1998 SOUTHERN AFRICA ECONOMIC ... - National Treasury

Southern Africa and Competitive n e s s
This ye a r ’s theme at the Southern African Economic Summit of
the World Economic Fo r u m , is “Priorities for Global
C o m p e t i t i veness in the 21st Century ”.O ver the past few ye a r s ,
m a ny of the Southern African Development Commu n i t y
(SADC) economies have moved aw ay from isolation and
patterns of low growth - South A f r i c a ’s ap a rtheid regime has
been dissolve d , dictatorships have been replaced by
democracies and economic policy in general is moving rap i d ly
t ow a rds free market principles. N ow, t h e re is an incre a s i n g
amount of international attention being paid to Southern A f r i c a ,
which is beginning to be seen as a region with enormous
p o t e n t i a l .
In terms of competitive n e s s , h oweve r, S A D C, as a whole lags
behind the developed wo r l d , as well as behind some of the
other so-called “emerging markets” such as China, South East
A s i a , Latin America and Eastern Euro p e. H aving embraced the
policy logic of the free market and its implications - minimising
state intervention in the economy, l owering barriers to trade
and attracting fo reign inve s t m e n t ,among others - the countries
of Southern Africa have no option but to accept the realities of
the economic env i ronment in the 21st Century. Te c h n o l o gy is
advancing at a rapid rate, the volume of cro s s - b o rder cap i t a l
f l ows is expanding, i nvestors are incre a s i n g ly looking outside
their traditional boundaries for new opportunities and new
w ays of making money ; in short , the world is becoming smaller.
On top of this, donor aid to developing countries is not as
fo rthcoming as it used to be. To be players in the wo r l d
e c o n o my in the next century, the countries of Southern A f r i c a
will need to become more competitive, and to develop some
w ay of holding their own against the dominant fo rc e s .
The Africa Competitiveness Report
A f r i c a ’s entry into the world economy is evidenced by the
p roduction (for the first time) of the Africa Competitive n e s s
R e p o rt .Compiled for this ye a r ’s World Economic Forum (held
in Davo s , Switzerland in Janu a ry / Fe b r u a ry) the re p o rt looks at
24 African countries and evaluates them in terms of their
c o m p e t i t i ve n e s s .Conclusions are based on a survey of A f r i c a n
b u s i n e s s ,as well as data collected from sources such as the
World Bank, the International Monetary Fund, the UN, a n d
African ministries of finance and central statistical offices. A l l
SADC countries, with the exception of the Democratic
Republic of Congo and the Sey c h e l l e s ,a re included.
Topping the overall Competitiveness Index (calculated on the
basis of six indices - openness, gove r n m e n t , f i n a n c e, l a b o u r,
i n f r a s t r u c t u re and institutions) is Mauritius. Other high-ranking
SADC countries include Botswana (3), Namibia (4) and South
Africa (7). Swaziland (8), Lesotho (10), Zambia (12) and Ta n z a n i a
(16) fall into the middle rankings, whilst Mozambique (18),
Z i m b a b we (20), M a l aw i(21) and A n gola (23) are near the
bottom of the table.
The re p o rt explains Mauritius’s and Botsw a n a ’s re l a t i ve ly high
l evel of competitiveness in terms of the stability (both political
and economic) of the countries, as well as we l l - m a n a g e d
economies and sound macroeconomic policies which have been
in place for some time. The re p o rt also found evidence of
“ g e o g r aphic bunching”, i . e. countries in a certain geograp h i c a l
a rea tended to have similar rankings - this is most notable in
relation to the Southern African Customs Union countries. A
c o rrelation between competitiveness and human we l f a re was
also noted, suggesting that competitiveness could contribute to
higher levels of human deve l o p m e n t ,and vice ve r s a .
Countries generally re g a rded as “ good re formers” (e. g .
Mozambique) did not necessarily fare well in terms of
c o m p e t i t i ve n e s s illustrating , that real change does not take place
overnight and that time is needed to strengthen institutions,
i n f r a s t r u c t u re and the economy in general. W h e re countries
such as Mozambique did obtain high rankings was in terms of
t wo new indices, the Improvement Index and the Optimism
I n d e x .Data for these indices was obtained from “ d i rection of
change” questions in the survey. Tanzania (3), Mozambique (4)
and Zimbabwe (6) we re, a c c o rding to the re p o rt , the thre e
countries which showed the most improvement in terms of
business env i ronment over the years 1992-97. M o z a m b i q u e
topped the Optimism Index for the years 1997-99; b u s i n e s s e s
we re also optimistic about the prospects of Tanzania (2) and
Zambia (6). The re p o rt explains the re l a t i ve ly low ranking of
countries such as Botsw a n a ,N a m i b i a ,Mauritius and South A f r i c a
in these indices part ly in terms of contentment rather than
p e s s i m i s m ,although obviously in the case of South A f r i c a ,f a c t o r s
such as crime and the instability associated with transition play
a major role as we l l .
O ve r a l l , the re p o rt emphasises the importance of go o d
government and good leadership as one of the pre requisites of
a successful economy. This encompasses political and policy
stability and transparency between business and gove r n m e n t .
Other areas of particular importance to the business
c o m munity we re found to be openness to trade, i m p rove d
i n f r a s t r u c t u re and low levels of corr u p t i o n .
In the “ E s s ays” section of the Africa Competitiveness Report ,
the authors and contributors go into greater detail about issues
such as fo reign direct investment flow s , g l o b a l i z a t i o n ,p o l i t i c a l
aspects of the re form process and developing competitive
a d v a n t a g e.The message of the re p o rt is clear:state interve n t i o n
in the economy should be kept to a minimu m , fo re i g n
i nvestment is crucial to grow t h , no economy can function in
i s o l a t i o n , economies should focus on developing a stro n g
gove r n m e n t ,good leadership and well-functioning institutions
a re import a n t .
The Africa Competitiveness Report highlights both how far
Southern Africa has come, and how far the region has to go
b e fo re becoming a “success story ” . Instead of taking rigid,
fo r mulaic ap p roach to re fo r m , the re p o rt offers frank and
practical discussions of problems which are uniquely A f r i c a n .
Southern Africa as a region has had its own singular history and
often the difficulties faced by policy makers today are as a re s u l t
of the legacy of Southern A f r i c a ’s past.The re p o rt recognises the
distinction between policy and implementation and that
something that looks good on paper may not necessarily wo r k
in practice. F u rt h e r m o re, the re p o rt recognises the potential of
countries which are still battling to ove rcome the effects of
political turmoil and badly-managed economies. S A D C
countries would there fo re do well to take heed of the re p o rt .
Regional Integration and Competitive n e s s
One area which the Africa Competitiveness Report does not
m a ke much mention of is the benefits of regional integration in
terms of competitive n e s s .The World Investment Report (1997)
e x p l o res the possibility of South Africa becoming a “ g row t h
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