COMPETITIVENESS

New Report Finds Education, Women’s Entrepreneurship, Tourism and Trade Key to Africa’s Competitiveness

A consensus among policymakers and researchers has emerged that African countries have weathered the global economic crisis well. Yet questions remain as to how sustainable this growth will be over the longer term.

Economic environments in recent years, but much remains to be achieved to ensure that recent strong growth continues. In particular, African governments must better harness the region’s resources through stronger integration into international trade and finance, improved educational systems, enhanced entrepreneurial opportunities for women and developing their tourism sectors. The conclusions, released today at the launch of a major new report, The Africa Competitiveness Report 2011, reflect research efforts of three institutions – the World Economic Forum, the African Development Bank and the World Bank. The jointly produced report is released at the start of the World Economic Forum on Africa, taking place from 4-6 May in Cape Town, South Africa.

“This year’s Africa Competitiveness Report is the third comprehensive effort by our three organizations to place the continent in a broader international context and to shed light on the important aspects of development in the region, which are so critical to ensure sustained and shared growth for Africa’s citizens” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.
The report highlights the following areas on which Africa should focus to ensure strong, sustained and shared growth:

Diversifying products and markets. African countries have much to gain by diversifying exports and by further opening up regional trade. Trade raises income through specialization, increased competition and the exploitation of economies of scale. It also increases the variety of products and services available in the market and promotes technological innovation. Despite improving over recent decades, Africa’s share in world trade remains low, it is heavily concentrated in natural resources and intra-African trade is particularly limited. Regional integration can help African countries become more competitive and resilient to external shocks, as the recent experience of East Africa during the global financial crisis illustrates.

Upgrading managerial skills and higher education. Even though African countries generally spend relatively large proportions of their national resources on education, higher education enrolment remains extremely low by international standards. The areas of higher education undertaken by a majority of African students are not in the fields of science, engineering technology and business as is the case in rapidly growing economies such as Korea and China, but more often in social sciences and the humanities. The result is a skills mismatch – university graduates remain unemployed, while African countries continue to face shortages of skilled labour.

Expanding women’s entrepreneurship. The rate of women’s entrepreneurship is high in Africa – higher than in any other region. However, this is not necessarily a sign of economic empowerment. This is because women are concentrated in the informal, micro, low-growth, low-profit areas. There are two main explanations for this. First, women’s education has continued to lag behind men’s, including areas of particular relevance to running a business such as financial literacy and management training. Second, while business laws are generally gender blind, family, inheritance, labour and land laws are often not, limiting control over assets within the household and decision-making authority. The report shows that while women are less likely to be operating larger firms in higher value-added sectors, those who do so in fact manage firms that perform equally well as those run by men. What is critical is not to increase entrepreneurship per se, but rather to enable women to move into higher value-added activities.

Reaping the full benefits of tourism. Africa’s rich natural and cultural resources represent a major unexploited endowment through travel and tourism, with the potential to generate significant employment, growth and poverty reduction. The region has many advantages on which to build its tourism industry, including price competitiveness, a strong affinity for tourism and rich natural resources supported by efforts towards environmental sustainability. However, a number of obstacles remain to develop the sector, notably improving safety and security, upgrading health and hygiene levels, developing infrastructure and access to African sites, and fostering the region’s human capital. Improvements in these areas would greatly enhance Africa’s ability to reap the enormous potential benefits of tourism.
 
“Africa must focus on the policies and strategies that are key for the sustained economic recovery and inclusive growth of the continent, such as higher education for skilled manpower and entrepreneurship development, and financial instruments that will support vibrant private sector development and regional integration and trade,” said Mthuli Ncube, Chief Economist and Vice President, African Development Bank.

In addition to assessments of competitiveness, trade performance and the ability to attract productivity-enhancing FDI in the region, the report also includes an analysis of what is needed to upgrade higher education in Africa, how to best expand women’s economic opportunities on the continent and the extent to which African countries have put into place environments that make it attractive to develop the travel and tourism sector.

The recent economic downturn underscores the importance of developing a competitiveness-supporting economic environment that is based on productivity enhancements in order to better enable national economies to weather unexpected shocks and to ensure solid, long-term economic performance.

African policymakers have recognized that Foreign Direct Investment (FDI) can also play a positive role in promoting growth, productivity, and development in their economies. FDI can be particularly beneficial for export sectors, as foreign companies help integrate developing countries into the global economy by easing access to foreign markets and including local enterprises in global production chains. Experiences from other world regions also suggest that FDI can help facilitate export diversification.

Kenya, Senegal, South Africa, and Tunisia are the top regional performers with respect to innovation, on a par with such innovative countries as India and Italy. These countries have high-quality scientific research institutions, invest strongly in research and development, and are characterized by a significant level of collaboration between business and universities in research. The low rankings of the other countries from the region should not be of significant concern at this stage, given the importance of focusing on the more basic areas for improvement first.

Sub-Saharan Africa has been losing market share in global agriculture exports in terms of unprocessed commodities. Its share of world exports in agricultural commodities was slashed in half, from 5.4 percent in 1995–97 to 2.7 percent in 2006–08. The decline was mainly the result of lagging agricultural productivity in the region. Its number one export product, cocoa,accounted for more than 30 percent of the continent’s exports; cocoa was followed by coffee, tea, and tobacco.Top exporters of agricultural commodities were Côte d’Ivoire, Ghana, Kenya, South Africa, Ethiopia, and Nigeria, all of which (except Nigeria) lost market share despite increasing their exports in absolute terms. Given its endowments of land, climate, and labor, sub-Saharan Africa should have a strong comparative advantage in agriculture. On the face of it, the sub - continent has the resources to both feed its growing population and meet the world’s burgeoning demand for food and other agricultural products. In sub-Saharan Africa, demand for food is expected to reach US$100 billion by 2015, double the levels in 2000. There are encouraging success stories, such as the production of cassava chips in Ghana, organic coffee in Tanzania, cut flowers in Kenya, and aquaculture in Malawi. However, these remain few and far between, and they have not been sufficient to improve the subcontinent’s overall export performance in terms of both agribusiness and agricultural commodities. Although Africa has the highest rate of people living in rural areas in the world, the continent still imports 45 percent of its rice and 85 percent of its wheat.

The 2010 Global Manufacturing Competitiveness Index ranks talent-driven innovation—which emanates from improved higher education—as the leading driver of manufacturing competitiveness. Correspondingly, as we have seen earlier,
the GCI indicates that sub-Saharan Africa ranks especially poorly in terms of its systems of higher education and its ability to adopt technology.

Those sub-Saharan

African countries—such as South Africa and Kenya— that achieved improvements in these areas, as well as progress in what is defined by the GCI as the basic requirements of an economy (institutions, infrastructure,macroeconomic environment, and health and basic education), are among those whose exports of heavy manufactures grew the fastest since 1995–97.