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Economic freedom in South Africa continues to decline

22 Mar 2022 - by Chris Hattingh
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The 2022 Index of Economic Freedom, released by the Heritage Foundation, has found a worldwide decline in economic freedom – with the largest decline in average scores ever measured.

The Index uses a scale from 0 to 100 and 12 categories to rank 177 countries.

Singapore claimed the top spot on the 2022 Index.

The highest ranked African nation is Mauritius, at 30th.

South Africa came in at 112th, has an overall score of 56.2, is ranked 17th among 47 countries in the sub-Saharan region and, although its overall score is above the regional average, it’s below the world average.

The country’s Fiscal Health score was exceedingly bad.

Since 2017 South Africa has recorded a 6.1-point overall loss of economic freedom, falling from the ‘Moderately Free’ category into the ‘Mostly Unfree’ category.

With an official unemployment rate of over 34% and millions of people without work, it’s clear to see the consequences that occur when a government implements policies and fosters an environment that undermines economic freedom.

As of March 2022, South Africa has also spent two years under various stages of lockdown, which will have further inhibited people’s freedom to engage in economic activity, and thus severely restricted growth.

Treasury forecasts an average growth rate of 1.8% over the next three years – but without radical changes in terms of policies that are implemented, economic freedom will continue to decline, and growth will remain effectively non-existent.

When countries have higher economic freedom, citizens, on average, live better lives.

A higher per capita income is found in countries that score better on the Index; better education, healthcare, and cleaner environments also occur.

When people are able to create wealth for themselves and their families, they are also empowered to take better care of the communities and environments around them – thus, economic freedom enables and encourages more responsible and active citizenship.

The effects of lower economic freedom are phenomena such as inflation (when governments implement regulations that inhibit the manufacturing and flow of goods and services, and devalue currencies by printing more money), increased social tensions as various interest groups try to compete and control the political levers over the economy, and an average lower quality of life as people struggle to improve their own circumstances and are forced to rely on forms of government assistance.

Grinding poverty and helplessness also occur more regularly in countries with less economic freedom.

If South Africa does not do the reform work necessary to increase economic freedom, we should expect increased political fighting, because it will ultimately matter most who one knows in government – and if one can be friendly with those players – than whether one can try to start a businesses or enterprise and create wealth for oneself.

– Chris Hattingh is Deputy Head of Campaigns at the Institute of Race Relations. He is a member of the advisory council of the Initiative for African Trade and Prosperity, and a Senior Fellow at African Liberty.

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