World Bank : South Africa Is One Of Most Attractive Emerging Markets

Despite of the fact that a  World Bank research survey  has disclosed that  South Africa, being one of the most attractive emerging markets, is in a prime position to attract more foreign direct investment, critics of structural approach have perceived in the report just technical estimations based on formal figure, that do not  match accurately with sociological reality of the south african market  illustrated by the high levels of crime and labour market rigidity.

The report whch was released early August, reported that South Africa ranked third, after Thailand and Malaysia, out of 12 countries regarding the business community’s perceptions of conducting business in the country.

The World Bank’s senior economist and lead author of the report Taye Mengistae said although South Africa’s business environment compares favourably with its peers, its crimes, access to finance for small business, skills developments and the productivity levels of the workforce, remain as the nation’s weak areas.

The chief economist of South African firm Econometrix, Azar Jammine, said Africa’s economic growth, with the exception of South Africa’s, exceeded the world’s economy by one percent last year.

However, several observers have approached that the report was not structural, and was based on single samples of   indices but on the whole market environment.

Meanwhile, the economy continues its recovery from the 2009 recession, having grown by 1.1% quarter-on-quarter (SAA ) (1.4% year-on-year [y-o-y]) in Q110. Although the Q1 number is relatively encouraging, the consumer remains under pressure and a number of recent data points signal that some weaknesses remain in the economy. In all, it is a mixed picture, and against this backdrop, we retain our forecast for real GDP growth of 3.0% in 2010. In fact, the rate of annual economic expansion will not return to the pre-financial crisis levels of 4.0-6.0% this year owing to a weak consumer sector, a small contraction in private investment, a rebound in imports and periodic strikes affecting the export sector.

The business environment remains broadly attractive. South Africa has one of the most sophisticated business environments in Sub-Saharan Africa, representing a key component of its status as a regional economic powerhouse. Strong state institutions fostering relative political and economic stability have been key in attracting foreign investors over the past several years. However, a weakened power sector has dented South Africa’s image as a top investment destination and could limit foreign direct investment inflows. Furthermore, high levels of crime and an inflexible labour market will continue to constitute significant structural problems that will blemish the attractiveness of the country’s business environment over the longer term.

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