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The five most competitive African countries as a benchmark for other African nations

Analysis based on empirical studies

by A.-K. Rademacher (Author) R. Kempf (Author) J.-H. Holm (Author) Th. Ziegler (Author) J. Jachmann (Author)

Research Paper (undergraduate) 2006 60 Pages

Economics - Case Scenarios

Excerpt

Content

DECLARATION OF ACADEMIC INTEGRITY

ILLUSTRATION INDEX

TABULATIONS INDEX

ABBREVIATION INDEX

1. SELECTING THE FIVE MOST COMPETITIVE COUNTRIES IN AFRICA

2. INTRODUCTION TO THE COUNTRIES AND THEIR CHARACTERISTICS
2.1 A COUNTRY PROFILE ON EGYPT
2.2 A COUNTRY PROFILE ON BOTSWANA
2.3 A COUNTRY PROFILE ON MAURITIUS
2.4 A COUNTRY PROFILE ON NAMIBIA
2.5 A COUNTRY PROFILE ON SOUTH AFRICA

3. ANALYSIS OF THE COMPETITIVENESS OF THE FIVE AFRICAN NATIONS
3.1 DEFINITION OF COMPETITIVENESS
3.2 COMPETITIVENESS OF BOTSWANA
3.2.1 South African customs union
3.2.2 Agriculture
3.2.3 AIDS and their influence on the human capital
3.2.5 Sector
3.2.6 Tourism
3.2.7 Future prospects
3.3 COMPETITIVENESS OF SOUTH AFRICA
3.3.2 Primary Sector
3.3.3 Secondary Sector
3.3.5 Visions of the future
3.3.6 Infrastructure
3.3.7 Soccer world championship 2010 in South Africa
3.4 THE COMPETITIVENESS OF EGYPT
3.4.1 Agriculture
3.4.2 Industry (The industrial policy)
3.4.3 Energy
3.4.4 Transport
3.4.5 Trade (Foreign Trade)
3.5 THE COMPETITIVENESS OF NAMIBIA
3.5.1 Primary Sector
2.6 THE COMPETITIVENESS OF MAURITIUS
3.6.1 Financial Services

4. BENCHMARKING THE COMPETITIVENESS OF THE FIVE SELECTED NATIONS
4.1 GOVERNMENT EFFICIENCY
4.1.1 Public Finance
4.1.2 Institutional Framework
4.1.2.1 The Cost of Capital
4.1.2.2The country credit rating
4.1.3 Openness
4.2 BUSINESS EFFICIENCY
4.2.1 PRODUCTIVITY AND EFFICIENCY
4.3 ECONOMIC PERFORMANCE
4.3.1 Domestic Economy
4.3.2 International Trade
4.4 BASIC INFRASTRUCTURE
4.4.1 Technological Infrastructure
4.4.4 Scientific Infrastructure
4.4.5 Health
4.4.6 Education

5. THE INFRASTRUCTURE CHAIN AND ITS IMPLICATIONS

LIST OF LITERATURE

LIST OF ELECTRONIC LITERATURE

APPENDIX

Illustration Index

Chart 1 Total government expenditure

Chart 2 Country Credit Rating 2003

Chart 3 Inward FDI flows, by Host Region and Economy 26 1990-2005

Chart 4 Foreign Direct Investment (Net) in Mill USD

Chart 5 Procedures (number) for starting a business

Chart 6 Duration (days) for starting a business

Chart 7 Distribution of Income in Egypt and South Africa

Chart 8 GDP based on PPP per capita (in USD)

Chart 9 GDP per Capita (PPP) 2002

Chart 10 Output per Worker

Chart 11 Degree of Customer Orientation

Chart 12 Number of listed domestic companies

Chart 13 Growth Competitive Index

Chart 14 Import and Export overview

Chart 15 Structure of Export

Chart 16 Ranking Infrastructure

Chart 17 Technology index

Chart 18 Internet hosts and telephone lines

Chart 19 Quality of scientific research institutions

Chart 20 Quality of public schools

Chart 21 Illiteracy rate

Chart 22 World rankings on the ease of doing businesses

Chart 23 Annual growth in labour productivity for selected groups and regions, from 1991 to 2003-4

