Economic Freedom of the World report: How does South Africa stack up?

In the recently published Economic Freedom of the World annual report South Africa ranked 99th amongst 165 jurisdictions for economic freedom. As noted in a press release by the Free Market Foundation, this ranking is the culmination of a steady decline from a high of 47th in 2000. 
The report measures five broad areas which include the size of government, regulation, sound money, freedom to trade internationally and the legal system and property rights. It would be useful to see how South Africa is stacking up in these areas and what can be done to improve the country’s lot through focusing on four out of five of these areas (excluding sound money).
Size of government
Both the size of the public sector and the pay of public sector employees has long been an issue that has bedevilled the government’s finances and posed a risk to the country’s sovereign debt.  For the 2022/23 fiscal year, the government will spend about R697-billion on the salaries of its 1.3-million-strong workforce – or about 35% of the budget. Even though the government has been promising to slash the public sector wage bill, the country’s debt-to-GDP ratio is set to exceed 70% by 2023 as the budget deficit will still be at 6.8% of GDP, even if all the government’s efforts prove fruitful.
Even as government struggles to contend with a burdensome public sector wage bill and an increasing GDP to debt ratio, there is a push to expand government spending even more, with calls for a National Health Insurance (NHI) which would all but obliterate private healthcare and substitute it with an ineffective and bloated government version with poorer levels of care. In various surveys many doctors indicate that they would leave if the NHI were to be fully implemented.
These policy and fiscal directions taken by the government will and are suffocating the space the private sector operates in and replace with a government death spiral marked by inefficiency and corruption and rent seeking that will make South Africans less free and much poorer.
The legal system and property rights
Secure property rights and efficient land registration institutions are a cornerstone of any modern economy. They give confidence to individuals and businesses to invest in land, allow private companies to borrow – using land as a collateral – to expand job opportunities, and enable governments to collect property taxes, which are necessary to finance the provision of infrastructure and services to citizens.
Unfortunately, due to what can be broadly described as system inefficiencies. It’s estimated that in 2011 some 1.5 million people lived in low-cost dwellings provided to the poor by the government's so-called “Reconstruction and Development Programme” (RDP) houses, with inaccurate or outdated titles, in most cases due to transfers outside of the formal system. 
Another 5 million lived in RDP houses where no titles had yet been issued, due to systemic inefficiencies. Along with 1.9 million people in backyard shacks, 2 million on commercial farms, and 17 million in communal areas, this means that in that year around 30 million people, nearly 60% of all South Africans, lived on land or in dwellings held outside of the land titling system.
The Free Market Foundation’s Khaya Lam (My Home) land reform project, has to date (as of July 2022) enabled over 8,000 title deeds.
South African businesspeople are not sure the country provides the best place in which to commit their capital and themselves over the long term. The reasons are myriad – government regulations cost too much; inflexible labour market increases costs and hassles; essential infrastructure and institutional efficiency are deteriorating, with enormous implications for business; there have been too many changes too quickly – over 500 changes to the regulatory environment for business in the past 6 years; an inefficient, declining justice system and unconvincing approach to combating crime; an intense focus on race leads to unease concerning inclusion in ‘the new South Africa’; and race is too often seen as more important than competence.
Government does not speak with one voice on growth and jobs as the benchmark for all government actions – national, provincial and local. The result is that market friendly messages are frequently cancelled out by anti-market approaches and sentiments. Government now suffers from a growing credibility gap. Too many unfulfilled promises have led to public scepticism about ministers and their department’s capacity to deliver.
Freedom to trade internationally
The recent moratorium on import tariffs of surplus chickens from abroad (known as anti-dumping tariffs) is instructive in how global trade can make goods and services cheaper for local consumers. This then makes the government’s Localisation plans all the more baffling.
The Centre for Development and Enterprise (CDE) has published a hard-hitting critique of South Africa’s localisation policy titled ‘The Siren Song of Localisation: Why localisation policy will not lead to industrialisation’. It warned that localisation could raise the cost of doing business, reduce export competitiveness and constrain future development. 
CDE Executive Director Ann Bernstein argues that localisation is an anti-export strategy, highlighting the fact that imports are critical not only for development but also to support innovation and exports, owing to integrated global supply chains and the need for imported capital goods to support the export of manufactured products
Professor Lawrence Edwards, a co-author of the report argues: “Given the strong link between imports and exports and given that there are no examples of successful industrialisers who have not exported a very large proportion of their output, it is very hard to see how a deliberate strategy of reducing imports is appropriate for South Africa.”
If South Africa is to move up the rankings of the EFW Index in the coming years and become a freer and by consequence more prosperous society, our country’s stakeholders ranging from the public to civil society and business, government and labour would do well to pay attention to the data in the report and the broad areas that the report measures. It is no coincidence that Mauritius, Africa’s freest country and in the top ten in the report has a per capita income (in PPP dollars) almost double (22,390 PPP Dollars) that of South Africa (the next best country at 11,870 PPP Dollars).
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