Africa is not living up to its potential

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Along with the closed sessions, the glad-handing and self-interested networking for World Economic Forum insiders, the forum issues a biennial Global Competitiveness Index for Africa and selected comparators.

Analysis of the latest list of 144 countries, on which South Africa sits at 56, shows Africa’s best-performing economy is Mauritius at number 39, and the worst is Guinea at number 144.

South Africa has slipped three places since the 2013/14 index and Mauritius has gained six places, while Guinea just bounces along the bottom.

The index is the result of collaboration between the World Economic Forum, the International Bank for Reconstruction and Development/the World Bank and the African Development Bank, as well as the Organisation for Economic Cooperation and Development.

The World Economic Forum sees 2015 as a “promising” time for the African continent: for 15 years, growth rates have averaged at more than 5%, and rapid population growth promises a large emerging consumer market and labour force potential.

The rapid takeoff of mobile communications points to the continent’s growth potential in other sectors.

But the rah-rah is only about potential, not the reality for most Africans.

“However, Africa continues to be largely agrarian, with an economy that is underpinned by resource-driven growth and a large and expanding informal sector,” the report says.

“Indeed, more than a decade of consistently high growth rates have not yet trickled down to significant parts of the population: nearly one out of two Africans continue to live in extreme poverty, and income inequality in the region remains among the highest in the world.

“What is more, across sectors – from agriculture to manufacturing and services – productivity levels remain low.

“It will be necessary to raise productivity across all sectors of the economy to achieve higher growth and create quality employment, and turn this progress into sustainable and inclusive growth,” the report says.

“Across the region, agriculture’s share of gross domestic product (GDP) is declining and manufacturing is stagnating, while the service sector, in contrast, is increasing as a share of total employment and GDP, providing critical inputs to boost other economic activities.”

This evolution in Africa’s economic structure is happening in parallel with Africa’s unique and evolving demographic dynamics: 450 million workers were projected to join the workforce between 2010 and 2035.

High unemployment rates among youth with secondary and tertiary education even in countries that do well on educational attainment, such as Mauritius and Tunisia, indicate a mismatch between the education system and the needs of employers.

Surveys among employers confirm these trends: 54% of African employers state that jobseekers’ skills do not match their needs, and 41% of employers believe that unemployed people lack skills in general.

At a time when international investment flows were stalling elsewhere, foreign direct investment into the region reached $57 billion (R715 billion at the current exchange rate) in 2013.

Mauritius and South Africa, the continent’s top performers, come in above the southeast Asian average – an improvement since the last report, when they ranked below that comparator region. They also rank above the emerging market economies of Brazil and India.

They are followed by a second cluster of countries – Rwanda (62), Morocco (72), Botswana (74) and Algeria (79) – which, on average, are more competitive than Latin America.

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