The world is changing fast and to keep up you need local knowledge with global context.
With data going back to 1975, the Fraser Institute’s Economic Freedom Index provides empirical evidence of the direct correlation between the prosperity of countries and how much choice citizens have in how they may apply their energy and their money. This is reaffirmed in the just-released 2023 Index, which showed the ANC’s socialist economic policies continue to hurt the nation’s ranking on the Gold Medal of such indices – SA is down from 32nd at the turn of the century to 94th this year. Neil Emerick of the Free Market Foundation has been analysing the report for decades. He reckons it is the perfect template for Moonshot Pact political parties that can apply the data to develop a platform to campaign job-creating policies. Something which holds the key to winning the 2024 National Election. – Alec Hogg
Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.
Relevant timestamps from the interview
- 00:10 – Introductions
- 01:06 – Neil Emerick on what brought interest into the Economic Freedom Report from the Fraser Institute
- 03:09 – The South African results
- 04:17 – We’ve fallen a long way
- 06:35 – On what caused this decline
- 09:50 – The Melanie Veness interview and why big business hasn’t been speaking up on the issues
- 14:47 – It’s hard to see the upside
- 16:33 – Growing average of 1% GDP for the last ten years
- 18:12 – How do you get the message through to those who are still voting
- 19:06 – Message to the Moonshot Pact
- 20:00 – Conclusion
Transcript of the interview with Neil Emerick of the Free Market Foundation.
Alec Hogg: The Fraser Institute is well known amongst people in South Africa, particularly in the mining sector, where its measure of relative attractiveness of legislation is used to pressure bureaucrats into adjusting approach. Annually, it also compiles the Economic Freedom of the World Report. Neil Emerick, from the Free Market Foundation, has been tracking this report for many years. Unfortunately, since the year 2000, South Africa’s performance has been declining. Let’s discuss the latest figures.
Neil Emerick: I was drawn to the report for the same reasons as its authors—Milton Friedman and Michael Walker from the Fraser Institute. They wanted to prove that economic freedom benefits people and economies but lacked an objective measure. Since its launch in 1996, the report (which tracks back to 1975) has evolved into an academic tool, looking at what correlates with desired economic outcomes like growth, literacy, and health.
Alec Hogg: From an outsider’s perspective, it’s evident that countries with higher economic freedoms tend to be more successful. However, South Africa is ideologically heading in the opposite direction, reflected by a poor ranking in the Economic Freedom Index. Can you elaborate on the South African results?
Neil Emerick: Certainly. The report categorises data into five sections, further divided into various parameters. This year, South Africa ranked 94th, similar to last year’s rank of 93rd. The most recent report is always the most accurate due to annual data updates.
Alec Hogg: So, we’ve fallen from 32nd in 2000. That’s a significant decline.
Neil Emerick: Exactly, it’s the trends that matter. Countries like Venezuela have experienced significant declines over short periods. South Africa has progressively worsened in economic freedom levels, as seen in rankings and score points.
Alec Hogg: When examining all the areas—legal system, property rights, access to sound money, freedom to trade internationally, and regulation of credit, labour, and business—we seem to have regressed. Do you have any thoughts on this?
Neil Emerick: Yes, all these areas have declined. The government’s large consumption relative to GDP, higher top tax rate, and complex regulations have affected our economic freedom score. Red tape has burdened businesses, while government spending has risen, affecting the investment environment negatively.
Alec Hogg: This week I spoke with Melanie Veness, Chair of the Association of Chambers of Commerce in South Africa. She calls the current state of Transnet an “epic failure.” She believes the business community needs to be more assertive, given damning data like this. Why do you think they’ve been silent?
Neil Emerick: That’s an excellent question. Possibly due to South Africa’s unique history, businesses gave the new government the benefit of the doubt for years. Yet, empirical data shows a decline. If businesses are now ready to speak up, that’s healthy for our democracy.
Alec Hogg: South Africa’s decline into the third quartile behind countries like Kenya and Uganda is alarming. We’re now closer to countries like Russia and China. Do you think we’re approaching a tipping point?
Neil Emerick: We’re not quite at the edge yet. We’re more of a middle-income laggard. Although declining, we are not in a situation similar to Venezuela at this point.
Alec Hogg: Yet, we were in the second quartile until 2014. Vanessa suggests South African business has been like a “frog boiled slowly.” Now, with Transnet’s failings affecting imports and exports, the scales have tipped. What are your thoughts?
Neil Emerick: I agree. We’ve reached a point where these issues can no longer be ignored. Businesses must be more assertive to instigate change and improve the investment environment.
Alec Hogg: It illustrates what’s happening in many other parts of the country. The contractors deployed into Transnet don’t even know how ineffective they are. Even the chief executive, Portia Derby, said we can’t improve the rails much because that would affect road traffic. It’s bewildering, to say the least. This situation underscores the frustration many South Africans feel. We know what makes societies prosperous, and yet we continue to follow the opposite path. Given your years of work in this area, how do you see things?
Neil Emerick: I think a dynamic at play might change things this year. We’ve been advising the ANC for the last 20 years about the dangers of their ideology. There were some receptive ears, but largely, the ANC has not listened. Now, opposition parties are becoming more viable, and I would like to see them adopt a pro-market stance. Parties like DA and Action SA, led by Herman Mashaba, former chairman of the Free Market Foundation, must present policies that are not just anti-ANC but offer a true alternative.
Alec Hogg: Ample evidence supports your stance, especially considering South Africa’s dismal economic performance. Our GDP has grown at an average of just 1% for the last 10 years.
Neil Emerick: Absolutely, and our unemployment levels are absurd.
Alec Hogg: Interestingly, the population has grown at 1.6%, so on a per capita basis, we’re regressing quickly. Your thoughts?
Neil Emerick: Let me share a statistic. Each year, reports publish graphs showing the benefits of economic freedom. The most compelling data relates to the income earned by the poorest 10%. In countries with more freedom, the poorest 10% earn substantially more. It’s a counter-narrative to the notion that free markets create inequality.
Alec Hogg: So how do you get that message across to those still voting for politicians who say otherwise?
Neil Emerick: That’s not my job, but these complex messages must be simplified to reach a broader audience. What should be clear is that jobs and economic growth will only occur if businesses are allowed to flourish. That should be the opposition parties’ platform.
Alec Hogg: What would you say to market-driven political leaders like Herman Mashaba and others who are more open society-driven than the ANC and EFF socialists?
Neil Emerick: The first thing would be to acknowledge that we can learn from other countries. South Africa’s problems are internal, not external. These are choices made by the government of the day. So, my message would be: choose the right policies, understand them, take them to the voters and persuade them that this is the way forward.
- Mashaba: Decriminalise prostitution, commercialise ESKOM, bury BEE… – and the “Better Devils” of the Multi-Party Charter…
- Worst Storm Surge in 20 years leaves SA’s coastal towns battered…
- Piet Viljoen cheers the end of suddenly departed Naspers CEO, Bob “40% value destroyer” van Dijk
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.