SA ahead of Brics nations in economic freedom

2015-02-01 15:00

South Africa has become a marginally nicer place to do business, thanks to improved labour, financial and trade freedom – and a slight improvement in corruption levels.

That’s according to the Heritage Foundation, which released its 2014 Economic Freedom Index this week and ranked South Africa 72 out of 178 countries, with an overall score of 62.6.

That’s way ahead of the regional average of 54.9 – and significantly above Africa’s biggest economy, ­Nigeria, which managed a ranking of 55.6 and is considered by the Heritage Foundation to be a “mostly ­unfree” economy.

Botswana beat us with a score of 69.8.

South Africa is also ahead of its counterparts in its Brics grouping with Brazil, Russia, India and China, which all landed in the “mostly unfree” category.

Brazil achieved a score of 56.6, India 54.6 and China and Russia 52.7 and 52.1, respectively.

The foundation defines economic freedom as the right of every person in a country to control his or her own labour and property.

Societies it adjudges to be economically free give ­people the opportunity to work, produce, consume and invest as they see fit.

Essentially, economic freedom means less state ­intervention, and allowing open and free market systems.

To compile its index, the foundation examines things such as open ­markets, regulatory efficiency, the rule of law and state spending.

The index for 2014 revealed countries with higher levels of ­economic freedom substantially outperformed the stragglers when it came to ­economic growth, per capita incomes, healthcare, ­education, protection of the environment, reduction of poverty and its residents’ overall ­wellbeing.

South Africa’s score is essentially unchanged from last year, with a 0.1-point gain reflecting slight improvements, the foundation ­reported.

On the downside, the country’s performance was hampered by ­declining investment and business freedom and the management (or mismanagement) of government spending.

The SA Institute of Race Relations (SAIRR) is concerned about the country’s overall score and ranking, saying this brings it “uncomfortably close” to the minimum score within the moderately free category.

The institute believes South Africa could easily slip into the “mostly unfree” category – that’s for countries that score below 60.

SAIRR CEO Frans Cronje said: “If the current interventionist thrust in policy persists, the downside risk is South Africa’s ranking could dip below 60. We would then be classified as a ‘mostly unfree’ economy.”

The trend seems to suggest, though, South Africa is steadily getting better.

For the past nine years, South Africa’s score has ­always been between 60 and 65 (see graphic) and in fact has shown signs of improvement since 2013, when its score was 61.8. That was the lowest score it received.

Way down at the bottom of the table are countries ranked as “repressed”, because they scored between 40 and 49.9. North Korea ranked last, preceded by ­Cuba, Venezuela and Zimbabwe.

It remains to be seen whether a thawing of economic and political relations with the US will bump up Cuba’s ranking in the next report.

Hong Kong, Singapore, New Zealand, Austria and Switzerland were the top five freest economies.

Hong Kong’s overall score of 89.5 was a drop of 0.5 from the 2013 survey – because, the Heritage Foundation reported, of a “higher level of perceived corruption that outweighs small improvements in business freedom, labour freedom and fiscal freedom”.

SA’s economic freedom score

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