How the world rates South Africa

South Africa is maintaining its strong showing in world rankings, with a number of recent international reports supporting the country's strengths as an investment destination.

Despite some local scepticism - brought on in part by political uncertainty in the lead-up to the 2009 elections - overseas business analysts are still optimistic about South Africa, rating it as less risky and more rewarding for investment than most other African countries.

Global Competitiveness Index

Source: World Economic Forum
Latest publication date: October 2008
South Africa's ranking: 45 out of 134 countries

South Africa is ranked 45th out of 134 countries in the World Economic Forum's Global Competitiveness Index for 2008/09 - down one place from 44th in 2007/08.

Conducted by the World Economic Forum (WEF) in partnership with leading academics and a global network of research institutes, the index calculates its rankings from publicly available data and an annual poll of over 12 000 business leaders worldwide.

The index is based on 12 "pillars of competitiveness", namely: institutions; infrastructure; macroeconomic stability; health and primary education; higher education and training; goods market efficiency; labour market efficiency; financial market sophistication; technological readiness; market size; business sophistication; and innovation.

South Africa remains the highest ranked country in sub-Saharan Africa, with what the WEF describes as "a very stable performance".

"Among the country's strengths," the WEF notes, "is the large size of the economy, particularly by regional standards (ranked 23rd in the market size pillar).

"The country continues to receive good marks in more complex areas measured by the index, such as intellectual property protection (23rd), the quality of private institutions (25th) and goods (31st), as well as financial market efficiency (24th), business sophistication (33rd) and innovation (37th)."

South Africa also benefits from "high spending on research and development, accompanied by strong collaboration between universities and the business sector in innovation (both ranked 28th)."

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At the same time, the WEF says, South Africa faces a number of obstacles to competitiveness.

"For example, the labour market is ranked a low 88th for its lack of flexibility. Further, the country’s innovative potential could be at risk with a university enrolment rate of only 15%, which places the country 93rd overall. The poor security situation remains another important obstacle to doing business in South Africa.

"The greatest concern, however, remains the health of the workforce, ranked 129th out of 134 countries, due to high rates of communicable diseases and poor health indicators more generally."

Doing Business report

Source: World Bank and International Finance Corporation
Latest publication date: September 2008
South Africa's ranking: 32 out of 181 countries

South Africa ranks 32nd in the World Bank and International Finance Corporation's Doing Business 2009, an annual survey of the time, cost and hassle involving in doing business in 181 countries around the world. The country was placed 35th in the previous survey.

The survey tracks indicators of the time and cost involved in meeting government requirements in business start-up, operation, trade, taxation, and closure. Not measured are variables such as macroeconomic policy, quality of infrastructure, currency volatility and investor perceptions.

South Africa's move up the rankings was thanks to big jumps in the sub-categories of paying taxes (up from 65th to 23rd place) and starting a business (57th to 47th place).

"In South Africa, entrepreneurs starting a business no longer have to obtain legal assistance or have their incorporation documents notarized, thanks to amendments to the Corporate Act," the report states. "These amendments also allow electronic submission of documents and publication, easing business start-up.

"In addition, the government reduced the tax burden by eliminating the regional establishment levy and regional services levy."

South Africa is also a strong performer when it comes to getting credit (2nd overall) and protecting investors (9th overall), but weak when it comes to ease of employing workers (102nd) and trading across borders (147th).

According to the survey, Africa had a record year for regulatory reforms that make it easier to do business, with 28 African countries completing 58 reforms and four countries - Senegal, Burkina Faso, Botswana and Egypt - placed in the top 10 regulatory reformers.

Mauritius was the continent's top performer for the year, moving up to 24 on the overall rankings, with South Africa the second most business-friendly African country at 32, followed by Botswana at 38.

Singapore maintained its position as the overall top-ranked economy for the third year running, with New Zealand, the US, Hong Kong and Denmark completing the top five and the United Kingdom, Ireland, Canada, Australia and Norway completing the top 10.

IT industry competitiveness index

Source: Economist Intelligence Unit
Latest publication date: September 2008
South Africa's ranking: 37 out of 66 countries

South Africa ranks 37th out of 66 countries measured in the 2008 IT industry competitiveness index, published in September 2008. The country's ranking is unchanged from 2007.

The survey, now in its second year, ranks the information technology (IT) industry environments of 66 countries on the extent to which they support a competitive domestic IT sector.

The survey is compiled by the Economist Intelligence Unit, the business information arm of The Economist Group, publisher of The Economist.

According to the study, South Africa performs best in the areas associated with the business and legal environment, scoring 76.9 out of a possible 100 for the former and 63.5 for the latter. The country also fares relatively well for its support for IT industry development, with a score of 57.5.

South Africa's IT infrastructure is identified as a key area in need of improvement, primarily through the provision of high-quality networks and greater liberalisation of telecommunications.

