South Africa’s biggest area of underperformance with regard to its economic growth environment is technology, says a report from global investment banking firm Goldman Sachs.

Goldman Sachs’ economic report on South Africa entitled ‘Two Decades of Freedom’ details what advances the country has made since the start of democracy in 1994 and what challenges the country needs to overcome to further spur on growth.

Economic advances South Africa has made in the last 20 years include the likes of improved macro fiscal and monetary balances, higher foreign reserves and a rise in disposable income, says Goldman Sachs.

Meanwhile, key economic challenges the country faces include the likes of unemployment and inequality, a poor savings rate and consumer indebtedness, labour instability and education.

But more specifically, the report says that according to the Goldman Sachs ‘Growth Environment Scores (GES)’ -- which benchmark the performance of countries against parameters such as human capital, macroeconomic conditions, and political conditions -- South Africa’s “biggest area of underperformance is technology.”

Goldman Sachs in its South Africa report explains that the GES is an index “developed to measure the extent to which structural conditions and policy settings in a country are conducive to transforming the economic potential of the BRICs, next 11 and other countries into reality.”

A higher score on the index, therefore, denotes a more conducive economic environment. And it is in the areas of personal computers, internet users, internet servers, patent applications and research and development (R&D) where South Africa scores low at respectively just 1.1, 2.0, 0.3, 0.9 and 2.3.

South Korea, meanwhile, respectively scores much higher in these same areas: 7.5, 9.3, 9.9, 10 and 8.

“When we benchmark South Africa against the best-in-class growth market peer, South Korea, we identified those areas in which SA lagged by more than 5,” says the Goldman Sachs report.

The report goes on to explain, “South Africa significantly underperforms South Korea in the areas internet access, personal computers, and R&D (research and development).”

“By making improvements in these areas with large potential impacts, South Africa could show significant progress.

“Finding a way to fund and roll out computers and internet access to communities would be one way in which South Africa could address the issue,” adds Goldman Sachs.

Regarding technology adoption in South Africa, it is not all doom and gloom, though, as the country scores 10 on the GES index for mobile subscriptions: the same score as that of South Korea.

South Africa’s mobile penetration rate is well above 100%, according to researchers.

Yet, apart from a positive picture regarding its mobile market, South Africa has faced criticisms over its lack of attention to the potential of its ICT sector by other global bodies in the past.

The World Economic Forum (WEF) ‘Networked Readiness Index’, which ranks 144 economies based on their “capacity to exploit the opportunities offered by the digital age,” ranks Mauritius and South Africa at the top of its list of African countries for 2013.

Mauritius has a global ranking of 55 while South Africa ranks 70.

But despite South Africa being in the top two African countries on this index, the WEF has heavily criticised the country’s underperformance with regard to ICT adoption.

“Despite a sharp improvement in the development of its ICT infrastructure (59th)—notably in terms of international Internet bandwidth capacity (66th)—and a strong uptake by the business community (33rd), the ICT impacts (92nd), particularly the social ones (112th), remain limited,” said the WEF report.

“The perception of a lack of clear government vision (105th) to orchestrate and implement a holistic ICT strategy for the country, coupled with deficiencies in the educational system for some segments of the population (102nd), play negatively in this process and outweigh a rather positive political and regulatory framework for ICT development (21st) and pro-business environment (55th),” said the report.

The Goldman Sachs South Africa report can be viewed by clicking here.