Africa’s path to greater economic freedom, by Nana Fredua Agyeman


Without economic freedom, economic development is unlikely. Whether you are starting a new business, claiming ownership of land, not falling victim to corruption, or paying low and straightforward taxes that don’t swallow up most of your income, virtually every aspect of your business ‘a healthy economy are linked to economic freedom. Unfortunately, according to a new report that measures economic freedom, many African states rank among the lowest in the world.

The World Economic Freedom report, published annually by the Fraser Institute, a Canadian think tank, measures the extent to which countries’ policies and institutions support economic freedom. This is important, especially for African countries, as there is strong evidence that freer economies are richer, healthier, and grow faster than less free economies.

To rank economic freedom, the Fraser Institute’s 2021 report, which was released last month, analyzes 165 countries in five broad categories (size of government, legal systems and property rights, sound currency, free international trade, and regulation) which were further divided. into components and sub-components. A total of 42 indices are analyzed in the report.

Among the top 10 countries where the concept of self-ownership is supported in tandem with minimal government intervention in the economy, no African country was present. Hong Kong, as usual, remained in the lead, followed by Singapore, New Zealand, Switzerland, Georgia, United States, Ireland, Lithuania, Australia and from Denmark.

However, at the bottom of the EFW rankings, seven of the world’s 10 least free economies were African; Central African Republic, Democratic Republic of Congo, Republic of Congo, Zimbabwe, Algeria, Libya and Sudan.

Rankings are important because they can influence the decision-making of foreign investors and reassure or discourage those who wish to venture into African markets. However, beyond investment, the EFW report highlights the radically different outcomes between countries that have great economic freedom and those that suffer from heavy government interference.

The average GDP per capita in the countries that rank in the top quartile (that is, the twenty-five percent of the top-ranked countries) for economic freedom is $ 50,619, compared to $ 5,911 for economies ranked in the bottom quartile. Likewise, the poorest 10% of countries where citizens are the most economically free have an average income of $ 14,400. In contrast, the poorest 10% of the least economically free countries have a per capita income of $ 1,549.

The EFW report also shows that while 34.1% of the population of the least free countries live in extreme poverty (defined as living on less than $ 1.90 per day), only 0.9% of the population in the countries the best ranked. There is no doubt that economic freedom is closely linked to exiting poverty.

Interestingly, people in the freest countries tend to live 15 years longer than those in countries where government plays a significant role in the economy. As people live longer in freer economies, it’s no surprise that these states also have the lowest infant mortality rate, which is almost ten times lower than nations in the bottom quartile of economic freedom. . Among other beneficial educational outcomes, the data also reveals that enrollment, particularly at the secondary level, is much higher in the most economically free countries in the world.

A broad continental perspective of EFW data reveals that the average economic freedom score in Africa rose from 6.8 out of 10 in 2000 to 6.71 in 2019, peaking at 6.85 in 2012 (see figure 1). Looking at the data in more detail, Mauritius is ranked first in Africa, followed by Cabo Verde, Seychelles, Botswana, Uganda, Rwanda, Zambia, Gambia, South Africa. South and Nigeria. Mauritius and Cabo Verde are the only African countries in the most economically free quartile of the 165 countries analyzed in the report.

In addition, Mauritius ranks 11th in the world, ranking higher than major countries such as Canada, Japan, Germany, France and China. Sound currency, one of the indicators of economic freedom that examines such things as inflation, the freedom to own currency in foreign bank accounts, and money growth is one of the biggest contributors to the success of Mauritius where the country obtains an impressive 9.54 out of ten.

Despite the decline over time of economic freedom in Africa, all is not pessimistic for the continent. The introduction of the African Continental Free Trade Area (AfCFTA) will give African nations the boost needed to catalyze economic freedom. With reduced tariffs on up to 97% of goods and a commitment to intellectual property laws, integral components of economic freedom such as property rights and the freedom to trade internationally could significantly increase the Africa’s overall position in rankings in future reports. This will go a long way in improving the well-being of millions of people.

While the AfCFTA does not suddenly solve all of Africa’s problems, it is a step in the right direction towards economic freedom which is strongly linked to prosperity and, in turn, will help lift millions of people out. on the continent of poverty. .

Nana Fredua Agyeman is an intern at the Africa Trade and Prosperity Initiative.


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