Chart 24 Productivity and Output per worker

Chart 25 Business impact on HIV

Chart 26 Quality of educational system

Chart 27 Overall Trade Competitiveness Index

Chart 28 IT Club Initiative

Tabulations Index

Table 1 The Basic economic facts of Namibia

Table 2 Competitiveness Index for African countries after the World Competitivess Report 2004

Abbreviation Index

Abbildung in dieser Leseprobe nicht enthalten

1. Selecting the five most competitive countries in Africa

The African continent is country of very diverse and different premises. There exist 53 different nations, all struggling with poverty, urbanisation, geographical restrictions and high governmental indebtness or profiting from natural resources. Africa has been influenced by western nations through colonialisation in the past, massive subsidisation in the recent past and dependence on the world economy and influence though globalisation today.

Literature on the topic of competitiveness in Africa or a specific country is very diverse. Some sources, like the World Economic and Financial Survey (cf. International Monetory Fund 2005), have a very neutral view on the economic situation in various African regions. They see the growth rates of GDP as a source of poverty reduction, but they also see a great potential of danger for the economy. They criticize the underdeveloped infrastructure, the removal of textile quotas (cf. International Monetory Fund 2005, p. 13) as a reduction of African competiveness or the high trade barriers against African goods in other developing countries (cf. page 16).

We can find very positive views on the development in recent years, like the development of Botswana from one of the poorest countries in the world to a middle income-economy in the 1980s (cf. Barnhoorn 1994, page 31) as well as negative views on the current situation in Egypt (cf. Ibrahim and Ibrahim, 2006), which according to the Global Competitiveness Report (cf. Porter 2004) still is a competitive country. When talking about competitive countries in Africa we also have to be careful about the definition of competitiveness. We cannot take Western or Western European standards of competitiveness and apply them to African nations. As Lamping and Jäscke (cf. 1993, p. 100) suggest, we have to put this term into perspective. Different factors make up the economic and competitive situation of a country and especially in Africa premises are very different.

Due to the different viewpoints one can find in literature on Africa, we decided to analyze the countries of Egypt, South Africa, Botswana, Mauritius and Namibia by taking the figures from the Global Competitiveness Report 2003-2004 (see Table 2 in appendix). We can summ up the rankings and then pick out the countries with the lowest sums, because the higher the country is in the ranking, the better the competitivenss.

These countries, Botswana, Egypt, Mauritius, Namibia and South Africa, are in the focus of this work. Although they receive high rankings by the World Economic Forum (WEF) compared to other African nations, the ranking is based on surveys and financial figures. But these figures do not give us an overall impression of the competitve situation in a country and may give as a wrong impression of the country’s performance. Therefore the following sections will discuss the competitiveness of each country in specific categories. There then will be a benchmarking of certain categories which make up an economy to give an example for better development in other regions of Africa.

2 Introduction to the countries and their characteristics

The competitiveness of each country is affected by its history and its geographical location. Next to these aspects politics determine a competitive country. The following paragraphs will give a brief introduction of the countries according to these factors.

2.1 A Country profile on Egypt

Once a Greek said "Egypt is the gift of the Nile. Without the Nile, Egypt would be little more than a desert wasteland” (US Department of State 2006a). The Nile creates the world’s most extensive oasis in the Nile Valley and Delta. The climate is dry and hot in summer time followed by moderate winter times. Egypt is allocated in the north east of Africa, bordering on the Sudan, Lybia and Israel as well on the Mediterrain Ocean.

Egypt is the most populous country in the Arab world and the second-most populous on the African Continent. It has endured as a unified state for more than 5,000 years, and archaeological evidence indicates that a developed Egyptian society has existed for much longer. For 2,400 years Egypt was governed by foreigners: Assyrians, Persians, Greeks, Romans, Byzantines, Arabs, Turks, French, and British. Before Egypt was ruled by Pharaos. The Ottoman Turks controlled Egypt from 1517 until 1882, when British expeditionary forces crushed a revolt against the Ottoman rulers, marking the beginning of British occupation and the virtual inclusion of Egypt within the British Empire. In deference to growing nationalism, the U.K. unilaterally declared Egyptian independence in 1922 (cf. Nohlen 2002. pp. 26-28). British influence, however, continued to dominate Egypt's political life and fostered fiscal, administrative, and governmental reforms. In 1948 Nasser took over power by overthrowing Egyptians last King. He evolved into a charismatic leader, not only of Egypt, but the Arab world, promoting and implementing "Arab socialism." He nationalized Egypt’s economy. Afte]r Nasser's death, another of the original "free officers," Vice President Sadat, was elected President. Sadat introduced greater political freedom and a new economic policy. Since 1991, President Mubarak has overseen a domestic economic reform program to reduce the size of the public sector and expand the role of the private sector (cf. US Department of State 2006a).

