[ La leçon d’économie numéro 24 du Pr Amath Ndiaye ] Africa and structural competitiveness

Par Pr Amath NDIAYE, FASEG-UCAD.

In Germany, in 2024, the price of a kilowatt hour of electricity was twice as expensive as in Senegal. Since January 2025, the guaranteed minimum wage in Germany is equivalent to twenty-five times that of Senegal. Given these production factor costs, can we conclude that the Senegalese economy is more competitive than that of Germany? No, because economic competitiveness is not limited to the costs of production factors because it is a much more complex concept. It is for this reason that we must always distinguish between price competitiveness and structural competitiveness. Structural competitiveness is the ability to sell products or services on domestic and foreign markets, independently of their prices but by promoting other arguments (quality, innovation, after-sales services, brand image, delivery times, ability to sell on credit, ability to adapt to diversified demand, etc.).

This type of competitiveness takes time to build because it is based on customers’ perception of the offer; perception which itself is built over the long term based on the satisfaction provided in the past. It also requires a lot of public and private investment to develop and maintain a supply of sufficient quantity and quality. Thus, the structural competitiveness of an economy depends on infrastructure, public governance, the institutional and business environment, the quality of human resources, macroeconomic performance and research and development, among other factors. are the lessons to be learned for Africa?

Structural competitiveness indicators

Several influential reports assess the economic competitiveness of countries and regions around the world. We will cite the three main ones.

The Global Competitiveness Report

It is a report on global competitiveness published annually by the World Economic Forum (WEF). It provides a detailed assessment of the factors influencing the economic competitiveness of countries around the world, based on data on economic performance and the quality of institutions.

It calculates a Global Competitiveness Index (GCI) which measures the competitiveness of a country based on 12 pillars. These pillars represent the factors that contribute to a country’s long-term productivity and prosperity. These 12 pillars are grouped into 3 sectors:

– Basic needs (Institutions, Infrastructure, Macroeconomic stability, Health, Basic education)

– Factor efficiency (higher education and training, labor market efficiency,—

-Efficiency of the goods market, Development of the financial market)

– Innovation and sophistication (Technological readiness, Market size)

Countries often ranked well in this report are:

– Switzerland: regularly in the lead thanks to its macroeconomic stability, its advanced infrastructure and its innovations.

– Singapore: praised for its business-friendly environment and administrative efficiency.

– the United States: leader in innovation, with a strong capacity to attract talent and investments.

According to the Global Competitiveness Report published in 2018, the highest ranked African countries were: Mauritius 49th globally, South Africa 67th, Seychelles 74th, Morocco 75th, Tunisia 87th, Botswana 90th, Algeria 92nd, Egypt 94th, Namibia 100ᵉ and Kenya101ᵉ.

Le Doing Business Report/ Business-Ready

Published by the World Bank, the Business Ready report replaced the Doing Business report discontinued in 2021. While Doing Business focused on assessing the business environment for small and medium-sized businesses, Business Ready aims to develop private sector as a whole. The B-Ready thus distinguishes itself from its predecessor by a more balanced and transparent approach. It is based on three main pillars: the regulatory framework, public services and the operational efficiency of the system. These pillars are measured through ten key indicators linked to the life cycle of companies, from their creation to their insolvency.

The 2024 report assesses the business and investment climate in 50 economies, based on 1,200 indicators. Of the 15 African countries assessed, eight are ranked in the report.

With an average score of 72.67/100, Rwanda stands out as the undisputed leader in Africa in terms of business climate. It is followed by Mauritius which displays an average score of 63.67/100, therefore ranking in second place in Africa. Mauritius obtains particularly good results in operational efficiency (70/100). Morocco, for its part, records an average score of 62.67/100 and particularly stands out in the regulatory framework pillar with 69/100. Botswana obtains 61/100, Togo 56.1/100, Tanzania 59.67/100, Ghana 56.33/100 and Ivory Coast 52.67/100.

IMD World Competitiveness Yearbook (WCY)

The WCY, published annually since 1989 by IMD Business School (Switzerland), provides some of the best-known indicators. It analyzes and ranks countries based on their ability to create and maintain an environment that allows businesses to be competitive. The indicator is based on more than 300 criteria with reference to economic literature, international, national and regional sources and following the recommendations of the financial community and government agencies. The assessment of country competitiveness focuses on four main sub-indexes: economic efficiency, government efficiency, entrepreneurial efficiency and infrastructure.

In the World Competitiveness Yearbook 2024 rankings, Singapore came out on top with a perfect score of 100 points, closely followed by Switzerland, Denmark and Ireland.

