Weak institutions threaten Africa’s competitiveness, report warns

The International Institute for Management Development World Competitiveness Booklet 2026 finds that economic success is increasingly shaped by the credibility of institutions, particularly the rule of law, rather than traditional factors such as cost advantages or market size. In a global environment marked by geopolitical tensions and economic uncertainty, the report says countries that enforce predictable rules and uphold contracts are better positioned to attract investment and sustain growth. Across Africa, businesses continue to struggle with structural constraints. Executives identified high borrowing costs (63%), exchange rate volatility (44%), and weak domestic demand (36%) as the most significant challenges, all above global averages. Access to finance remains a major concern, with countries such as Kenya, Nigeria, Botswana and Ghana among the most affected. These pressures, combined with currency instability, are weighing heavily on business confidence. South Africa (SA) remains the continent’s most competitive major economy but continues to face structural headwinds. The report places SA ahead of regional peers in areas such as business efficiency, yet still outside the global top tier, underscoring ongoing challenges in infrastructure, governance and economic performance. High unemployment, energy constraints and concerns around corruption and institutional effectiveness continue to weigh on confidence, while slow reform implementation limits the country’s ability to fully convert its institutional strengths into sustained competitiveness gains. However, the report emphasises that these economic challenges are not decisive on their own. Outcomes depend largely on how effectively domestic institutions manage risk and uncertainty. Where legal systems are transparent and reliable, firms are more willing to invest despite challenges. In contrast, weak governance, slow judicial processes and inconsistent regulation amplify risks, discouraging long-term investment and innovation. The report also highlights a link between governance and financial constraints. In countries where corruption and poor enforcement are prevalent, businesses are more likely to report difficulty accessing credit. Globally, institutional trust is deteriorating, with nearly 68% of economies recording declines in the rule of law in 2025. Despite this, courts continue to enjoy higher public confidence than political institutions. The findings suggest that for African economies, improving competitiveness will depend less on external conditions and more on internal reforms. Strengthening judicial systems, improving regulatory clarity and tackling corruption are identified as urgent priorities. Without these reforms, the report warns, many African economies risk remaining stuck in low-investment cycles as global competition intensifies.