Moody’s blues and other morbid stats

2012-10-20 11:49

Understandably, there has been much hand-wringing over the recent downgrade by ratings agency Standard & Poor’s, and Moody’s downgrade of parastatals Eskom and Telkom, 12 of our ­municipalities and our banks.

These downgrades affect lending rates and the more ­“unstable” we are rated, the higher the interest rate. In simple terms, it means that yet again these added costs will eventually be passed on to the consumer.

However, the ­ripple effect will only be felt when we’re well into 2013. Its real impact will be like a silent and deadly virus eating away at our already diminished disposable incomes.

While the focus has been on the downgrades, another ranking system seems to have slipped quietly beneath the radar, which explains not only the worrying wildcat strikes spreading across the country, but more importantly a depressing trajectory of South Africa’s future.

Last month, the World Economic Forum released its Global Competitiveness Report. A few in the media cherry-picked a few good and bad points, but I believe it is worth revisiting and unpacking the report in light of these downgrades.

First, the good news. Overall, South Africa was ranked 52nd this year, remaining the highest-ranked country in sub-Saharan Africa and third-placed among the Brazil, Russian, Indian, Chinese and South African (Brics) economies. What was not revealed – and what many people are completely surprised and shocked at – is we rank number one in two pillars: our institutions and our financial market development.

In fact, within each of these pillars we are also ranked number one in two subcategories.

The graphic above shows the two top ­rankings in the category of institutions.

However, before we pat ourselves on the back, take a look at the seventh pillar rankings: that of labour market efficiency, where we rank second to last in hiring and firing practices, and come in rock bottom on cooperation in labour-employer relations, while our flexibility of wage determination is also nothing to be proud of.

So, while we are brilliant at auditing (ironically, we can identify which municipalities are dysfunctional, but sadly we have no systems in place for ­recourse) and have exemplary corporate board governance, we fail in the most important labour relations categories.

In a nutshell, this is the fuse that ignited the Marikana tragedy and what is fuelling the ongoing strikes that are tarnishing South ­Africa’s global reputation. These rankings ­also illustrate clearly not only the inequality that exists in our country, but perhaps more importantly how the seeds of dissatisfaction are sown between the blue-collar workforce and the C-Suite (senior executives). They ­explain how we got to where we are now, which is why I consider it the “good” news.

Now for the bad news: our future development trajectory.

South Africa’s education rankings are not only depressing but deeply concerning when you look at other factors that the report does not consider. As with labour relations, we languish at the bottom of the pile when it comes to our overall education system, our primary education, and our quality of maths and science education.

(Zimbabwe ranks 30th compared with our 140th – go figure.)

So while this may cause further hand-wringing, it becomes even more worrying when you layer in the fact that the country has an extremely youthful population, with one of the youngest populations in the world.

The average age of the South African population is under 25 and 31% of South Africans are 15 or younger. Youthful populations work positively for a country if there are two things in place: a good education system and plenty of employment opportunities.

We have ­neither. Add to this the fact that a large portion of our youth (people under 30) are either illiterate or have simply fallen through the cracks by not managing to finish school (half a million alone in 2011), plus the fact that we are currently dealing with approximately 3 million Aids orphans, then South Africa’s future looks decidedly bleak.

The time for chirping from the sidelines has passed. We all need to roll up our sleeves and fix things, collectively. Global rankings mean nothing to failed states.

» Chang is the founder of Flux Trends. Visit ­www.fluxtrends.com 

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