South Africa spends plenty on education but isn’t more digitally competitive

Despite spending an enormous amount on education, South Africa is struggling to compete digitally.
Despite spending an enormous amount on education, South Africa is struggling to compete digitally.
Image: Mike Hutchings
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It’s not surprising that a new ranking of the most digitally competitive countries in the world would be led by countries like the US and Sweden. What might be surprising to some is the country that saw the biggest dip in its digital capacity, according to the list: South Africa.

We’re talking, after all, about the most advanced economy in Africa. In June, Amazon announced it would be adding 3,000 virtual customer service jobs in the country. And just last week, a new report from McKinsey said the country’s customer business outsourcing sector has the potential to rival hubs in places like Bangalore and Manilla. So what explains the country’s drop from 48 in 2019 to 60 in this year’s ranking of digital competitiveness by the Swiss-based International Institute for Management Development?

IMD chief economist Christos Cabolis says one of the striking issues with South Africa is how it fared in the rankings’ “knowledge” category, which assesses a country’s training and education, talent, and scientific concentration. Despite the fact that South Africa ranks first in this category among countries on education spending, it scores dismally in other areas, including digital and technological skills, higher education achievement, science graduates, employee training, high-tech patent grants, R&D expenditure and personnel, and international experience. (One bright spot is that it scores relatively well on the number of female researchers.)

“The amount of funds as a percentage of GDP that South Africa contributes to education is the highest of the 63 economies that we are studying, yet the results are not supportive with this amount of money,” Cabolis says. “Between giving the money and working on the implications of the output, something is lost.”

South Africa budgeted 246 billion rand ($14.8 billion) on basic education programs in 2018/19, which was around 16.7% of total government resources. According to Unicef, the country spends more than 20% of its resources on basic and higher education and its combined education spending is more than 6% of GDP.

Overall, African countries in particular face an annual $40 billion gap in education financing, but there’s often a low efficiency score in terms of the outcomes relative to spending, notes the African Development Bank.

IMD ranks the 63 countries by combining official statistics on issues ranging from unemployment to regulation to trade with questionnaires of business executives and managers about working in the different markets. The hard data, from international sources like the IMF and World Bank, is weighted twice as much in the ranking as the less tangible impressions collected in the surveys.

It then uses this information to assess a country’s capabilities on three fronts, Cabolis explains. The first is “knowledge,” which scores a country’s capacity to understand and discover new digital technologies, measured through things like training opportunities and scientific research. Second, technology: the landscape within which economies are able to develop digital technologies, informed by things like regulation, and the availability of capital.

Finally, the ranking measures “future readiness,” or how prepared an economy is for digital transformation, by measuring, for example, business adaptivity, and the country’s ability to integrate digital technologies in everyday life. Countries that ranked as the most digitally competitive were also seen as extremely “future ready,” Cabolis says.

The ranking is not necessarily globally representative as it only includes countries that ask to be included—South Africa is the only African country on the list. It is also notable that this year’s list was compiled from responses collected between February and the end of March, during the first wave of the coronavirus pandemic.

While it is difficult to pinpoint exactly what might be responsible for the gap between South Africa’s investment in education and its poor digital readiness, Cabolis notes the country has struggled with corruption in several sectors, particularly education, which may be preventing citizens from benefiting directly from the investment.

South Africa also does not have the most welcoming environment for immigrants, who can help with the transfer of knowledge—an indicator that IMD considers in its rankings. And its regulatory environment does not make it easy for entrepreneurs to experiment and innovate.

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