With the installation of the 2004 Egyptian parliament, the Government of Egypt began a new reform movement, following a stalled economic reform program begun in 1991. In the past year, the cabinet economic team has simplified and reduced tariffs and taxes, improved the transparency of the national budget, revived stalled privatizations of public enterprises and implemented economic legislation designed to foster private sector-driven economic growth and improve Egypt's competitiveness. The Egyptian economy relies heavily on tourism, oil and gas exports, and Suez Canal revenues, much of which is controlled by the public sector and is also vulnerable to outside factors (cf. US Department of State 2006a).

2.2 A country profile on Botswana

The Botswana, a term also used to denote all citizens of Botswana, refers to the country's major ethnic group (the "Tswana" in South Africa), which came into the area from South Africa during the Zulu wars of the early 1800s. In prehistoric and very recent times the Kalahari thirstlands of Botswana have been central in the historical geography of the region, as the intermediate territory between the savannas of the north and east and the steppes of the south and west. Prior to European contact, the Batswana lived as herders and farmers under tribal rule (cf. US Department of State 2006b).

In the 19th century, hostilities broke out between the Batswana and Boer settlers from the Transvaal. After appeals by the Batswana for assistance, the British Government in 1885 put "Bechuanaland" under its protection. The northern territory remained under direct administration and is today's Botswana, while the southern territory became part of the Cape Colony and is now part of the northwest province of South Africa. In June 1964, Britain accepted proposals for democratic self-government in Botswana. The 1965 constitution led to the first general elections and to independence in September 1966 (cf. Hofmeier and Mehler 2004, pp. 39 - 41).

Since then Botswana has gained in international stature as a peaceful and increasingly prosperous democratic state. It has had one of the fastest growing economies in the world, rising from one of the poorest to lower-middle income level. This new prosperity has been based on the mining of diamonds and other minerals: since the early 1980s, the country has been the world's largest producer of gem quality diamonds (cf. CIA World Factbook 2006a). Tourism is an increasingly important industry in Botswana. There has been extensive development of educational and health facilities, in villages and traditional rural towns as well as in rapidly growing new towns. Botswana's economic record has been built on the foundation of wisely using revenue generated from diamond mining to fuel economic development through prudent fiscal policies and a cautious foreign policy (cf. US Department of State 2006b and Nohlen 2002, pp.123-124).

With its proven record of good economic governance, Botswana was ranked as Africa's least corrupt country by Transparency International in 2005, ahead of many European and Asian countries. The WEF rates Botswana as one of the two most economically competitive nations in Africa. Because of history and geography, Botswana has long had deep ties to the economy of South Africa.

Botswana's currency, the Pula, is fully convertible and is valued against a basket of currencies heavily weighted toward the South African Rand (cf. US Department of State 2006b).

2.3 A country profile on Mauritius

The insular state in the Indian Ocean consists of the isles Mauritius and Rodrigues. Besides that there still is the historical claim of the British territory in the Indian Ocean. About 1800 km ahead of the African coast the isles of volcanic heritage can be allocated (cf. Nohlen 2002, p. 551).

Although known to Arab and Malay sailors as early as the 10th century, Mauritius was first explored by the Portuguese in 1505 and first colonized in 1638 by the Dutch. Mauritius was populated over the next few centuries by waves of traders, planters and their slaves, indentured labourers, merchants, and artisans. The island was named in honour of Prince Maurice of Nassau by the Dutch (cf. Nohlen 2002, p. 552). In 1715 the French claimed the island and by 1767 the French government had taken control of the “Île de France”. In 1810 Mauritius was captured by the British, four years later their possession was confirmed by the Treaty of Paris. Still French institutions, including the Napoleonic code of law, and language were maintained. After being a British colony for 158 years, Mauritius became an independent state in 1968 and a republic in 1992 (cf. Darga 2005, pp. 3-5). Politically seen since, Mauritius is highlighted by the three legal governmental changes in 1982, 1995, and 2000 through elections (cf. Hofmeier and Mehler 2004, p. 188). The basic elements of democracy are deepened in society: there is a high attendance for elections (cf. Darga 2005, p.34).

