ECONOMY: SA Ranking Slips Down
Recent Western Cape Business News
South Africa will need to be extra cautious in the coming years in order to stabilise and improve its ranking in the emerging markets opportunity index compared to other emerging markets across the globe.
Grant Thornton’s emerging markets opportunity index forms part of the global business advisory firm’s International Business Report for 2010.
South Africa’s ranking has slipped from 13th to 15th place out of the 27 emerging markets measured in terms of top investment opportunities with Chile and Iran leaping over South Africa compared to 2008. The top five emerging nations maintained the same rankings since the survey was last conducted in 2008. China leads the way thanks to its huge consumer market, increasingly open economy and trade growth, followed by the other developing Asian powerhouse, India. Russia, thanks to its wealth of natural resources, is third, followed by the two largest economies in Latin America - Mexico and Brazil - (table of rankings available on request).
“A big concern is the large percentage drop in South Africa’s ranking since 2008,” says Leonard Brehm, national chairman of Grant Thornton South Africa. “Other than Nigeria, which recorded a 20% drop since 2008, South Africa showed the second largest drop with a 10% decline in the country’s 2010 score.”
The index measures opportunities for investment in 27 emerging economies by taking account of key factors such as size, wealth, involvement in world trade, growth potential and levels of human development.
“The importance of the emerging markets to the world economy has been brought into sharper focus as the world emerges from the recession,” says Brehm. “The International Business Report indicates to us that the emerging economies have been less severely hit by the recession than developed countries. These nations also tend to recover more quickly with growth rates over the next two years forecast to be double that of the more mature economies.”
On a positive note, of the three countries on the African continent which are ranked in the emerging economies index, namely South Africa, Egypt and Nigeria, South Africa is the highest ranked. Says Brehm, “South Africa’s economy is well-developed in many ways with an abundance of natural resources and robust financial, legal, communications and transport sectors, but it remains polarised with an unemployment rate touching 25%.”
The survey also shows that businesses in emerging markets fear their growth prospects are hampered by poor access to finance and a lack of highly-skilled workers to a much larger extent than their counterparts in more mature economies. “South African private business owners cite the lack of availability of a skilled workforce as the greatest constraint to business growth (34%),” adds Brehm. “The emerging markets average for this factor is only 25%, indicating the lack of skills in South Africa as a major concern for business.”
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