Picture: THINKSTOCK
Picture: THINKSTOCK

MOST of the world’s least competitive economies are in Africa, which means they do not have the level of productivity needed for prosperity, the World Economic Forum (WEF) said in a report released on Thursday.

The continent’s robust pace of growth of more than 5% over the past decade had not yet led to the same magnitude of rising living standards observed in other regions with similar growth patterns, it pointed out.

"The question is whether Africa will be able to maintain these impressive growth rates, and whether future growth will be built on the types of productivity enhancements that are associated with rising living standards," it said.

The WEF report defines competitiveness as the set of institutions, policies and factors that determine the level of productivity of a country. Competitive countries tended to produce higher income levels for their citizens and improved the rates of return obtained by investment, it said.

Africa’s competitiveness gap with comparable regions — Southeast Asia, Latin America and the Caribbean — was particularly large in the basic building blocks such as governance and institutions, infrastructure and education, it noted.

"Beyond these gaps, countries (with the exception of South Africa, Egypt and the oil-exporting economies) suffer from small market sizes," it said.

"Moreover, despite the rapid rise in mobile telephone subscriptions, Africa trails other regions significantly in its use of information and communication technologies," it said.

Efforts to foster trade through regional integration were critical for Africa to diversify its resource-dependent economies and increase the region’s competitiveness, the report noted.

It said that in 2011 the share of Africa’s intra-regional goods trade in total exports was just 12%, compared with 25% in the Association of Southeast Asian Nations, 65% in the European Union and 49% in the North American Free Trade Agreement block.

Inefficient border administration reduced the price competitiveness of African exports in global markets and added to the cost of imports, the report noted.

Access to finance, and identifying potential markets and buyers were also considered important bottlenecks to exporting across Africa.

The WEF said Africa’s "deep and persistent" infrastructure deficit was a major impediment to developing trade on the continent and improving competitiveness.

While more than half of Africa’s growth performance could be attributed to improvements in infrastructure, $93bn a year until 2020 was needed for infrastructure development, the report noted.

"Africa needs well-structured networks linking production centres and distribution hubs across the continent to deepen regional trade and integration," it said.

Infrastructure development had to be supported by a comprehensive policy mix, which should use "growth poles".

The WEF defined "growth poles" as multiyear, generally public-private investments aiming to accelerate growth in industries that engage in export and support infrastructure around already existing opportunities in the economy.

It recommended that African countries simplify import-export procedures and streamline border administration.

Improvements in information and communication technologies could support administrative trade processes and make them more transparent, it said.

The WEF recommended that policy makers reconsider subsidies and tariffs in the energy sector that were not cost reflective and prevented crucial investments. They should also invest in the diversification of the energy mix, promote energy efficiency and pursue green energy.

In the transport sector, outdated infrastructure and limited maintenance called for a pressing rehabilitation in all subsectors, which was particularly important in landlocked countries, it said.

A co-ordinated effort by several African countries was needed for the full positive impact of those recommendations.

"Efforts are under way in some parts of the continent, but to truly improve Africa’s productivity and competitiveness, and see a rapid rise in living standards, such efforts must be scaled up and accelerated," it said.