Since independence in 1968, Mauritius has developed to one of the strongest economic countries in Africa: from a low-income, agriculturally based economy to a middle-income diversified economy with growing industrial, financial, and tourist sectors. Economic growth was first driven by sugar, then textiles and tourism, and more recently by financial services. The government's development strategy focuses on expanding local financial institutions and building a domestic information telecommunications industry. A stable democracy with regular free elections and a positive human rights record, the country has attracted considerable foreign investment and has earned one of Africa's highest per capita incomes (cf. US Department of State 2006).

Trade, commitment to democracy, colonial and cultural ties, and the country's small size are driving forces behind Mauritian foreign policy. The country's political heritage and dependence on Western markets have led to close ties with the European Union and its member states, particularly the United Kingdom and France, which exercises sovereignty over neighboring Reunion. Mauritius has friendly relations with other African states in the region, particularly South Africa, by far its largest continental trading partner.

2.4 A country profile on Namibia

Namibia is allocated in the far south of the African continent. Neighbors are South Africa, Botswana, Zambia and Angola. The terrain varies from coastal desert to semiarid mountains and plateaus. The inhospitable Namibian Desert constituted a formidable barrier to European exploration until the late 18th century, when successions of travellers, traders, hunters, and missionaries explored the area. In the following years, Germany and the United Kingdom had been in negotiation about the conquered land. German administration ended during World War I following South African occupation in 1915 (cf. US Department of State 2006d). By 1920 South Africa took over the full power of administration and legislation. The agreement by the League Council required that South Africa promote the material and moral well-being and social progress of the people. When the League of Nations was dissolved in 1946, the newly formed United Nations inherited its supervisory authority for the territory. South Africa refused UN requests to place the territory under a trusteeship agreement (cf. Hofmeier and Mehler 2004, p. 208). During the 1960s, as the European powers granted independence to their colonies and trust territories in Africa, pressure mounted on South Africa to do so in Namibia. In 1977, Western members of the UN Security Council launched a joint diplomatic effort to bring an internationally acceptable transition to independence for Namibia. South Africa continued to administer Namibia through its installed multiracial coalitions. After 10 years of failing negotiations South Africa eventually agreed on withdrawing its troops from the region. On April 1, 1989 the South African appointed Administrator Pienaar officially began administrating the territory's transition to independence. The 11-month transition period went relatively smoothly. By February 9, 1990, the Constituent Assembly had drafted and adopted a constitution (cf. Hofmeier and Mehler 2004, p. 209 and Nohlen 2002, p. 593).

The constitution provides for the private ownership of property and for human rights protections, and states that Namibia should have a mixed economy and encourage foreign investment. The Namibian economy has a modern market sector, which produces most of the country's wealth, and a traditional subsistence sector. The country's sophisticated formal economy is based on capital-intensive industry and farming (cf. US Department of State 2006d). The economy is heavily dependent on the extraction and processing of minerals for export: Namibia is the world's fifth-largest producer of uranium, and the producer of large quantities of lead, zinc, tin, silver, and tungsten. The Namibian economy is closely linked to South Africa with the Namibian dollar pegged one-to-one to the South African rand (cf. CIA World Factbook 2006b).

2.5 A country profile on South Africa

People have inhabited southern Africa for thousands of years. Most of today's black South Africans belong to the Bantu language group, which migrated south from central Africa, settling in the Transvaal region sometime before AD 100. The Nguni, ancestors of the Zulu and Xhosa, occupied most of the eastern coast by 1500 (cf. US Department of State 2006e).

