A new study from Grant Thornton reveals that the country’s lack of dynamic business growth opportunities places it 54th out of 60 countries.
According to the latest Grant Thornton Global Dynamism Index (GDI) which ranks the business growth environments of 60 leading countries, South Africa has slipped two places in the global rankings from the previous report released two years ago.
The GDI combines 22 indicators, including GDP growth, R&D spend, regulatory risk, access to finance and labour productivity, across five growth areas to identify the best business growth environments. The index ranks the development of the business growth environments of 60 of the world's largest economies over the past 12 months. It also correlates and compares these results with the perceptions of business leaders from Grant Thornton’s International Business Report (IBR) about operating in different markets.
South Africa fares worst in the labour and human capital indicator, lying second last on the list of 60 countries. This is due to the 25,1% unemployment rate and labour productivity growth being measured at -0,4 compared to 0,6 in 2012.
“Overall, the South African economy has actually performed in line with the previous study apart from the declines in labour productivity, and a further decline in inward direct investment,” says Ian Scott, CEO at Grant Thornton Cape. “The latter is less of a reflection on South Africa and can be ascribed to the emerging market contagion that has seen global investment shifted from perceived fragile economies.
“However, systemic inhibitors to the country’s business dynamism remain and need to be addressed if we are to realise the potential of what remains one of the most advanced economies on the continent.”
Scott says that a lot of work is required to lift South Africa into the top 30 most dynamic economies in the world, which could be achieved by creating a more business-friendly environment.
Singapore, which tops the GDI study, is noted for its robust, broad-based offer to dynamic businesses for its financing environment, and ranking in the top 25 in the economics and growth indicators.
Scott adds it is laudable that South Africa ranks highly for historical advantages such as its corporate tax (12th), the quality of overall financial regulatory system (20th), legal and regulatory risk (32nd). The country lies second for growth in broadband penetration and has also improved its total IT spend to be placed 15th on the list.
“This performance is highly commendable, but we need to seriously look at the factors that are still holding us back,” Scott says. “Some solutions which would certainly bolster our business environment include scrapping exchange controls, easing the business operating environment and addressing the inefficiencies inherent in state-owned enterprises.
“The answers themselves are not overly complicated, but implementing the changes requires a frank and open dialogue between government and business on how we can jointly overcome barriers to efficiency thereby moving the economy forward.
“Creating a more dynamic economy will help address many of the national imperatives such as unemployment, poverty and inequality,” Scott concludes.
Notes to editors
Some PDF documents have been included with this press release to provide a greater overview of the South African country profile, according to this year’s GDI findings. These profiles are available for other countries too – please contact me if you wish to receive these additional documents (firstname.lastname@example.org)
About the Global Dynamism Index
The Grant Thornton Global Dynamism Index (GDI) is an annual research project designed by the Economist Intelligence Unit and commissioned by Grant Thornton, which ranks the development of the business growth environments of 60 of the world's largest economies over the past 12 months. The index draws together 22 indicators, including GDP growth, R&D spend, regulatory risk, access to finance and labour productivity, across five areas of dynamism to produce the rankings.
About the International Business Report
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 10,000 businesses per year across 36 economies. This unique survey draws upon 22 years of trend data for most European participants and 11 years for many non-European economies.
More information: www.grantthornton.global
Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis, primarily by telephone. IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with more than 5,000 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors conducted between February and May 2015.