South Africa and the Economic Freedom of the World Report 2015


EVERY year, the Fraser Institute, a free-market think-tank based in Canada, publishes the Economic Freedom of the World (EFW) Report. The report “measures the extent to which individuals within a particular country enjoy the liberty to produce, exchange, and interact with one another with minimal interference from governments.”, according to Richard J Grant, a professor of finance and economics at Lipscomb University.

Free-marketeers believe the report vindicates their view that free-markets work – that they result in individual prosperity. I too, as a pro-market South African policy analyst, view this report as evidence that only free markets will save our world.

There are many though, who disagree with us, but they object to our opinions without any credible, sensible facts to support their rejection of a free-market system.

This report, in my opinion, ought to guide politicians on what kind of policies they should pursue in order to speedily grow economies. Because at the moment, most governments around the world, choose policies that are anti-market and culminate in repression of personal freedoms.

The South African government makes these wrong choices too; and, as a result, its ranking on the EFW continues to decline. This year, it declined to an overall rating of 6.74 (out of 10). Relative to other countries, it has dropped to 96th in the economic freedom index.

These statistics aren’t startling. Because we continue to see the government interfering in the economy and its size expanding, at a huge cost to taxpayers. These interventions, have produced one of the highest unemployment rates in the world. The hard-hit are the youth, who account for more than half of the unemployed.

Meanwhile, other African countries such as Mauritius and Rwanda have improved, and continue to improve their rankings in the economic freedom index. Hence there were no surprises when I read about Mauritius’ pro-market policies in the Financial Mail days ago.

Mauritius’ corporate tax rate is just 15%, in contrast to South Africa’s 28%. It’s the best place to do business in Africa, according to the World Bank. There are no restrictions on the movement of capital. There’s no capital gains tax, donations tax or hereditary tax.

Based on these tax statistics, there is no doubt that if Mauritius continues with these pro-market policies, foreign direct investment will flow in to the country, more and more jobs will be created, and Mauritians will prosper.

South Africa needs to do the same – pursue pro-market policies to grow the economy.

But under President Jacob Zuma, it’s clear this will not happen. His government has continued its interventionist economic policies that have caused serious harm to our economy.

He does so when countries that were poor just 65 years ago, Hong Kong and Singapore, continue to hold on to their number one and number two spots in the economic freedom index. They are also among the richest in the world. While those that rank at the bottom of the index are amongst the poorest. This, is evidence that free-markets work.

The Independent Entrepreneurship Group (Ineng) will also launch the report in Cape Town this weekend, Saturday the 19th. The event will be at Friedrich Naumann Foundation, Pinnacle Building, 18th floor, Cnr Burg and Castle Road, at 11:00 AM. Our Director at Free Market Foundation, Themba Nolutshungu, will be the speaker.

By launching this report and assessing South Africa’s ranking on the economic freedom index, we hope South Africans, the government officials, the media, academics, and ordinary citizens, will hear our lone voice – that calls for the lifting of controls on the economy. Because we believe it is the only way we will surmount the socioeconomic challenges we face.

We thank all those who attended the launch of the report at Free Market Foundation. I hope those living in Cape Town will attend another launch at Ineng this Saturday. PM


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