ZIMBABWE’S ranking in the Global Competitiveness Index (GCI) compiled by the World Economic Forum declined one place to 125th out of 140 countries. In the 2015/16 report published on Wednesday, Zimbabwe is ranked 15 from the bottom — the lowest since 2012/13 when it was 12 places from bottom.
The country’s overall score of 3,45 (out of seven) is marginally lower than 3,54 in 2014. Because both the number and the selection of countries ranked varies yearly, a more meaningful comparison is one with the country’s overall score out of a possible seven on the index. The report shows that the GCI score for 2015 is the second highest Zimbabwe has recorded since the revised index was first published in 2005, an improvement of 28% on its record low of 2,77.
Since 2005 the Zimbabwe score has increased 6% from 3,25 to 3,45, which is 4% below the Sub-Saharan Africa average of 3,58. The highest score in the 2015 report is for Switzerland, ranked top with 5,76, while the lowest is Guinea ranked 140, with 2,84. The highest for Sub-Saharan Africa is Mauritius in 46th place (down seven places over the year at 4,43), while South Africa is up seven places to 49th (4,39).
The most serious barriers to doing business in Zimbabwe over the past three years include access to finance, which remains far and away the main problem, followed by policy instability and restrictive labour regulations.
With a 45% overvalued exchange rate, Zimbabwe is going to find it very difficult to accelerate economic growth especially given the make-up of its export portfolio at a time of depressed commodity prices,” the report says.
“The belief that growth will be re-ignited by foreign direct investment, diaspora inflows and offshore credit lines is naïve.
“It is clear from the Global Competitiveness Report that the country needs far-reaching structural and institutional reforms, allied with much higher levels of investment, especially in infrastructure, than in the last 25 years. This is not quick-fix territory, but structural reform and transformation.”
On a purchasing power parity basis — the preferred metric used in the GCI report — income per head in Zimbabwe today is one-third lower than in 1990 and some 37% below its peak in 1998.
During the 1990s, per capita incomes increased a mere 0,44% a year, and the best period of growth by far was that during the Government of National Unity (2008-2013) when incomes recovered rather than grew 6,7% annually. Since then, growth has slowed to a crawl (0,6% a year) and is likely to remain so.
As noted in last year’s review of Zimbabwe’s rankings, the country’s weak long-run economic performance that goes back to the 1960s will not be reversed by minor policy changes.
The necessary reforms are much more deep-seated and structural than currently contemplated by the government or even the International Monetary Fund, both of whom are focusing on narrowly technical, short-run changes that fall far short of what is needed.
The current policy focus on foreign capital to “rescue” the economy is misplaced, the report says.
“At a time of global economic turmoil of the kind experienced since the global financial crisis in 2008, reliance on foreign capital is a high risk strategy, the more so if it is not accompanied by deep-seated domestic reforms to reduce such foreign dependence and create a platform for self-sustained economic development,” it says.
“The 2014 conclusion written a year ago bears repeating. The overriding conclusion from the report is that sweeping, fundamental reforms that extend beyond the norms of economic policy are needed. In particular, Zimbabwe needs to pay far greater attention than in the past to institutional renewal and reform. Improved policies are unlikely to be designed by weak institutions and even less likely to be efficiently implemented without institutional reforms.”