17 September 2012

East Africa: EA Competitiveness Still Low

analysis

Kigali — Despite the 2012/2013 global competitiveness report placing Rwanda as the 3rd most competitive economy in Africa, the East African region is still portrayed by the report as very uncompetitive.

Burundi, an East African member emerged last in the report which also places Tanzania, Uganda and Kenya's economies in uncomfortable positions.

Even for Rwanda, the report underlines weak areas that could see Rwanda's competitiveness ambitions dealt a huge blow if not addressed.

It says, "The greatest challenges facing Rwanda in improving its competitiveness are the state of the country's infrastructure, its low secondary and university enrollment rates, and the poor health of its workforce."

Despite the damning verdict, Rwanda's ranking as one of the best in the world, Africa and the best in the region is most likely to lift its stoke in terms of investment attraction providing an edge over its lame duck neighbors. But even then, as the great play writer Wole Soyinka said, when one pigmy is taller than the other, it shouldn't brag because the fact remains both are still pygmies.

Economically, measured against developed countries, most African economies are still pygmies and would be laughable if countries like Rwanda that seeks to be the new hub of foreign investment weighed itself against neighbors.

Rwanda's ambition to be the first choice for investors in Africa will take great lessons from the new report which saw it move seven steps to be ranked 63rd in the whole world. The new ranking has effectively placed Rwanda the third most competitive economy on the continent after South Africa and Mauritius who have been ranked 52nd and 54th respectively.

"We are delighted at the feat and though it's almost impossible to beat those two, we are not saying we can't," said Finance Minister John Rwangombwa.

The impressive ranking doesn't however reflect the rest of the East African Region which has been portrayed as largely uncompetitive. Globally, the index ranks Kenya at 106th, Tanzania-120th, Uganda, 124th while Burundi emerged last at 144 as the most uncompetitive economy in the world.

Rwanda, it seems has decided to break free from the rat's race and now is racing with the lions of the continent, South Africa and Mauritius but to keep up, weak areas pointed out by the index will have to be urgently improved.

In ranking the economies, the GCI uses twelve key indicators which it then categorizes into three including Basic infrastructure indicators, Efficiency enhancer's indicators and innovation and sophistication indicators.

Under the basic infrastructure indicators, the GCI takes a close and analytical look at a country's level of institutional soundness, infrastructure, micro-economic environment and Health and primary health care.

The score still indicates East Africa lags behind and that though Rwanda still 'immerges taller than the other pygmies', its own score is not impressive.

The index ranks Rwanda at 70th with Tanzania settling for the 122nd rank in second position for the region. Kenya is at 123, Uganda at 132 while Burundi is placed second last over all globally and last regionally at 142nd rank.

Leaving the country scores aside, the general impression given by the GCI is that the East African Region has a lot to do to improve the basic conditions for investment in order to sustain their economic growth and also give the five-state integration an attractive outlook for investment.

This will call for more efforts to grow institutions, invest in infrastructure and primary healthcare for their people which will in turn ensure stable macro-economic conditions.

When it came to the second category of the GCI pillars, efficiency enhancer's indicators, the index analyzed the economies' higher education and training standards, level of goods market efficiency, labour market efficiency, financial market development, technological readiness and market size. This time, Rwanda was beaten by Kenya while Burundi emerged over all last.

The report placed Kenya at 76th, Rwanda at 94th, Uganda at 104th, Tanzania at 113th while Burundi was a distant 144th rank. There's even a huge gap between Singapore which was ranked first under this category and Africa's best, South Africa at 34th and Mauritius 62nd.

The third and final category which concerns Innovation and sophistication factors also indicates that East African Economies are still lame ducks.

Kenya emerges best in East Africa at 56th rank globally, Rwanda 60th, Tanzania 92nd, Uganda 101st while Burundi is placed at 142nd rank.

Rwanda's strong points, the index notes are its strong and relatively well-functioning institutions, with very low levels of corruption (an outcome that is certainly related to the government's non-tolerance policy), and a good security environment.

It also praises its labor markets as efficient with its financial markets as relatively well developed.

Kenya, East Africa's biggest economy, the index says has its strengths in good scientific research institutions that collaborate well with the business sector in research activities.

The index also praises Kenya's education system as efficient although it benefits a relatively small proportion of the population compared with most other countries. Kenya's other strength lies in its well developed financial markets that meet international standards coupled a relatively efficient labor market.

However, the index raises serious health concerns characterized by a high prevalence of communicable diseases contributing to the low life expectancy of less than 57 years and reducing the productivity of the workforce.

The security situation in Kenya is also worrisome ranked globally at 125th.

Concerning Tanzania, while the index applauds its public institutions characterized by a relative even handedness in the government's dealings with the private sector and government regulation that is not seen as overly burdensome, the country is warned to urgently address infrastructure issues ranked at 132nd with low-quality roads and ports and an unreliable electricity supply.

Uganda's corruption levels and weak macro-economic policies have been identified as a major threat to its competitiveness ambitions. Burundi will need the help of everyone to improve as it ranks last in all three categories of the 12 key pillars.

While addressing delegates to the sixth World Economic Forum in Beijing in China last week, President Kagame said the East Africa is looking at addressing its challenges as a region in order to boost its competitiveness.

For that to work, partner states might need to adopt some best practices from say Rwanda or Kenya to boast partners' own competitiveness.

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