Switzerland tops the overall ranking in The Global Competitiveness Report 2009-2010. The United States falls one place to second position, with weakening in its financial markets and macroeconomic stability. Singapore, Sweden and Denmark round out the top five. European economies continue to prevail in the top 10 with Finland, Germany and the Netherlands following suit. The United Kingdom, while remaining very competitive, has continued its fall from last year, moving down one more place this year to 13th, mainly attributable to continuing weakening of its financial markets.
The rankings are calculated from both publicly available data and the Executive Opinion Survey, a comprehensive annual survey conducted by the World Economic Forum together with its network of Partner Institutes (leading research institutes and business organizations) in the countries covered by the Report.
South Africa, at 45th overall, remains the highest ranked country in sub-Saharan Africa, with a stable performance compared with last year. The country continues to benefit from the large size of its economy, particularly by regional standards (it is ranked 24th in the market size pillar). South Africa does well on measures of the quality of institutions and factor allocation, such as intellectual property protection (24th), the accountability of private institutions (5th), and goods market efficiency (35th). In this area there has been a notable improvement in the evaluation of the country’s financial markets, which have increased in rank from 24th last year to a very high 5th this year, indicating strong confidence in South Africa’s financial markets at a time when trust has been eroded in many other parts of the world. South Africa also does reasonably well in more complex areas such as business sophistication (36th) and innovation (41st), benefiting from good scientific research institutions (ranked 29th) and strong collaboration between universities and the business sector in innovation (ranked 25th).
On the other hand, South Africa’s competitiveness would be enhanced by tackling some enduring weaknesses. The country ranks 90th in labor market efficiency, with inflexible hiring and firing practices (125th), a lack of flexibility in wage determination by companies (123rd), and poor labor-employer relations (121st). Furthermore, the country’s innovative potential could be at risk with a university enrollment rate of only 15 percent, which places the country 94th overall. In addition, South Africa’s infrastructure, although good by regional standards, requires upgrading (ranked 45th). In this light, the improvements in transport infrastructure related to the 2010 World Cup is a welcome development that should reinforce South Africa’s competitiveness. The poor security situation remains another important obstacle to doing business in South Africa. The business costs of crime and violence (133rd) and the sense that the police are unable to provide protection from crime (106th) do not contribute to an environment that fosters competitiveness. Another major concern remains the health of the workforce, ranked 127th out of 133 countries, the result of high rates of communicable diseases and poor health indicators more generally. Improvements in these areas will enhance South Africa’s competitiveness outlook.