Competitiveness is a field of economic theory that analyses the facts and policies shaping the ability of a nation to create and maintain an environment that sustains value creation for its enterprises and more prosperity for its people.

C

ompetitiveness customarily refers to the relative position of an enterprise or nation in comparison to other enterprises or nations in the global market.

Productivity, in turn, is defined as the means, the willingness, and ability of persons, enterprises, economies or any other defined system to efficiently use the resources at their disposal to produce products or offer services that satisfy the consumer or user.

These two concepts are linked and increased levels of productivity will result in the higher competitiveness of the goods and services produced in a given economy.

State of SA competitiveness

In the recent report published by World Economic Forum for 2012-13, South Africa is ranked 52nd among 144 countries, remaining the highest-ranked country in sub-Saharan Africa and the third-placed among the Brics economies.

The country benefits from the large size of its economy, particularly by regional standards (ranking 25th). It also does well on measures of the quality of its institutions and on factor allocation, such as intellectual property protection (20th), and the accountability of its private institutions (2nd). Particularly impressive is the country’s financial market development (3rd), indicating high confidence in South Africa’s financial markets at a time when trust is returning only slowly in many other parts of the world.

South Africa also does reasonably well in more complex areas such as business sophistication (38th) and innovation (42nd), benefiting from good scientific research institutions (34th) and strong collaboration between universities and the business sector in innovation (30th). These combined attributes make South Africa the most competitive economy in the region.

However, in order to further enhance its competitiveness, the country will need to address some weaknesses. South Africa ranks 113th in labour market efficiency (a drop of 18 places from last year), with rigid hiring and firing practices (143), a lack of flexibility in wage determination by companies (140) and significant tensions in labour employer relations (144).

Efforts must also be made to increase the university enrolment rate in order to better develop its innovation potential. Combined efforts in these areas will be critical in view of the country’s high unemployment rate of almost 25% in the second quarter of 2012.

Productivity as an economic growth driver

Productivity is a key enabling factor governing how society adds value through optimally mixing available resources (human knowledge and skills, technology, equipment, raw materials, energy, capital and intermediary services). Its growth contributes towards the prosperity of nations, makes companies competitive in the global market, and thus contributes to quality of life.

# This is the first of a series of articles on productivity dealing with qualitative factors of productivity and the myths about productivity. Productivity SA is a Schedule 3A public entity whose vision is to lead and inspire a productive and competitive South Africa.

By: Bongani Coka is CEO of Productivity SA

This article was originally published on the Productivity SA website