Introduction
Improving Africa’s competitiveness has taken on a heightened importance as the region experiences subdued growth following a decade of commodity-fuelled expansion. The commodity plunge, as well as the economic slowdown in China, Africa’s largest trading partner, has exposed the economic vulnerabilities of many countries across the region. As a result, the issue of industrializing and diversifying beyond the extractive economy is now being taken seriously. Meanwhile, economies in the region are weak on national competitiveness, a prevalent and persistent problem. In the World Economic Forum’s 2016–2017 Global Competitiveness Index, not a single African country was ranked in the top quartile, with 24 of the bottom 38 countries (n = 138) coming from the region (WEF, 2016). This is particularly problematic as many economies in the developing regions of Middle East, Latin America and especially Asia, are making considerable progress in their drive to enhance international competitiveness.
On a somewhat positive note, some African countries are making progress, with 13 countries increasing their competitiveness scores in the 2016–2017 WEF Global Competitiveness Index rankings. Rwanda, with the most improved score, climbed remarkably to the 52nd position, while Botswana jumped up seven positions to rank 64th; Africa’s top four, Mauritius (45th), South Africa (47th), Rwanda (52nd), and Botswana (64th) featured in the upper half of the world rankings. The region also achieved improvements in three areas: business environment, information and communication technologies, and infrastructure (WEF, 2016).
Like many other developing regions, country performance in Sub-Saharan Africa (SSA) varies widely, reflecting economic and political conditions. There is also a wide variation across and within the various regions in SSA. With three of the top four most competitive countries, Southern Africa is the most competitive SSA region; however, it also includes some of the competitiveness region’s least competitive countries as Madagascar, Mozambique, and Malawi rank 128th, 133rd, and 134th (n = 138) respectively. The performance of the East Africa region, home to the continent’s emerging spotlight, Rwanda, has generally improved since 2007. The West Africa region is not only the least competitive region, but it is also stagnating in the competitiveness rankings. The highest ranked West African country, Côte d’Ivoire (99th) barely makes the top 100, and countries like Sierra Leone and Nigeria rank in the bottom 15; West Africa countries ranked poorly in almost all the pillars of the competitiveness index (WEF, 2016).
Africa’s Competitiveness: A Brief Historical Overview
Historically, African countries have had low levels of global competitiveness. Out of 75 countries on the 2000–2001 index, South Africa stood out amongst African countries, ranking 25th, with Mauritius (52nd), Zimbabwe (65th), and Nigeria (67th) lagging in the lower quartile (WEF, 2000). This same pattern was repeated in 2005–2006 when there was no African country in the top quartile; a few countries in the second quartile (South Africa, 42nd; Botswana, 48th; Mauritius, 52nd); a few countries also in the third quartile (Ghana, 59th; Namibia, 63rd; Tanzania, 71th); while many others trailed in the lower quartile (Nigeria, 88th; Kenya, 92nd; Ethiopia, 106th; Chad, 117th), ranked in the bottom 50 countries out of 117 countries (WEF, 2005). In the 2010–2011 edition of the index, 8 of the bottom 10 countries were also from Africa (n = 139) and SSA was once again outperformed by Southeast Asia and Latin America (WEF, 2010).
This consistent poor ranking of African countries is worrisome, as the past 15 years have seen impressive economic growth rates that are second only to Asia (WEF, 2016). However, high growth rates have not been sufficient as the continent overly relies on exports of primary goods from natural endowments (making it vulnerable to commodity shocks), and the problem of low productivity levels persists. To tackle the persisting challenges posed by the low levels of competitiveness and the vulnerability of commodity exporters to international shocks, the Action Agenda for Africa’s Competitiveness report (WEF, 2016, p. 2) highlights “the need for economic diversification, especially into sectors that offer significant employment opportunities”.
