THE Indian Ocean island of Mauritius has overtaken South Africa as the most competitive country in sub-Saharan Africa, a key survey showed on Wednesday.

The World Economic Forum’s (WEF) global competitiveness report shows South Africa’s competitiveness deteriorated slightly this year, dragged down by labour discord, a failing education system and poor healthcare provision.

The report, however, commends South Africa’s financial sector regulations, which have been credited with having shielded the country’s economy from the worst of the global crisis.

The survey shows South Africa has slipped one place to 53rd out of 148 countries ranked in the 2013-14 WEF index.

South Africa ranked bottom of the list on labour market efficiency, with the index placing the country at 148th, or last place, in labour-employer relations, 144th in flexibility of wage determination and 147th in hiring and firing practices.

"These rankings show once again that South Africa’s labour laws and regulations are a significant disadvantage to both domestic and foreign businesses looking to invest in the country," said Adcorp labour economist Loane Sharp.

Speaking at a banking function yesterday, Investec CEO Stephen Koseff said that the more flexible the labour market regulations, the more jobs could be created. "I’m saying we need a grand bargain with labour.

"There has to be labour market flexibility in the wages to encourage job absorption."

Business Unity SA (Busa) said that the index presented a "balanced and realistic assessment" of the country’s socioeconomic strengths and weaknesses. "Although SA is still ranked 53rd this year, it should be recalled that a few years ago South Africa was at 35th position," said Busa special policy adviser Raymond Parsons.

"South Africa needs to critically interrogate the causes of this global competitiveness slippage."

Mr Parsons said that, overall, the different components of the WEF index to a large extent mirrored the "diagnosis" and framework of the National Development Plan and other studies of the local economy.

The 2013-14 index captured the opinions of more than 13,000 business leaders in 148 countries between January and May this year, focusing on 12 pillars.

The pillars are institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation. The country’s bargaining system has come under fire from some quarters, including from Reserve Bank governor Gill Marcus.

The principal criticism of the bargaining system has been that it benefits big firms while often neglecting small businesses.

The competitiveness index continued to rank the country’s private sector, most notably the financial sector, very highly.

South Africa took first place on the regulation of securities exchanges and second place on the availability of financial services.

Further, the country ranked second out of the 148 nations for the availability of financing through local equity markets.

"This all suggests a stronger basis for more collaboration between the public and private sectors to enhance delivery," Mr Parsons said.

The WEF said that in the future, countries will no longer be distinguished as developed or developing economies but by how innovation-rich or poor they are.

South Africa ranked 33rd on capacity for innovation and 35th for the quality of scientific research institutions.

"When you look at institutions and innovation, there has been a very steady advance in those pillars, which points to new strengths," Brand SA research head Petrus de Kock said. "We are far ahead of the Brics (Brazil, Russia, India, China and South Africa) on innovation alone."