South Africa was gradually increasing the index of economic freedom …



South Africa ranked 99th out of 178 countries in the 2021 Economic Freedom Index report published by the American think tank The Heritage Foundation – up from 106 in 2020 – but remains in the “mostly nonfree” category for the third time in a row.

With an improved economic freedom score of 59.7 (out of 100) compared to last year, South Africa fell slightly short of placing in the “moderately free” category by 0.3 points.

“South Africa’s upward movement in terms of the freedom index is good news,” said Bonang Mohale, president of Business Unity South Africa (Busa), who adds that this is especially true given the slow deployment of the vaccine in the midst of the pandemic.

Still below the investment category

“The rating agency Moody’s had already lowered us below the investment grade. As we speak, we are three notches below the investment grade.

“We are [also] just put our arms around the lost nine years of state capture, ”says Mohale.

The report covers the second half of 2019 and the first half of 2020 and measures economic freedom according to four main pillars:

  1. Rule of law: property rights, integrity of government, judicial efficiency;
  2. Size of government: public expenditure, tax burden, fiscal health;
  3. Regulatory efficiency: freedom of business, freedom of work, monetary freedom; and
  4. Open markets: commercial freedom, investment freedom and financial freedom.

According to the report, South Africa’s new ranking is mainly attributed to the solid improvement in judicial efficiency which stands at 57.1 points (2020: 38). Although the country’s judicial processes are known to be reliable, the courts are understaffed and understaffed.

To further climb the ladder of economic freedom, the government will have to “prioritize improvements in the justice system and deal with persistent labor market rigidities that trap more than a third of workers in the informal economy,” suggests The report.


Labor market change is necessary, and it should not hurt
South Africa does not emerge from unprecedented economic shock

Mohale nevertheless sees the improved ranking as “good news”, given that almost two weeks ago Statistics South Africa released figures showing the country has experienced 1.2% GDP growth.

“This being the successful second quarter means that we are technically out of a recession [for] now. But sadly, the 1.2% GDP growth does not even touch the sides to cope with our stubbornly high unemployment levels, which then lead to increasing levels of poverty and inequality.

“But what should concern most of us is the fact that this positive GDP growth and this upward movement in our freedom index does not take into account the two weeks of rampant looting in July and the Cyberattack from Transnet, which will most certainly reverse these gains in the third quarter, ”says Mohale.

Read: Unemployment in South Africa is much worse than a bloodbath

South Africa ranks ninth out of 47 countries in the sub-Saharan Africa region, a score above the regional average. However, Mauritius takes first place in the regional ranking, with an overall score of 77. This places it in the “mostly free” category with a global position of 13.

Singapore occupies the first position for the second time in a row, making its economy the freest in the 2021 index.

New Zealand replaced Hong Kong in second place, with Australia, Switzerland and Ireland completing the list of the top five economically free countries.

Countries like Iraq and Libya were not ranked due to their persistent lack of data.

Palesa Mofokeng is a Moneyweb intern.



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