SADC Member States and Competitiveness
The SADC Secretariat is playing a useful role in helping regional Member States’ Investment Promotion Agencies (IPAs) and Ministries responsible for private investment and foreign direct investment (FDI) to win the support of policy / decision makers within Government and other key stakeholders. In particular, the role highlight the importance of the improving the investment climate by explicitly demonstrating the potential gains which serve as a positive catalyst that lures potential domestic, regional and foreign investors. Through the strategic relationship between the SADC Secretariat and relevant institutions of Member States, positive performance rankings and trends have been achieved over a period of years. Furthermore, SADC Secretariat will soon start developing a manual on how Member States can design and improve their investment climate by extracting best practices and/or lessons from various reports on competitiveness, investment climate and doing business. Indeed, both the rankings and trends are an invaluable source of information not only for governments’ policy / decision making processes, but also for investors and lenders.
The Global Competitiveness Report defines competitiveness as the set of institutions, policies and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the sustainable level of prosperity that can be earned by an economy. More competitive economies are able to produce higher levels of income for citizens. The productivity level determines the rates of return obtained by investments (physical, human, and technological) in an economy. Because the rates of return are the fundamental drivers of the growth rates of the economy, a more competitive economy is one that is likely to grow faster in the medium to long run. Competitiveness involves static and dynamic components. Although the productivity of a country determines its ability to sustain a high level of income, it is also one of the central determinants of the returns to investment, which is one of the key factors explaining an economy’s growth potential.
Global Competitiveness Report 2010
The World Economic Forum Global Competitiveness Report of 2010 provides a detailed breakdown of the ranking into basic requirements, efficiency enhancers and innovation factors. The report highlights 12 pillars of competitiveness built up from 111 indicators. For instance, the pillars within basic requirements are institutions, infrastructure, macroeconomic environment, and health and basic education of population. The pillars within efficiency enhancers are higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness and market size. The pillars within innovation and sophistication are business sophistication, networks, suppliers, technological innovation and research and development.
All the pillars of competitiveness and the indicators under those pillars are relevant to the competitiveness of all economies. Some of the pillars are more relevant to economies that are operating at more basic production activities while others in efficiency and innovation driven economies. The Global Competitiveness Index therefore weighs the pillars in accordance with the relevance of particular pillars to an individual economy.
Doing Business Report 2010 and 2011
The World Bank Doing Business Report assesses the ease of doing business in a country. For a typical small to medium sized domestic enterprise, it examines the process and time involved in starting a business in terms of dealing with various types of permits, recruitment of workers, registration of property rights, access to credit facilities, protection given to investors, payment of taxes, trading across borders, enforcement of contracts and business closures. A special regional report on “Doing Business: Making a Difference for Entrepreneurs (2011)” that is available on the World Bank website rants all SADC Member States among 175 179 countries in 2011 and 2010 respectively.
Rankings on the ease of doing business in SADC, 2010 and 2011
Timely Approvals for Investment
In the SADC region, it is mandatory that both domestic and foreign investors should have authentic approved business licenses before starting operating. For those who do not require a formal approval, it is necessary in practice to seek approval in order to obtain a residence or work permit or to obtain access to land. In this respect, the period taken by SADC Member States to process all the requirements of a foreign investor to start formal business ranges from 11 to 263 days as shown in the graph below.
Predictable and Transparent Processes and Framework
For SADC Member States, the number of procedures in which a foreign investor is involved before starting a business is shown in the table below. From the table, the procedures range from 9 to 14 in comparison with Sub-Saharan or global averages.