Finance, infrastructure, institutions crucial to making Africa more competitive

New report from World Economic Forum, World Bank and African Development Bank takes stock of African competitiveness

Cape Town, South Africa, 13 June 2007 – African businesses can become far more competitive, but African governments and their international partners will need to improve access to finance, rebuild infrastructure and strengthen institutions.

The conclusions, released today at the launch of a major new report, The Africa Competitiveness Report 2007, reflect research efforts of three institutions – the World Economic Forum, the African Development Bank and the World Bank. Low access to financial services emerges as a major obstacle for African enterprises, but poor infrastructure, corruption and weak institutions also make African goods and services less competitive in the global marketplace. The report also points to the growing number of success stories in the region that show the steps countries can take to improve business conditions.

The jointly produced report was released ahead of the World Economic Forum on Africa, taking place from 13 to 15 June in Cape Town, South Africa. It is the first report on the region’s business environment to leverage knowledge and expertise within the three organizations, marking a new level of research cooperation. The report also presents an integrated vision of the policy challenges African nations face as they build a foundation for sustainable growth and prosperity.

The five common themes that emerge from the analysis of the competitiveness landscape in Africa are:
1) Good policies are critical for a sound business environment. Policies are more important than geography or the abundance of natural resources. Countries that have implemented sound policies rank higher on competitiveness, with better growth and productivity outcomes.
2) A critical constraint to businesses in Africa is access to finance. Further, improvements in the regulatory environment (such as better collateralization, transparency and auditing) represent a necessary step for unleashing the potential of finance for competitiveness in Africa.
3) Infrastructure remains one of the top constraints to businesses in Africa. Energy and transportation are among the main bottlenecks to productivity growth and competitiveness in Africa. Firms lose as much as 8% of sales due to power outages, and transportation delays can account for as much as 3% of lost sales.
4) Corruption in Africa is a serious obstacle to improving productivity and competitiveness. The frequent payment of bribes, inconsistent enforcement of regulations, significant time spent with officials and political favours directed to special interest groups significantly impact productivity.
5) There are significant examples of success throughout the region. The World Economic Forum’s Global Competitiveness Index shows that the region, and sub-Saharan Africa in particular, lags primarily in the basics of infrastructure and education. However, many countries perform much better on issues associated with technological readiness and efficiency. Sustaining and expanding these opportunities remains a challenge.

“The work done by the World Economic Forum in the area of competitiveness is an important contribution to a better understanding of the challenges faced by policy-makers and the international community in their efforts to better assist these countries. This year’s Africa Competitiveness Report is a comprehensive attempt by our three organizations to place the continent in a broader international context and to cast light on the important aspects of development in the region,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.

"Africa has the potential to become a far more competitive player in the global economy," said Obiageli Katryn Ezekwesili, Vice-President, Africa Region, World Bank, Washington DC. "The study finds that, while a number of governments have significantly improved the business climate in their countries, the region as a whole has much more to do to make Africa a competitive location for enterprise. These changes in the business climate, together with greater access to finance and new investment in infrastructure, should come together to advance Africa’s drive to develop, create jobs and reduce poverty."

“The key to the future of African economies is trade and investment and, therefore, the business climate. Our aims at the African Development Bank are to act as a catalyst, to enhance the investment climate and to respond to demand in support of the Bank’s development goals. This is achieved by rallying investors to look at opportunities in African countries differently. I applaud the palpable progress being made in the regulatory and institutional domains. But we must vigorously now deal with the other set of barriers – physical – that means infrastructure. It is crystal clear today that energy shortages, poor roads and inadequate communication between countries and regions constitute a real impediment to the private sector and economic growth and, in the case of energy shortages, threaten to roll back economic achievements of the last six years,” said Donald Kaberuka, President, African Development Bank (ADB), Tunis.

The report analyses many aspects of Africa’s business environment and highlights the key issues that hinder improvements in Africa’s competitiveness and job growth. This year it examines many aspects of Africa’s business environment and themes that will boost the prosperity of nations. This includes detailed assessments of the drivers of productivity and employment growth, including the rankings of 29 African countries in the Global Competitiveness Index; the competitiveness and investment climate in Africa’s four largest economies (South Africa, Algeria, Nigeria and Egypt); the effect of gender disparities on employment and competitiveness; and the role of new technologies in fostering a more dynamic business environment.

Also included are detailed competitiveness and investment climate profiles, providing a comprehensive summary of the drivers of the competitiveness environment in each of the countries included in the report.

The Africa Competitiveness Report 2007 is an invaluable tool for policy-makers, business strategists and other key stakeholders, as well as essential reading for all those with an interest in the region.

Should you require further information on this study go to www.weforum.org/africacompetitiveness or   please contact public.affairs@weforum.org or gcp@weforum.org

General information on the Global Competitiveness Programme of the World Economic Forum is available at http://www.weforum.org/gcp

The World Economic Forum is an independent international organization committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas.

Incorporated as a foundation in 1971, and based in Geneva, Switzerland, the World Economic Forum is impartial and not-for-profit; it is tied to no political, partisan or national interests (www.weforum.org).