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SA’s economic freedom plummets

File picture: Ronen Zvulun

File picture: Ronen Zvulun

Published Sep 15, 2016


Johannesburg - South Africa’s economic freedom ranking has slipped several notches, the 2016 survey has found.

The latest Economic Freedom of the World: 2016 Annual Report, released on Thursday by the Free Market Foundation in conjunction with Canada’s Fraser Institute, shows SA has slipped to position 105 out of 159 countries, down from 93 a year ago.

FMF director Temba Nolutshungu notes South Africa has steadily lost ground in the rankings.

“It is tragic that a country ranked 42nd in the world in 2000, just outside the top 25 percent of countries in the world, should have fallen 63 places in the rankings in 15 years to a point where it now ranks in the bottom 35 percent.

“It is unusual for a country’s scores in every economic freedom component to decline from one year to the next as South Africa’s has done between 2013 and 2014,” says FMF director Eustace Davie. He points out that the only other countries to have hit bigger drops in the past 15 years are Argentina, and Venezuela.

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“Studies have shown that there is a significant, though not immediate, correlation between economic freedom, economic growth and human welfare, so a steady and dramatic decline in economic freedom in the country should not be taken lightly. It is time for government policy to start taking the country in the other direction – towards economic freedom, high growth, a high demand for labour, prosperity and justice for all,” says Nolutshungu

Hong Kong has again topped the index, followed by Singapore, New Zealand, Switzerland, Canada, Georgia, Ireland, Mauritius, and United Arab Emirates. Australia and the United Kingdom tied for 10th.

The 2016 report was prepared by James Gwartney, Florida State University; Robert A. Lawson, Southern Methodist University; and Joshua Hall, West Virginia University.

It is based on data from 2014 (the most recent year of available comparable data) and measures economic freedom (levels of personal choice, ability to enter markets, security of privately owned property, rule of law, etc.) by analysing the policies and institutions of 159 countries and territories.

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The 10 lowest-ranked countries are: Iran, Algeria, Chad, Guinea, Angola, Central African Republic, Argentina, Republic of Congo, Libya and Venezuela. Some countries such as North Korea and Cuba can’t be ranked due to lack of data.

Research in peer-reviewed academic journals shows people living in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer lives.

For example, countries in the top quartile of economic freedom had an average per-capita gross domestic product of $41 228 in 2014, compared to $5 471 for bottom quartile nations.

Moreover, the average income in 2014 of the poorest 10 per cent in the most economically free countries ($11 283) dwarfed the overall average income in the least free countries ($5 471). And life expectancy is 80.4 years in the top quartile of countries compared to 64 years in the bottom quartile.

The Fraser Institute produces the annual Economic Freedom of the World report in cooperation with the Economic Freedom Network, a group of independent research and educational institutes in nearly 100 nations and territories.

How SA ranked:

South Africa’s scores in key components of economic freedom (from 1 to 10 where a higher value indicates a higher level of economic freedom):

- Size of government: changed to 5.54 from 5.55 in the last year’s report

- Legal system and property rights: changed to 5.79 from 5.81

- Access to sound money: changed to 8.04 from 8.17

- Freedom to trade internationally: changed to 6.71 from 7.04

- Regulation of credit, labour and business: changed to 7.11 from 7.15


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