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Practical steps for African competitiveness

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Kathy Gibson reports from the World Economic Forum on Africa in Durban – Africa is in danger of becoming even less competitive on the global stage, with stagnant economies not growing fast enough to create the 450-million new jobs that will be required over the next 20 years.

Although South Africa is well ahead of the continent on many fronts, it is still effectively going backwards as it battles to overcome a couple of specific challenges.

Klaus Tilmes, director of the trade and competiveness practice at the World Bank, tells IT-Online that skills development is a major issue in the country. Industry and manufacturing in particular is battling to find the practical skills they need to expand operations.

He cites a shortage of welders as just one example of how South Africa’s skills development is not keeping pace with industry requirements.

The country would also benefit enormously from open trade policies that would foster regional economic integration, Tilmes adds.

The Africa Competitiveness Report 2017, launched today, urges countries in sub-Saharan Africa to implement urgent structural reforms in order to boost productivity. This is the only way they will generate enough jobs for the continent’s growing young population.

Competitiveness is defined as the set of institutions, policies and factors that determine the level of productivity – and hence future prosperity – of a country. The biennial report comes at a time when growth in most of the region’s economies has been slowing despite a decade of sustained growth, and is likely to stagnate further in the absence of improvements in the core conditions for competitiveness.

Compounding the challenge to Africa’s leaders is a rapidly-expanding population, which is set to add 450-million more to the labour force over the next two decades.

If current policies continue, however, only 100-million jobs are likely to be created during this period.

Africa’s young, dynamic population does, however, possess the potential to lead an economic revival in the region, backed by targeted long- and short-term structural reforms in key areas, the report finds.

It recommends the following long-term actions:

* Strengthening institutions is a pre-condition to enable faster and more effective policy implementation; failure of implementation in the past has often been attributed to weak institutions.

* Improved infrastructure, to enable greater levels of trade and business growth.

* Greater adoption of technology.

* Developing the right skills to remain competitive in a rapidly changing global economic landscape

Short term actions, should include:

* Prioritising sector-specific reforms in labour-intensive sectors such as agri-business, construction and micro-enterprises.

* Targeted support for vulnerable regions and/or populations in fragile countries.

* Open trade policies to foster regional economic integration.

* Developing value-chain links to extractive sectors to encourage diversification in resource-rich countries.

* Increase housing construction through investment, better urban planning and less bureaucracy.

“To meet the aspirations of their growing youth populations, African governments are well-advised to enact polices that improve levels of productivity and the business environment for trade and investment,” Tilmes comments. “The World Bank Group is helping governments and the private sector across Africa take the steps necessary to build strong economies and accelerate job creation in order to benefit from the potential demographic dividend.”
Key to increasing competitiveness is job creation, Tilmes says. “The working age population is growing by leaps and bounds. Government policy-makers understand the urgency of putting jobs at the top of the agenda.”

Rapid urbanisation is a challenge for Africa, leading to massive city growth and straining the urban infrastructure.

African Development Bank’s Bah El Hadj says that urban planning and the creation of affordable housing are the main challenges facing cities.

“Urban planning is needed so we know were urban infrastructure that takes into account the socio-economic development of cities should be built.

“Governments also need to focus on affordable housing. This will help to improve people’s living standards and also create jobs.”

Mauritius was the top African performer in the Africa Competitiveness report, with South Africa coming in second.

On the global rankings, Mauritius came in at 45 and South Africa at 47.

Other countries in the African top 10 are Rwanda (52 on the global rankings), Botswana (64), Morocco (70), Namibia (84), Algeria (87), Tunisia (95), Kenya (96) and Cote d’Ivoire (99).

Mauritius consistently outperforms its peers in Africa because its leaders have streamlined its goods market, built solid infrastructure and promotes a healthy workforce.

South Africa and Rwanda have improved their global ranking since the last index was released in 2015. Their continued growth can be attributed to the uptake of technology, efficient financial markets and a focus on strengthening institutions.

South Africa has been relatively less affected by commodity price falls than other economies in the region, and has registered marginal improvements in almost all aspects of competitiveness.

Most significant areas of progress include enhanced competition, both locally (32nd) and internationally (55th); better use of talent in terms of how pay reflects productivity (98th); and a small but important upgrade in the quality of education (up seven places since ACR 2015), with primary school enrolment also now passing 97%.

However, a number of shortcomings may limit South African competitiveness going forward.

Infrastructure development has stalled, both in transport and electricity, with power shortages experienced this year. Institutional quality has diminished, with increased political uncertainty, less transparency, some security concerns, and business leaders having less trust in politicians (down 19 places since ACR 2015).

The slowdown of the Chinese economy and exchange rate volatility may dampen growth, now forecast at 0,1% for 2016. This makes it unlikely that the high unemployment rate will diminish soon, hampering the ability to leverage Africa’s demographic dividend.

Companies cited the most problematic areas for doing business as inefficient government bureaucracy, restrictive labour regulations, inadequately educated workforce, policy instability, corruption, crime and theft, poor work ethic in national labour force, inadequate supply of infrastructure, tax rates, access to financing, inflation, foreign currency regulations, government instability/coups, tax regulations, poor public health, and insufficient capacity to innovate