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Africa’s growth story shows progressive structural change

Photo by Duane Daws

29th January 2014

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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A new index by the Gordon Institute of Business Science (GIBS) has provided “empirical” proof of Africa’s growth story, however, the Middle East has also emerged as strong performer.

The GIBS Dynamic Markets Index (DMI) showed that progressive structural strange in many of Africa’s economies had lifted Africa’s “dynamism”.

The DMI is a global study measuring the improvement or deterioration of 133 countries through six “enabling pillars of market dynamism” over a seven-year period, from 2006 to 2012.

The new index, scheduled to be updated and released yearly, was described as a tool that measured the performance and progressive change of the institutional structures and the economic capabilities of the selected countries and went beyond focus on gross domestic product and the demographics of each nation.

The six pillars of dynamism included the open and connected pillar, which had internal, external and information openness subcomponents, and red tape, which included administrative burden, corruption, labour regulations and taxation.

The sociopolitical stability pillar measured political expression, crime, socioeconomic threats and war and conflict, while the justice system’s subcomponents included enforcing contracts, property rights and protecting investors.

The subcomponents of macroeconomic management comprised aid dependency, State debt burden, monetary stability and State dependency, and human capital comprised demographic energy and skills subcomponents.

Countries were categorised into dynamic, catch-up, static or adynamic markets based on the final score.

African countries comprised a large part of the catch-up markets and reflected findings of progressive structural change through improved institutions as a means of realising true economic potential, GIBS Centre for Dynamic Markets director Dr Lyal White said on Wednesday.

“We finally have some form of empirical evidence that supports the story around the rise of African economies that is not just based on commodities cycles,” he said.

The DMI recognised the complexities prevalent in sub-Saharan Africa and other catch-up nations, but White said the results supported the continent’s rise and the “enormous” opportunities ahead.

While the “African story” was “exciting”, it was not the only growth story as countries in the Middle East demonstrated structural improvements.

The Middle East was the top-performing region, said White, explaining that it was positioning itself for high-quality services and global connectedness. The national policies of countries within the Middle East were also aligning to become an all-important linkage in the global economy.

Resource-rich countries in Central Asia had surprisingly emerged as strong competitors in the “catch-up” category.

The study showed that 36.8%, or 49, of the 133 countries analysed were starting to catch up, meaning countries that had relatively low scores for indicators of dynamism in 2006 had continued to demonstrate structural improvements in their political economies with a sustained increase in dynamism over the period under review.

These markets had emerged as the “most exciting” story of dynamism and economic potential, White avered.

“The DMI suggests that while the commodity boom has played a significant role in the growth of catch-up markets, many of these markets have addressed core structural areas of their political economies through stronger institutions, effective policies and greater stability. They have made a conscious effort to improve their competitive performance and attract foreign capital for sustainable growth and development,” he said.

These countries included Rwanda, Ghana, Albania, Burundi, Uganda, Mozambique, Zimbabwe, Malawi, Cameroon and Ethiopia, besides others. Kazakhstan, Saudi Arabia, Vietnam, Philippines and Indonesia had also fallen into the catch-up category.

However, South Africa fell into the static market category over the seven-year period from 2006 until 2012, with “little-to-nothing” happening to improve its core structural areas.

Poor scores within the red tape and human capital categories had mostly hampered the nation’s competitive progress.

Nearly 50% of the countries studied had fallen into the static or adynamic categories as they either made lacklustre improvements to the dynamism of their institutions and policy environment or had eroded their dynamism and regressed during the period under review, in effect, failing to advance and further improve their competitive performance among their global peers, said White.

Many countries categorised under the static market category were countries with high scores of dynamism in 2006, but had shown stagnation or decline over the period up to 2012, while nations listed within the adynamic markets had low levels of dynamism and had declined further.

Besides South Africa, Canada, Russia, the US, Australia, India and Israel were deemed static, while Brazil, Venezuela, Argentina, Zambia, Tanzania, Mali, Egypt and Iran had been categorised as adynamic markets.

Nigeria and Kenya were also labelled adynamic after revealing a “surprisingly” poor performance within the six pillars.

Only 18 of the 133 countries reviewed were deemed dynamic markets, with the top performers starting off with relatively high levels of dynamism in 2006 and improving or maintaining their dynamism.

These countries included Qatar, Panama, Botswana, Peru, Mauritius, China, Tunisia, Kuwait, Bahrain and Switzerland, besides others.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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