Opinionista Gracelin Baskaran 6 November 2019

A regional mindset stunts South Africa’s growth

With South Africa at a pivotal rebuilding phase after years of economic mismanagement, it must come up with a new way of viewing itself in relation to the global economy.

From time to time, it’s easy to put oneself in a “feel-good” moment, by comparing our self with lower-performing countries, mainly on the basis that we are in the same region.

For example, the 120-page report released by the government ahead of its investment conference that kicked off on Monday 4 November boasted that South Africa is the continent’s second most competitive economy behind Mauritius. It’s true. But this isn’t necessarily a milestone. Of the 141 countries ranked in the 2019 World Economic Forum’s (WEF) Global Competitiveness Index, only seven African countries are represented in the first 110 spots. Of the 30 lowest performers, 26 are African.

The tendency to “feel good” by running a regional comparison spills over into the private sector. For example, this year’s Global Food Security Index gave South Africa a comfortable lead on being the most food-secure country in Africa, and agriculturalists celebrated this ranking. However, this can give us a false sense of security. Other middle-income countries such as Malaysia, Brazil, and Chile came out ahead of South Africa.

Similarly, the investment conference report highlighted the fact that South Africa is the region’s principal manufacturing hub. While this is true, it’s far from being globally competitive. South Africa’s share of manufacturing of total GDP sits at around 12%, compared to the likes of China, Thailand, Malaysia, Germany, Singapore, Japan and Indonesia, all of which sit between 20 and 29%. This means there is substantial room for marketing the manufacturing sector as one for growth, rather than just positioning itself as a regional leader.

For the investment conference to reach its intended goal, South Africa needs to shift away from a feelgood approach, to a pragmatic one that improves its ease of doing business, as President Cyril Ramaphosa recently pointed out in one of his Monday newsletters to the nation. Currently, South Africa sits in 84th place out of 190 countries, with regional players such as Mauritius, Rwanda and Kenya ahead of us. In fact, while South Africa has dropped two positions since 2018, Kenya, another key economic player on the continent, jumped from 80th to 56th position, signalling that the country is serious about attracting investment.

The WEF Competitiveness Index shows that South Africa is particularly weak in certain areas of doing business: cross-border trade (145th), starting a business (139th) and getting electricity (114th). Targeted reforms are being developed to address some of these areas. For example, the Economic Policy Paper released by National Treasury on the same day as the medium-term budget policy statement last week highlighted the importance of promoting focused and flexible industry and trade policy and highlighted efforts to strengthen trade agreements, given South Africa’s position as an export-led country. It also highlighted the need to improve network infrastructure by strengthening competitive pricing, efficiency, and efficacy of industries such as electricity, transport and communications.

With the investment conference underway, South Africa should not sell itself as the best among low performers. Rather, it should position itself as a country that is fully cognisant of the challenges it is facing, and a reforms agenda that is proactively targeting them. Aspirational growth requires shifting towards a globally, rather than regionally, competitive mindset. DM

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