South Africa struggling to recover from recession

South Africa has been ranked 43rd tied with Russia in the dynamism of its economy and its ability to bounce back from the 2008-09 global economic crisis, according to the Grant Thornton’s new Global Dynamism Index (GDI) which ranked 50 economies.

During this economic crisis South Africa was pushed into a brief recession but is thought to have lost more than 1 million jobs.

A statement announcing the index said this came to show that South Africa was struggling to recover from the 2008-09 global economic recession. The new index – developed by the Economist Intelligence Unit (EIU) for the global audit and advisory firm, ranks 50 economies on 22 indicators of dynamism.

“The ratings go well beyond basic GDP data,” says Deepak Nagar, national chairman at Grant Thornton SA. “The dynamism indicators highlight key economic changes which have enabled recovery from the 2008-09 economic recession, thereby signifying nations more likely to experience a faster rate of future growth,”

In the survey, five areas were defined as key drivers to an economy’s dynamism, namely business operating environment, science & technology, labour & human capital, economics & growth, and the financing environment.  Within these groups, there were 22 key data points that were analysed.

More than 400 senior executives from a broad range of countries and industries were interviewed to determine which aspects of these five attributes they deemed most important for business growth. This allowed for the weighting of each aspect according to its perceived relevance.

South Africa’s highest ranking of these attributes in the survey was in the economics & growth area, with an 18th position achievement overall, while the nation scored 21st position joint with Hungary, for its financing environment.

SA was 36th for science & technology, 39th for its business operating environment and it was ranked second last, at 49th position for labour & human capital.

“Our GDI rankings mirror the recent World Economic Forum’s (WEF) 2012-13 Global Competitive Index in which South Africa was ranked third overall for the country’s financial market development, an equally impressive ranking to that of economics & growth and its financing environment aspects highlighted in this GDI report,” says Nagar. “In addition, South Africa’s poor labour & hiring capital score compares equally with the WEF’s rankings of SA at 113th for labour market efficiency (a drop of 18 places from last year), at 143rd for rigid hiring and firing practices, 140th for a lack of flexibility in wage determination by companies, and significant tensions in labour-employer relations where SA was ranked 144th out of 144 economies.”

Nagar adds that the GDI ranking of each economy across the five areas identified as drivers to an economy’s dynamism also provides some interesting comparisons between the relative strengths of mature and developing economies. The Nordic region is the most dynamic in the world according to the GDI, with Finland second overall scoring 70.5 and Sweden ranked 3rd globally (69.6).

Nagar said “It is not surprising to see Singapore, and two Nordic nations – Finland and Sweden – occupy the top three places in the overall ranking. All are open and trade-orientated – these nations also have well developed legal frameworks in place and invest heavily in R&D. All things dynamic businesses want to see.”

“These results clearly show above all that there are many different paths to, and aspects of, dynamism. Different economies offer different environments that can help, or hinder, business growth,” concludes Nagar.

Overall Rankings are as follows:

1. Singapore    72.1

2. Finland        70.5

3. Sweden       69.6

4. Israel                       69.3

5. Austria         66.1

6. Australia        65.6

7. Switzerland   65.1

8. South Korea              64.9

9. Germany       64.8

10. United States  64.1

 Global top 10 rankings for the five identified areas:

A.   Business operating environment

(Foreign trade and exchange regimes and controls; policy towards private enterprise and competition; political stability; and legal and regulatory risk)

1. Finland        94.2

2. Ireland         93.4

3. Sweden       92.8

4. Netherlands 91.5

5. Denmark     91.4

6. Canada       91.2

7. Australia      90.7

7. Luxembourg            90.7

9. New Zealand           90.4

10. Austria       90.1

B.   Science and technology

(Broadband subscriber lines per 100 inhabitants; growth in broadband subscriber lines; R&D as % of GDP; total IT spending growth)

1. Israel                       73.0

2. Finland        65.8

3. Sweden       64.9

4. South Korea            61.0

5. Switzerland 59.0

6. Japan                      58.8

7. Denmark     56.4

8. Taiwan        53.9

9. Germany     53.5

10. UAE          53.2

C.   Labour and human capital

(Labour productivity growth; unemployment; school life expectancy; % of population under 30.)

1. Argentina        72.5

2. Slovak Republic 72.4

3. Uruguay         69.0

4. China                          67.4

5. New Zealand              65.6

6. South Korea            64.1

7. Australia      63.9

8. Norway       62.4

9. Indonesia     62.1

10. Taiwan      61.6

 D.   Financing environment

(Quality of overall financial regulatory system; access of firms to medium-term capital; growth in value of inward M&A deals; value of inward M&A deals; private sector credit as % of GDP; inward direct investment growth; corporate tax burden.)

1. Singapore    82.2

2. Finland        72.3

3. France         71.8

4. Austria         71.4

4. Chile                        71.4

6. Poland         70.4

7. New Zealand           69.8

8. United States          69.5

9. Israel                       68.3

10. Slovenia    67.6

E.    Economics and growth

(Real GDP growth; private consumption per head; change in $ value of stock market index.)

1. Argentina     95.6

2. China                       94.6

3. Uruguay      82.3

4. Chile                        80.6

5. India                        80.0

6. Indonesia     79.8

7. Nigeria         79.4

8. Turkey         78.0

9. Singapore    75.3

10. Colombia   73.8

10. Russia       73.8

 

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