The WCY 2024 now ranks four African countries among the 67 economies studied, a first since the creation of this index 36 years ago. According to the report, Africa is represented by Botswana (55th globally), South Africa (60th), Nigeria (64th) and Ghana (65th). Note that this is the first appearance of Nigeria and Ghana in this ranking. Although still considered low, the African contribution reveals a significant dynamic of growth and economic development.

For Africa, the inclusion of four of its countries in this prestigious ranking demonstrates significant progress in competitiveness. However, this reveals the need for continued reforms and targeted strategies to improve infrastructure, governance and entrepreneurship.

Africa’s structural inability to maximize the benefits of AGOA and EBA

The “Everything But Arms” (ESA) program, established by the European Union in 2001, allows least developed countries (LDCs) to export almost all their products (except arms and ammunition) to the Europe without customs duties or quotas. AGOA (African Growth and Opportunity Act) is an American law adopted in 2000 which aims to facilitate exports from African countries to the United States by removing customs duties on many products.

Although these initiatives offer considerable opportunities, Africa is struggling to take full advantage of them for several reasons, including structural, economic, and institutional. For comparison, in 2022, India exported goods and services worth $85.5 billion to the USA while African countries benefiting from AGOA only exported $9.7 billion. of dollars.

Among the unfavorable factors, there is the dependence on raw materials which means that many African countries concentrate their exports on raw materials (oil, minerals) rather than on manufactured or processed products with high added value.

Africa mainly exports a limited number of AGOA-eligible products (textiles, clothing, crude oil) and does not fully exploit the opportunities offered in other sectors such as agri-food, technology or pharmaceuticals.

There is also the absence of competitive manufacturing industries due to high costs, insufficient infrastructure and low productivity. African products, particularly textiles or manufactured products, have difficulty competing on the European and American markets with products from countries like China or South-East Asia which have less expensive labor. and economies of scale.

Insufficient infrastructure (ports, airports, roads, warehouses) increases production and export costs. Logistical delays and high transport costs make African products less competitive, even with tariff advantages.

Furthermore, African SMEs lack the resources necessary to comply with European and American standards in terms of quality, food safety and sustainable development (traceability, certifications, compliance with sanitary and phytosanitary standards). They also do not benefit from sufficient administrative support to comply with these complex and costly standards.

Even with preferential access to the European and American market, African products face intense competition from more industrialized countries or those with similar trade agreements (e.g. Southeast Asia via GSP+, Latin America via other bilateral agreements). And African products are often perceived as being of lower quality, which limits their attractiveness.

Although AGOA and TSA provide duty-free access, foreign investors are hesitant to set up factories in Africa due to structural obstacles (corruption, political and economic instability, legal insecurity).

The lack of structural competitiveness significantly hampers Africa’s development by affecting the ability of African countries to exploit their economic potential, attract investments and integrate effectively into the global economy.

The lack of structural competitiveness prevents the development of local value chains to transform raw materials into high value-added products on site. Africa receives the lowest proportion of global foreign direct investment (FDI); which limits technology transfer, job creation and economic development.

Transport infrastructure (roads, ports, airports, railways), energy and telecommunications must be multiplied and integrated at the continental level.

Africa must promote education and vocational training in order to have a qualified workforce capable of meeting market demands.

It must fight corruption, excessive bureaucracy and political instability which deter local and foreign investors.

Africa must also take advantage of the African Continental Free Trade Area (AfCFTA) to foster its regional integration and improve its overall competitiveness.

References:

– Annual reports World Economic Forum, Suisse.

– Ready Business Report, Banque Mondiale, Washington, 2024.

– World Competiveness yearBook, International Institute for Management Development IMD ) Suisse, 2024.

A propos

Prof. Amath Ndiaye is an eminent Senegalese economist, holding a State Doctorate in Economic Sciences from the Cheikh Anta Diop University of Dakar (2001) and a 3rd cycle Doctorate in Development Economics from the University of Grenoble, France (1987). Since 1987, he has taught at the Faculty of Economics and Management at Cheikh Anta Diop University in Dakar. A recognized expert, he has collaborated with prestigious institutions such as the African Development Bank, the World Bank, and the IMF, specializing in particular in the areas of exchange rates, economic growth, and institutional development. He was an expert member of the steering committee of the African Union Commission for the Creation of the African Central Bank. Prof. Ndiaye is the author of numerous influential publications, notably on exchange rate regimes and economic growth in West Africa. Trilingual, he is fluent in Wolof, French and English.