Regional highlights: Sub-Saharan Africa
Sub-Saharan Africa’s competitiveness has slightly weakened year on year, mainly as a consequence of deteriorating macroeconomic environments across the region (Figure 18). Public finance has been put under stress by economic slowdowns among trading partners and persistently low commodity prices, which affect the commodity-exporting countries. These factors help to explain why growth has dropped from over 5.0 percent two years ago to only 3.5 percent in 2015 and is projected to fall further, to 3.0 percent, in 2016.
Short-run pressure on public funds may have long-lasting effects on African economies by reducing much-needed investments in infrastructure and education, while higher uncertainty about country financial risks could shrink private investments. Slower growth and falling commodity prices have already started to affect the African financial sector, reducing liquidity and tightening credit conditions. As a result, although the banking system remains generally solid, business leaders rate the banking environment as worsening in two-thirds of the countries assessed by the GCI, and access to finance is mentioned more often as a problematic factor for doing business in the region.
Improvements have been achieved in the business environment, information and communication technologies, and infrastructure, but these have been insufficient to improve overall productivity levels, as reflected by a substantially stable GCI performance at the regional level (this changed by less than 1 percent compared to the last edition). Continued progress in these areas will be challenging, given low commodity prices and low growth trajectories in advanced and emerging economies—but progress is necessary, as these countries are among the areas where Africa still has the largest disparities with the world’s most competitive economies. Improving infrastructure, technological readiness, and health and primary education continue to be sub-Saharan Africa’s main priorities as the region seeks to reap the demographic dividend by creating more employment opportunities for the millions of youth who will enter the labor market every year (Figure 19).
Country performances in sub-Saharan Africa vary widely, reflecting economic and political conditions. Not all commodities have faced declining prices and demand: economies relying on oil and gas have been harder hit than those exporting gold or cotton.20 Droughts have also impacted agriculture unevenly, affecting the Horn of Africa and Southern Africa more severely than other areas. Politically, 2016 has been an election year in a number of countries (notably Cape Verde, the Democratic Republic of Congo, Ghana, and Uganda), increasing uncertainty in the business environment. Health and security situations have impacted the fundamentals of competitiveness in some countries, especially with continuing Ebola cases in Liberia and Sierra Leone and terrorism attacks in parts of West Africa, namely Côte d’Ivoire, Cameroon, and Nigeria.
Mauritius (ranking 45th) and South Africa (47th) remain the region’s most competitive economies, climbing two places and one place, respectively. South Africa maintains its regional leadership in terms of financial markets, competition, infrastructure, and education, despite recent challenges from exchange rate volatility, governance concerns, and policy uncertainty, as reflected in the institutions pillar.
Five sub-Saharan Africa economies improve their GCI rankings by three to six positions and their scores by 2 percent or more: Rwanda (52nd), Botswana (64th), Ghana (114th), Tanzania (116th), and Sierra Leone (132nd). Ghana, which improves the most, advances in labor market efficiency; along with Rwanda and Tanzania, it also strengthens its macroeconomic environment and improves its infrastructure, education, and institutions. Sierra Leone’s five-place rise is mainly thanks to recovering health conditions and infrastructure, while Botswana also gains five places thanks to a better performance in infrastructure, higher education, and goods market efficiency.
The region’s biggest losers this year are Zambia (118th), down an exceptional 22 positions, and Côte d’Ivoire (99th), down eight places—although its score fell by less than 2 percent. Côte d’Ivoire’s economy is growing at a rate of more than 8 percent, and its decline in ranking mainly reflects political uncertainty in an election year, growing terrorism concerns after the Grand-Bassam shooting in March, and concern about institutions. Zambia’s decline is driven by difficulties in public finance and a lower performance in institutions, infrastructure, and goods market efficiency. The country has been affected this year by power shortages, low copper prices, and political uncertainty ahead of August’s elections.21