The Portuguese were the first Europeans to reach the Cape of Good Hope, arriving in 1488. In subsequent decades, French Huguenot refugees, the Dutch, and Germans began to settle in the Cape. Collectively, they form the Afrikaner segment of today's population. After the British seized the Cape of Good Hope area in 1806, many of the Dutch settlers (the Boers) trekked north to found their own republics. The discovery of diamonds (1867) and gold (1886) spurred wealth and immigration and intensified the subjugation of the native inhabitants (cf. Hofmeier and Mehler 2004, pp. 280-281). The Boers resisted British encroachments, but were defeated in the Boer War (1899-1902). The resulting

Union of South Africa operated under a policy of apartheid - the separate development of the races. In May 1961, South Africa relinquished its dominion status and declared itself a republic (cf. US Department of State 2006e). In 1984, a new constitution came into effect in which whites allowed coloured and Asians a limited role in the national government and control over their own affairs in certain areas. The 1990s brought an end to apartheid politically and ushered in black majority rule (cf. Nohlen 2002, p. 750).

After national elections in 1999 the new President Mbeki shifted the focus of government from reconciliation to transformation, particularly on the economic front. With political transformation and the foundation of a strong democratic system in place after two free and fair national elections, focus on bringing economic power to the black majority in South Africa was needed. South Africa has made great progress in dismantling its old economic system, which was based on import substitution, high tariffs and subsidies, anticompetitive behaviour, and extensive government intervention in the economy. The new leadership has moved to reduce the government's role in the economy and to promote private sector investment and competition. South Africa has a sophisticated financial structure with a large and active stock exchange that ranks 17th in the world in terms of total market capitalization. South Africa has rich mineral resources. It is the world's largest producer and exporter of gold and platinum and also exports a significant amount of coal (cf. US Department of State 2006e).

3. Analysis of the competitiveness of the five African nations

The following section analyses the individual economies and its performance of the five selected nations. Each chapter describes the country’s specialness and which sectors dominate within the area.

3.1 Definition of competitiveness

Competitiveness describes how well a company or a region can sell their products in a given market in relation to the competitiors. You can be competitive if your price and the quality of the product are analog to the competitors. If the quality is too low, you have to lower the price to stay competitve.

3.2 Competitiveness of Botswana

Despite the geographical disadvantages (midland, high transport costs), climatical disadvantages and dependence on natural resources, Botswana is often called as a "model country" of Africa, because of its political stability, economic development and the constant improvement of the life circumstances. This is due to the circumstance that after the achievement of independence rich diamond mines were discovered, but also to the circumstance that the earned profits were mainly invested into the development of the country. This is again reflected in the economic growth. In the 90's and 80's Botswana had an average inflation rate of nearly 9 per cent per year, since that time, because of fewer inquiries, it is constantly declining. Botswana’s main trade partner is to 80 per cent South Africa.

The main industries of the country’s economy are the mining industry (diamond mining), tourism and agriculture as well as meat produciton. Many European enterprises have subsidiaries in Botswana and can thus supply the country with their goods. There are only few foreign enterprises, which operate directly from Botswana. However Botswana strives to attract foreign enterprises to set up their headquarters within the country. This would increase the number of jobs and the state could profit of additional tax funds. With contracts, e.g. the German- Botswanian Investment Protection and Subsidy Contract, they support a direct co- operation with western countries.

3.2.1 South African customs union

The South African States: South Africa, Swaziland, Lesotho, Botswana and Namibia founded the South African Customs Union on December 11th 1969. This customs union provides a free trade of goods and services between the member states. This is also the reason why Botswana operates such a high portion of its trade with South Africa.

As South Africa is the most economically progressed state in Africa and has a safe political system, it offers optimal conditions for foreign investors. With a membership in the customs union, countries as Botswana can deal without tariff costs products from western countries on the South African market.

3.2.2 Agriculture

The agriculture exists mainly out of cattle breeding and the cultivation of basic food such as corn, sorghum and millet, which suffered strongly from dry periods in the last years. Sorghum is the most important bread grain in Africa. It is cultivated primarily for production of flour and as food for cattle. The cultivation serves predominantly the self-sufficiency. Only in the damp southeast of the country there are large farms, which obtain partly an export surplus. Thus the agriculture offers to many inhabitants a working premise.

3.2.3 AIDS and their influence on the human capital

During the past years, Botswana has invested much into the support of people. The main goal for this support was to reduce poverty and to assist the workers in gaining know-how. In many cases this was very well achieved. Today nearly 100 per cent of the urban population has access to clean water (in the rural areas approximately 76 per cent). Also the poverty could be reduced to 24 per cent of the population.