Grounds for Cautious Optimism
Several African countries are now making progress in increasing their competitiveness, and there appears to be grounds for cautious optimism about future improvements. As wages rise in China and Asia, there is a real chance for Africa as international economy policymakers in China appear willing to offshore low-end manufacturing to Africa because of low wages (Newman et al., 2016). However, although low wages may be needed to attract offshore manufacturing, the productivity levels, which are perhaps more important, are currently low in Africa. The continent also faces some serious competition from Asia-Pacific economies such as India, Indonesia, Malaysia, Taiwan, and Vietnam, which are projected to be amongst the top global manufacturing countries by 2020 (Deloitte, 2016). Africa’s current low productivity levels and the competitive challenge from Asia-Pacific countries raise serious questions about the ability of the continent to compete effectively in the global economy.
Rwanda’s success story in building its national competitiveness offers some hope and interesting insights. With a score of 3.99 (out of 7) in 2010–2011, the country has moved steadily from being ranked in the 80th position to becoming 52nd in the 2016–2017 rankings with a score of 4.41. Rwanda’s progress is due largely to its business and political leadership, which seems to have adopted “Singapore’s model” for rapid economic growth (Ulrich and Thomas, 2014). The country’s performance is even more inspirational given the significant improvements in some of the pillars of the index such as institutions (a score of 5.6 out of 7, ranked 13th globally), health and primary education (5.5, 84th), labour market efficiency (5.4, 7th), goods market efficiency (4.7, 35th) and financial market development (4.6, 32nd).
Are there grounds for cautious optimism about Africa’s future’s competitiveness? Will there be more Rwanda-type success stories in the region over the coming years? The ongoing economic slowdown across SSA presents an opportunity. It appears that the severity of the great plunge in oil and commodity prices, combined with the relative political stability being experienced, and concerted efforts from governments may be grounds for cautious optimism. Rwanda’s recovery following the tragic genocide and political instability of the 1990s shows that progress is indeed possible. However, if past performance is relied on as an indicator of future results, Africa’s competitiveness outlook appears grim, as performance has been relatively stagnant for over a decade.
Bringing the Firm In: Competitiveness, Firm Performance and Business Failure
While a lot of attention has rightly been placed on competitiveness at the national level, it is also important to look at firm-level competitiveness. This is especially important in Africa, where the private sector is only beginning to develop with large corporations now playing a critical role in the domestic economy. As the quote above from the McKinsey Global Institute’s study of African economies indicates, the region urgently needs firms to step up their performance, as size matters for competitiveness. The study finds that Africa’s top 100 firms have been successful by building a strong position in their domestic markets and then expanding within the region. An earlier empirical study of manufacturers of various sizes in South Africa similarly concludes that: “competitiveness and productivity increase as the size of firms increases” (Kleynhans, 2009, p. 31). Hence, there is an urgent need to put in place policies to support private sector development in the region, to encourage the growth and expansion of African firms.
Beyond learning from the success of the current market challengers and leaders, it is important to pay attention to failed companies (Amankwah-Amoah, 2011). This is especially useful in the African context where firms have relatively high mortality rates. From airlines to textiles, automotive, manufacturing, financial services and agriculture, there are too many public and private firm failures (see Amankwah-Amoah, 2015; Carmody, 2001), and many enterprises never reach their potential or outlive their owners/founders. In sum, learning from failed enterprises can yield useful insights to help improve the competitiveness of African firms.
Unfortunately, business failure remains an under-researched topic in the African management literature. Given its importance to firm competitiveness and the need to address these gaps, we provide an extended discussion on the key issues and challenges related to business failures and highlight fruitful avenues for future research.
Researching Business Failures in Africa
African firms can learn and apply pivotal lessons from business failures to increase their global competitiveness. Increasingly, smart firms have turned to others’ experiences and failures as well as their own to improve their competitiveness and innovativeness (Yang, Phelps, & Steensma, 2010). Past studies have demonstrated that innovation can flourish by learning from failure (Cannon & Edmondson, 2005; Edmondson, 2011). Indeed, Li and Rajagopalan (1997) observed that learning from failure helps firms to make greater quality improvements compared with learning from success. Other studies on business failure in developed economies have demonstrated that organizations and individuals learn more from failure than successes (see Desai, 2011). Notwithstanding these observations, learning from business failures still remains a largely untapped source of knowledge for firms to improve their competitiveness in developing economies (Amankwah-Amoah, 2011).
Business failure is the cessation of b...