Putting the African growth story back into perspective

Despite Sub-Saharan Africa’s robust economic growth, a new report points out that the continent still lags behind the rest of the world with respect to competitiveness

Johannesburg's skyline. South Africa remains the most competitive country in Sub-Saharan Africa.

Johannesburg's skyline. South Africa remains the most competitive country in Sub-Saharan Africa.

Sub-Saharan Africa’s strong economic growth in recent years is well documented. The IMF says that the continent’s GDP advanced at a rate of 5.5% annually between 2000 and 2010, compared to a global average of 4.4%. A host of multinational companies such as General Electric, Walmart and IBM are pushing hard to get a foothold on the continent. It is no longer just the continent’s mineral resources that are attracting attention, but also the burgeoning consumer sector. In addition, Africa has started to get more positive coverage in the mainstream media. Time magazine, for example, recently dubbed Kenya ‘Silicon Savanna’ due to the country’s ICT revolution, while various publications have referred to the ‘new scramble for Africa’. One can hardly be blamed for getting caught up in the euphoria.

A sobering publication by the World Economic Forum (WEF), the Global Competitiveness Report 2011-2012, however, makes it clear that Africa has its work cut out before it can think of itself as a top business destination. The index ranks 142 economies according to their competitiveness. Only three Sub-Saharan African countries, namely South Africa, Mauritius and Rwanda, feature in the top half of this year’s rankings. Among the bottom 20 economies, 12 are from Africa.

“Africa’s competitiveness continues to lag significantly behind those of more advanced economies. It is therefore clear that much remains to be achieved to ensure that the recent strong growth continues into the future,” states the report.

The WEF defines competitiveness as “the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be earned by an economy. The productivity level also determines the rates of return obtained by investments in an economy, which in turn are the fundamental drivers of its growth rates. In other words, a more competitive economy is one that is likely to grow faster over time.”

The report notes that higher commodity prices were primarily responsible for the continent’s recent growth surge, and not necessarily greater productivity.

The WEF also says that Africa’s resilience to the global financial crisis was likely not due to strong productivity fundamentals, but that it can rather be attributed to “limited integration of most of the region’s economies, especially their financial markets, into the global economy. Although this fact sheltered African economies over the shorter term, it will hold back their development over the longer term.”

Sub-Saharan Africa needs to upgrade its infrastructure, improve education systems, and develop more solid institutional structures to support economic development. Business leaders surveyed for the report also indicated that access to financing and corruption are significant hindrances to operating on the continent.

The report does, however, note that some Sub-Saharan African countries have made progress regarding their competitiveness since the index was introduced in 2005. “African countries have introduced more sustainable fiscal policies, better managed inflation, and reduced their debt . . . Some have gone further, addressing fundamental structural rigidities by divesting from private-sector activity, opening up some publicly dominated sectors – such as telecommunications – and improving market efficiency, particularly labour markets,” says the report.

African business leaders surveyed were also more positive about their countries’ prospects than those in more developed markets.

Global Competitiveness Index 2011-2012: Sub-Saharan Africa ranking
CountrySub-Saharan Africa rankingOverall ranking 2011-2012 (Total of 142)Overall ranking 2010-2011 (Total of 142)
South Africa15054
The Gambia69990
Cape Verde15119117
Côte d'Ivoire20129129
Burkina Faso26136134