Global dynamism index 2013 reveals SA drivers for growth are severely lacking

According to the Grant Thornton Global Dynamism Index (GDI) 2013, South Africa’s main growth drivers are underperforming, making the country less attractive as a place to do business over the last 12 months. South Africa’s overall score was 44.1 down from

Dynamism refers to the changes in an economy which are likely to lead to a faster future rate of growth.

Even more worrying is the fact that South Africa’s scores in last year’s GDI compared to those of 2013 highlight a stagnant economy with no improvement in any of the performance indicators within the data. South Africa was ranked 43rd out of 50 countries for GDI 2012, compared to its 52nd position out of 60 countries for GDI 2013. The overall score therefore reflects a 12% decline.

Andrew Hannington, CEO of Grant Thornton Johannesburg, says: “South Africa’s global ranking according to GDP (Gross Domestic Product) is 29th, yet when specific drivers of economic progression and growth are measured as per this GDI survey, we score a dismal 52nd overall. One would expect our general scores all to be around our GDP score of 29th as a benchmark, but sadly in this GDI they’re dramatically worse than that, which means we’re unlikely to see a growth higher than the current 2%.”

Developed in conjunction with the Economist Intelligence Unit, Grant Thornton’s GDI ranks 60 of the world's largest economies on 22 indicators across five key drivers of dynamism: business operating environment, science & technology, labour & human capital, economics & growth, and the financing environment. A survey of 406 senior executives from a broad range of countries and industries was conducted in 2011 to weight each indicator by its importance to business growth prospects.

The findings show that China ranks third globally (up 17 places compared to GDI 2012), behind Australia (first) and Chile (second).

South Africa’s ranking of these attributes in the survey was:

• Economics and growth – 34th (score out of 100 = 51)

• Financing environment – 39th (score out of 100 = 43)

• Business operating environment – 43rd (score out of 100 = 63)

• Science and technology – 47th (score out of 100 = 22)

• Labour and human capital – 55th (score out of 100 = 42)

“Our GDI rankings mirror the recent World Economic Forum’s (WEF) 2013-14 Global Competitiveness Report," says Hannington. “The GDI is a measure of change whereas the WEF report is more static but both indicate that the unresolved labour issues continue to dog South Africa. The economy ranks in the bottom six for labour and human capital in the GDI, while rhree out of five critical poor performing areas in the WEF Report being labour related concerns.”

In the WEF Report, South Africa performed poorly in relation to an inadequately educated labour force, restrictive labour regulations and poor work ethic in the labour sector.

Hannington adds that GDI ranking of each economy across the five areas identified as drivers to dynamism also provides some interesting comparisons between the relative strengths of mature and developing economies.

The North American region is the most dynamic in the world according to the GDI scoring 61.4 out of 100 points, with Developed Asia a close second overall scoring 60.8 and the Asia Pacific region ranked 3rd globally (57.0).

The BRIC economies scored 50.9 out of 100 base points overall. However, China has streaked ahead of its BRIC counterparts in terms of the development of its business growth environment. GDI 2013 reveals that while the Chinese economy has significantly improved its attractiveness as a place to do business over the last twelve months, Russia, India and Brazil have fallen away and face significant challenges.

China has risen 17 places from this time last year to be ranked as the third most dynamic country overall, largely driven by increases in R&D, IT spending and labour productivity. By contrast, the other BRIC economies have all fallen down the rankings this year.

The other BRIC countries have, like South Africa all showed a decline in overall score. Russia is down by 5% to 47.7, Brazil is down by 13% to 47.9 and India down 11% to 45.3.

“The index suggests the BRICs are no longer travelling together. All have slowed over recent months, but it appears China is handling this transition most effectively – certainly as far as prospects for business growth are concerned,” says Hannington. “The challenge for the other BRICs – which seem to be struggling with similar concerns to those in South Africa - is to manage the specific issues which the index reveals and develop their attractiveness to stimulate economic growth.”

Hannington urges Government to critically assess the low growth rate in South Africa.

“We need to incentivise business to create jobs and to improve business sentiment so that we can truly begin to re-energise and encourage much-needed foreign direct investment. The jobs for youth proposals need to be speedily executed,” he concludes.

A link to the complete list of 60 countries and their detailed rankings can be found at: www.globaldynamismindex.com