Also the conditions of the education and the provision in the health sector increased strongly. The structure to some extent already provided functioning training and health service was already provided. This is overshadowed by a high number of deaths, which is assumed to result from AIDS/HIV. Botswana, Namibia and Zimbabwe belong to the states with the highest number of HIV infections of the total population. According to reliable estimates over 20 per cent of the total population are HIV infected. Unfortunately however the perception is hardly present about the bad condition, so that there are daily new infections.

The average life expectation with birth decreased from 70 years of age to 40 years of age. This effects the economical development strongly negatively, because there is a lot of know-how being lost with most of its population dying at a young age. This is a major reason, why the relatively high investments still haven’t shown an effect in the economical growth.

3.2.4 Mineral resources

Gold, nickel, copper, cobalt and coal are beside the diamonds the mineral resources of Botswana. However the special attention is on the excavation of diamonds, which constitutes over 70 per cent of the national income. This is the driving force within the economy and was responsible during the last decades for the high economic growth. The diamond mines are operated by a joint venture society of the international enterprise “de Beers” and the government of Botswana, called DEBSWANA. The enterprise de Beers is particularly in Botswana and South Africa active and has a position, similar to a monopoly, in the diamond industry.

Unfortunately the demand for diamonds on the world market is stagnating at the moment, which has strong consequences on the national market. The exports of the diamonds remain the same and thus lead to a stagnation of GDP. It has to be assumed that the high growth rates of the seventies to nineties will not be reached in the near future. The limited demand for diamonds as well as the volatility of the prices show that the export of diamonds will not be the driving force within the Botswanian economy.

3.2.5 Sector

As the demand for diamonds stagnates, the economic development of Botswana is in danger. The mining industry is no longer in the position to give the necessary impulses to the national economy. Thus the question arises for Botswana where economic growth should come from in the future. A suitable solution is not recognizable yet. One sets the largest hopes however in the third sector, particularly such as trade, bank and tourism.

3.2.6 Tourism

The tourism already proved itself in other African countries as a successful industry. In various countries it even became a basic pillar of the economy. This would also be a possibility for Botswana. The necessary political security is already given. However it still needs some financial expenditures to create hotels, infrastructure and tourist centres as well as time until the expected profits can be realised.

3.2.7 Future prospects

Although Botswana has had a very high economic growth during a long period and the wealth increased strongly on the average, Botswana now faces 2 major problems. The first problem is the stagnation on the diamond market and the second problem is the high HIV infected rate. If one does not find a solution for these two problems in the next years, the recent economic development cannot be continued.

3.3 Competitiveness of South Africa

Like in many different areas, South Africa is also in its economy a country of large contrasts. The economy is highly developed and industrialized in the cities, otherwise the rural areas have experienced no changes during the 19th century. Thus a mixture of developed and developing country resulted. There is a strong gradient in standard of living, way of life and career opportunities in the population. The large poverty (mainly in the black population) faces the successful economy of the country.

Nevertheless the economy is in an up wind. This has been caused by the annulment of the apartheid at the beginning of the 90's. Since that time the economy is recovering from the damage of the apartheid. The growth rate of 2005 was at 5 per cent and the prognoses for 2006 even lies at 6 per cent. Reason for this high inflation rate is a low level of the interest rate, which also gives poorer people the chance to invest with an outside financing. With approximately 13,5 per cent of the GDP, South Africa ranks in 2005 among the countries with the lowest overall economic saving rates. For the first time even the black population, which still is financially weaker in comparison than the white population, can profit from this economical boom. This development is very pleasing, but did not come just from somewhere. The government transacted large investments to build the economic basic conditions. The state is planning further indebtedness for the improvement of the infrastructure. This certainly happens in regard to the soccer world championship 2010, which will take place in South Africa.

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Details

Pages
60
Year
2006
ISBN (eBook)
9783640768455
ISBN (Book)
9783640768899
File size
931 KB
Language
English
Catalog Number
v160355
Institution / College
University of Cooperative Education Mannheim
Grade
1,5
Tags
African Analysis

Authors

  • A.-K. Rademacher (Author)

    11 titles published

  • R. Kempf (Author)

  • J.-H. Holm (Author)

  • Th. Ziegler (Author)

  • J. Jachmann (Author)

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Title: The five most competitive African countries as a benchmark for other African nations