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SA at the bottom of the ladder for maths, science – WEF report

SA’s business environment is the weakest of the seven pillars.

CAPE TOWN – The analysis of statistics is a wonderful thing. It allows for selective interpretation of numbers to reach a particular conclusion that usually supports an ideological standpoint. The analysis is also influenced by whether one chooses to see the glass as half full or half empty.

South Africa’s performance in the World Economic Forum’s 5th Financial Development Report, which was released this week, can be assessed in this fashion.

The report is important in that the index – which has been running for five years – analyses the financial system drivers that support economic growth. With these figures the overall competitiveness of financial systems can be assessed.

South Africa moves up one spot to place 28th out of 62 countries, and remains the top-ranked sub-Saharan African country in the index. Seven ‘pillars’ are analysed to provide the total score. These include the institutional environment, business environment, financial stability, financial markets and financial access. (see graphic)

As usual, South Africans can take pride in the strength of the institutional environment and financial stability. Despite the recent ratings downgrades, the World Economic Forum (WEF) research puts SA 17th out of 62 countries when it comes to financial stability. In reaching this score, three main factors are considered – currency stability, banking system stability, and the risk of sovereign debt crisis.

SA’s ability to manage its public debt is surprisingly high – it ranks 13th, ahead of Switzerland, Sweden, Norway, Jordan and the US.

However if the business sector is a key lever in economic growth and social development, then the glass rapidly empties. The index notes that SA’s business environment is the weakest of the seven pillars, placed 42nd. Within this pillar attributes like human capital, skills development, tertiary education and the quality of maths & science education are all measured. And SA scores an F.

While South Africans do not need an index to tell them what they already know, the hard facts on an index are sobering. SA scored at the very bottom of the ladder – 62nd – for the quality of its maths and science education, the very foundation upon which the whole system depends. Tertiary enrolments are low (54th) and as a result its human capital pool is weak (52nd).

There is also concern about a lack of high-quality, specialised training services (36th).

On the positive side, at least South Africans are less likely to emigrate than those from Pakistan, Kazakhstan, Russia, Bangladesh, Portugal, Greece, Italy, Spain, Egypt and Venezuela.

To compensate for the lack of depth of talent in the country, the business sector is one of the world’s best when it comes it comes to training and employee development (20th).

Making doing business less efficient and definitely more costly is the mediocre quality of overall infrastructure (36th). Within this SA’s precarious electricity supply (51) and poor internet adoption (56) is noted.

There are also contradictions. SA is the second cheapest country in the world when it comes to opening a business, but the 46th most expensive when it comes to registering a property. And while it is cheap, it takes forever to open a business.

Overall SA ranks a mediocre 29th in ‘cost of doing business’.

Two costs which cannot be measured, but which also impede economic growth are the low level of public trust in politicians (39th) and a high perceived high level of corruption (34th).

Rather than using the index as a means for politicians and their critics to selectively cherry pick the bits that fit their particular message, the report provides a constructive benchmark to measure our progress in identifying and resolving areas of weakness, with more sustainable economic growth the ultimate goal.



BUSINESS ENVIRONMENT:                42/62

FINANCIAL STABILITY:                      17/62



FINANCIAL MARKETS:                        25/62

FINANCIAL ACCESS:                          36/62

Source: The Financial Development Report 2012. World Economic Forum

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Johan Burger

Johan Burger

Brenthurst Wealth
Moneyweb Click an Advisor
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Moneyweb Investor Issue 24

The relative strength of the rand has seen South Africans relax since the cabinet reshuffle and sovereign downgrades by S&P and Fitch. Don't be deceived - this is a self-inflicted wound. In the May issue of The Moneyweb Investor, we take a closer look to see which companies are likely to thrive and which will not, in the post-downgrade world.

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