Global Competitiveness Index South Africa – Whose reality counts for small business?

“Global Competitiveness Index South Africa” is a common heading on slides discussing economic policy in South Africa.The data from the Global Competitive Index by the World Economic Forum plays a very important role in South Africa because it is seemingly reputable and rigorous. Motivations for several policy initiatives, in fact,  are directly substantiated by our rankings in the this international league table. The data is however derived from both national surveys (such as those conducted by Stats SA), but also includes a set of questions posed to business leaders. The questions related to perception of business leaders in South Africa (a handful actually) leaves me wondering why my reality is so different from theirs. I found the responses to issues related small business , extremely worrying, as the respondents to the survey share a world very different from that of a startup like Zapreneur.

 Three questions stood out for me:

  1. Intensity of local competition: The question asked was “In your country, how intense is competition in the local markets? [1 = not intense at all; 7 = extremely intense] “ . ?The survey placed us at number 45 out of 148 countries, with a score of 5,26.
  2. Extent of market dominance: ?The question asked was “In your country, how would you characterize corporate activity? [1 = dominated by a few business groups; 7 = spread among many firms] “. ?The survey rated South Africa 37 out of 148 countries, with a score of 4.28.
  3. Effectiveness of anti-monopoly policy: The question asked was In your country, to what extent does anti-monopoly policy promote competition? [1 = does not promote competition; 7 = effectively promotes competition]. Wait for it Zapreneur readers, we are ranked number 8 in the world, with a score of 5.32.

South African Respondents on Competition

Small Business Realities

Over the last two years and nine months since Zapreneur started, I have discussed issues with many small businesses in South Africa. This interaction tells me that there is a wide gap between the business leaders asked to respond to the World Economic Forum survey on the one hand, and the entrepreneurs starting and running businesses in South Africa. The perception I am left with is of an economy that is highly concentrated, where big players have dominance of value chains and where good initiatives on competition policy have yet to yield results in the day-to-day realities of starting and running a small business in South Africa.  I would thus of answered the questions asked in a very different way, and from a very different perspective.
This worries me a great deal, as part of what Zapreneur does is to advocate for easier starting of businesses in South Africa, but also for structural change to support small businesses and the entrepreneurs that run them to run viable opportunity based businesses. Yet, it seems before we can do that, we need a set of common understandings on what the nature of the South African economy in terms of its competitive landscape is. At the core of good public policy making on small business is understanding the nature of the problem we have, and if our business leaders think that we have an economy supportive of startups we are clearly have differences in understanding of the our economy. It raises the question ” Whose reality counts”?
(Perhaps, a useful way to start the discussion would be to better describe my understanding of the challenges we face. I have made a start but more is still needed to develop evidence based policy on small business in South Africa.)

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