"South Africa has been identified, alongside Bulgaria, the Ukraine and Vietnam as an emerging outsourcing destination, and through the realisation of faster, more reliable and more secure internet access, we can look forward to receiving a significant boost with fast, competition-led infrastructure development," said Alastair de Wet, chairperson of the South African chapter of the Business Software Alliance, sponsor of the survey.

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The overall top countries in the survey are the United States, with an overall score of 74.6, Taiwan (69.2), the United Kingdom (67.2), Sweden (66) and Denmark (65.2).

The top five countries in the Middle East-Africa region are Israel (56.7), South Africa (32.6), Turkey (32.4), Saudi Arabia (32.3) and Egypt (25.3).

FDI Confidence Index

Source: AT Kearney
Latest publication date: December 2007
South Africa's ranking: 18th most attractive destination

South Africa is ranked as the 18th most attractive foreign direct investment destination worldwide in 2007 Foreign Direct Investment (FDI) Confidence Index by global management consulting firm AT Kearney.

The index, a regular survey of global executives, provides a unique look at the present and future prospects for international investment flows, with companies participating in the survey accounting for more than US$3.8-trillion in annual global revenue.

South Africa made its debut in the top 25. China and India keep their top spots at first and second position respectively, while 15 of the 25 most attractive FDI destinations are developing markets. Brazil, the United Arab Emirates and Russia all rank in the top 10.

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"The assessment of senior executive sentiment at the world's largest companies found corporate investors optimistic about the prospects for developing nations and increasingly targeting them for more corporate investment in the years ahead," AT Kearney said when the index was released.

The company said emerging markets registered the strongest investor optimism.

"While China and India remain the top destinations for first-time investments overall, developing country investors are more bullish about new markets, such as Vietnam, Brazil and South Africa."

AT Kearney's Janet Pau said that developing country investors were likely to be responsible for more than half of the investments greater than US$500-million over the next three years.

Jane's Country Risk Ratings

Source: Jane's Information Group
Latest publication date: March 2008
South Africa's ranking: 115 out of 235 countries

Jane's Information Group, a respected UK-based defence industry analyst, published Jane's Country Risk Ratings for the first time at the end of March 2008. The report measures 235 countries, territories and entities according to 24 stability factors in distinct categories, such as political, social, economic, external, military and security.

South Africa was ranked 115th overall, alongside strong economies such as the Ukraine and Vietnam, and was rated the second most stable country in sub-Saharan Africa, behind Mauritius.

As the report is the first of its kind, it contains no comparative figures.

Christian La Miere, managing editor of the report, told Business Times that South Africa was in a band of moderate to relatively low-risk countries in terms of instability.

According to Business Times, South Africa's rating was tallied from:

  • 62 (out of a possible 100 points) for economic stability;
  • 69 for military steadfastness;
  • 42 for social stability, which includes indicators for crime, health and social cohesion;
  • 78 for external factors, such as South Africa's relationship with neighbours and the international community;
  • 78 for political stability, which focuses on constitutional and institutional factors.

"With all the current anxieties about crime, HIV/Aids, energy and leadership, a lot of people within South Africa might think the country might have ranked lower, but the figures show South Africa really has a lot of solidity in its systems, its economy and its institutions," Jane's Information Group researcher Sabine Machenheimer told Business Times.

The report ranks the Vatican City as the most stable, followed by Sweden, Luxembourg and Monaco. The United States was judged to be only the 22nd most stable country - just below Australia and Portugal - largely because of international drug trafficking and the proliferation of small arms within American society.

Failed States Index

Source: Fund for Peace, Foreign Policy magazine
Latest publication date: August 2008
South Africa's ranking: 52th strongest out of 177 countries

US think-tank Fund for Peace and magazine Foreign Policy rank the South African state as the 125th most vulnerable to failure out of 177 countries analysed in their latest Failed States Index - or in other words, as the 52nd least vulnerable country, slipping from 44th least vulnerable in 2007.

Fund for Peace analyses and reviews hundreds of thousands of articles from global and regional sources to compile its index of countries at risk of failure. Social, economic and political indicators are taken into account, with criteria of risk ranging from "progressive deterioration of public services" to "intervention of other states or external political actors".

South Africa ranks as the second strongest African country, after Mauritius at 29. Norway, Sweden, Finland, Ireland and Switzerland top the list, while Somalia, Sudan and Zimbabwe rank as the world's most vulnerable states.

"South Africa is a success story," Fund for Peace writes in its prognosis on the country. "Given the tensions that the country went through in the 1970s and 1980s, South Africa is doing remarkably well. The economy and the state institutions are quite strong.

"However, the corrosive legacy of apartheid remains, and unemployment, crime, and HIV/Aids ravage the poor. The state faces real challenges in meeting rising expectations."

  • Read the full index here

SAinfo reporter

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