, infrastructure, ICT adoption, macroeconomic stability, health, skills, product market, labour market, the financial system, market size, business dynamism and innovation capability.

Given all the current angst over policy inertia and uncertainty, political infighting within the ANC, anaemic growth, rising debt and a 29% unemployment rate, it came as something of a surprise that South Africa's ranking improved, from 67th overall last year to 60 out of the 141 economies surveyed in 2019.

It will be no surprise if President Cyril Ramaphosa mentions this in his weekly newsletter next Monday. He did promise in his State of the Nation Address that South Africa would work on improving its rankings in such areas.

Of the 12 pillars, South Africa’s overall best ranking, at 19, was its financial system, which remains world-class on many fronts. This pillar “assesses the depth, namely the availability of credit, equity, debt, insurance and other financial products, and the stability, namely, the mitigation of excessive risk-taking and opportunistic behaviour of the financial system.” The system certainly has depth and a range of sophisticated financial products that generally set South Africa apart from other emerging markets.

South Africa also did well – perhaps surprisingly so – on the “macroeconomic stability” pillar, with a score of 88 out of 100 and an overall ranking of 59. This pillar assesses the level of inflation, which is currently moderate, but also the “sustainability of fiscal policy”. One has to wonder if the WEF downplayed or missed some of the red flags here, with Eskom and a potential Moody’s downgrade both glowing hues of crimson.

South Africa had a dismal ranking on the health pillar, which is no shocker in a country that still has a huge HIV/AIDS case-load. It also ranked 90th in the “skills” pillar. This is just the latest alarm bell about the woeful shortage of skills and literacy required to boost economic growth and stimulate innovation. But is the Department of Home Affairs, which clearly has wretched skill levels itself, taking any notice?

South Africa also saw a bump in business confidence. The South African Chamber of Commerce and Industry’s (Sacci) monthly business confidence index (BCI) climbed to 92.4 in September from 89.1 – which was a 34-year low – in August. A pick-up in export volumes and vehicle sales and a strengthening of the rand were the main drivers, but the index is still 0.9 points below its September 2018 level.

And frankly, recovering from a 34-year low is nothing to celebrate.

“...[T]here are indications that the economy may have hit a trough and could obtain some stability albeit at a subdued level,” Sacci said. That suggests that business confidence – which is crucial to lift investment levels – remains “subdued” as well.

The best that can be said of the WEF and Sacci data and rankings is that at least things are moving in the right direction. BM