Rolling wage strikes that have swept across the country over the past year, labour discordance and a failing education system have played a major role in SA’s declining ranking, this year dropping one place from 52nd last year to 53rd overall this year.
And, while that may not immediately cause alarm bells, the report ranked SA “stone last” out of 148 countries in terms of labour market efficiency, which Adcorp Labour Economist, Loane Sharp, says will invariably impact foreign investment.
Sharp says the country is facing a “competitiveness crisis” having reached a 46 year low in labour productivity while on the other hand, real wages after inflation are at a 53 year high. And, if corrective measures aren’t implemented as a matter of urgency, he says SA will continue to lag behind its peers as new countries are added to the rankings.
“The disconnect between wages and productivity is the reason why the private sector is shedding jobs. We urgently need a labour law commission of enquiry which would be the first since 1977, to allow comprehensive revisions to our labour law regime in a non political way.”
“There are no prospects for improvement in SA’s labour market efficiency due to political and union interference in company business due to unrealistic minimum wage demands, to laws that are biased in favour of trade unions and due to dismissal protections that don’t allow companies to take action against poor performing employees,” he says.
In dropping ranks, SA has lost the title of most competitive country in sub Saharan Africa to Mauritius. The Indian Ocean island is considered to be one of Africa’s most transparent business environments, and ‘tax haven’, particularly for Indian businesses. Mauritius also has a stable political system that attracts investors (unlike the wave of service delivery and wage dispute strikes that have become normal practice in SA) and it is also considered having comparatively good infrastructure, low trade barriers and a good public education system.
On a more positive note, SA ranked first out of the 148 participating countries for the regulation of securities exchange for the fourth consecutive year, solidifying SA’s glowing reputation as a developed entity in the financial sector.
South Africa ranks first among the BRICS countries and second in the world when it comes to financial market development, according to the latest Grant Thornton Emerging Markets Opportunity Index, which was published earlier this year.
In terms of capacity for innovation, South Africa, ranked 33rd, scores higher than China and ranks 35th for the quality of scientific research institutions.