Labour holds SA back

The study forms part of the Global Competitiveness Report (GCR), a joint study conducted by the World Economic Forum, the African Development Bank and the World Bank.

Tunisia is ranked the 29th most competitive country in the world out of 128 economies included in the study. That puts it 17 places ahead of its nearest rival South Africa, the second-ranked country in Africa and by far the largest economy on the continent.

South Africa accounts for a third of sub-Saharan Africa's GDP despite having only 6% of its population. South Africa's GDP is estimated at US$255.2bn, compared with $30.6bn for Tunisia.

SA slips down rankings

Although South Africa is the second most competitive nation in Africa, the GCR ranks it the 46th most competitive country out of the 128 nations included in the study. That is six places lower than its 2005 ranking when it was ranked 40th out of 117 economies.

In 2005, South Africa lagged just three places behind Tunisia, which was ranked the 37th most competitive economy in the world.

Tunisia's bright spots include low levels of corruption (19th), reasonably well-protected property rights (36th) and an independent judiciary (34th), as well as a strong security environment (20th).

In terms of the quality of its private institutions and corporate ethics, Tunisia is on a par with European Union members Spain and Portugal, according to the report.

Tunisia also scores well in terms of the competitiveness of its labour market, a factor that continues to hobble South Africa given its strenuous labour legislation.

"Labour markets (in Tunisia) are quite flexible and efficient with relative ease for companies in hiring and firing in the country (32nd), quite strong cooperation in labour-employer relations (29th). (The country also has) one of the best assessments of the participation of women in the work force (5th)," says the report.

By contrast, South Africa ranks 126th in terms of labour market flexibility, which encompasses ease of hiring and firing, flexibility of wage determination and union-employer relations.

"Flexibility of wage determination in South Africa is also constrained by the short supply of skilled labour," says the report.

Skills hobble SA economy

John Page, chief economist for Africa and the director of the Poverty Reduction Group at the World Bank in Washington DC, said a lack of skills would also continue to hobble the competitiveness of Africa's biggest economy.

"Skills are beginning to constrain the competitiveness of countries of countries like Mauritius and South Africa, which have relatively high levels of manufacturing intensity," said Page.

Industrial production contributes 20.9% to South Africa's economy with services accounting for 66.4% of economic activity.

South Africa's higher education and training ranking also dropped to 57th place overall from 47th place last year.

Although South Africa prides itself as having arguably the most sophisticated infrastructure in Africa, the country also saw its ranking for this variable drop to 50th place from its previous ranking of 35th.

The report listed "particular concerns about the quality of electricity supply that has been increasingly plagued by interruptions and the low penetration rate of telephone lines".

Security concerns

The GCR also listed "a lack of security" as an obstacle to doing business in South Africa.

"The business cost of crime and violence (116th) and the unreliability of police services to protect citizens from crime (92nd) are highlighted as particular concerns," said the report.

However, South Africa did perform well on certain fronts, achieving a high ranking for property rights (23rd), corporate ethics (30th) as well as financial market efficiency (27th), business sophistication (32nd) and innovation.

"South Africa's scientific research institutions are assessed as on par with Hong Kong's and the country has a higher rate of patenting than a number of European countries including Greece, Portugal and Russia," says the report.

Jennifer Blanke, senior economist at the World Economic Forum said North African countries had relatively fewer obstacles to competitiveness than their sub-Saharan counterparts.

"The North African countries compare quite well internationally in terms of basic competitiveness requirements such as infrastructure, public health and education but can still improve their levels of technological innovation and market efficiencies," she said.

"The situation in sub-Saharan Africa is more difficult as these countries lack competitiveness in technological and market efficiency as well as basic infrastructure and in many cases, even macroeconomic stability."

The top 20 African countries ranked by the GCR are (global ranking brackets):

1. Tunisia (29)
2. South Africa (46)
3. Mauritius (58)
4. Egypt (65)
5. Morocco (72)
6. Libya (73)
7. Algeria (76)
8. Botswana (83)
9. Namibia (88)
10. Kenya (97)
11. Nigeria (102)
12. Gambia (104)
13. Benin (107)
14. Tanzania (108)
15. Cameroon (111)
16. Madagascar (113)
17. Lesotho (115)
18. Uganda (116)
19. Zambia (117)
20. Mauritania (118)

    Source: The Africa Competitiveness Report 2007