Money spent on politicians could be used for service delivery needs, say economists

South Africa’s economic decline – evident to most people who live here – has been confirmed by the 2022 World Economic Freedom Report, which shows the country’s ranking has declined from 93rd to 99th out of 165 nations assessed.

SA’s declining economic freedom is because of the high unemployment rate and rising taxes and reflects people’s individual freedom dragged down according to economists.

The report, compiled by the Fraser Institute of Canada and released by the Free Market Foundation (FMF), charted South Africa’s precipitous decline from the heady days of 2000, when SA ranked as high as 47th.

Economic freedom is defined as the fundamental right of every human to control his or her own labour and property, in an economically free society where individuals are free to work, produce, consume, and invest in any way they please.

According to FMF director Eustace Davie, the deterioration in the economic freedom was clearly visible and mass unemployment was a particularly significant and tragic consequence of that deterioration.

Efficient Group chief economist Dawie Roodt said that, as the economic freedom of the country increased, so would all other good things as well, such as lower unemployment and poverty. But in this case it was otherwise.

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“Economic freedom is a proxy for things like lower unemployment in a better country, so we want more of that which correlates with all other good things in an economy,” he said.

FMF associate Neil Emerick said SA was a lively destination for investment but its large government, closed economy and overregulation held it back from realising this potential. Roodt said the ideological approach of the South African government was “exactly the opposite” of economic freedom.

He said the ANC, with its tripartite alliance partners, believed in the importance of the state and the collective but not individual freedom.

“They all believe in big state-owned enterprises, large government and government making big decisions which showed it is not the individual who matters but the state,” he said.

“The consequences are what we see: high unemployment and high poverty. The main issue in SA is political which undermines wealth creation which results from low unemployment.”

Money spent on ‘maintaining politicians’

In terms of SA’s government’s continued belief, it can solve the country’s problems by spending more, while state-owned entities (SOEs) kept receiving billions of rands in bailouts.

Independent economist Professor Bonke Dumisa said the money spent on “maintaining all these politicians” was the money which could have been better used in optimising service delivery needs.

Dumisa said SA had far more national Cabinet ministers than the UK or US, yet SA had a far lower revenue base than those countries.

“It is worse when we start taking into consideration the other tiers of government like the provincial governments and the local government structures,” he said.

“Even with SOEs they were there as the deployment centres for political cadres and other beneficiaries of various forms of patronage.”

The Fraser Institute coordinator of the Economic Freedom Network Fred McMahon said that when jurisdictions increased taxes and regulations, the public became less economically free, which meant even slower economic growth and less investment.

Antswisa Transaction Advisory CEO and chief economist Miyelani Mkhabela said economic indicators plummeted with economic growth, unemployment rate, inflation, business confidence and consumer confidence practical signs the economy needed an economic strategy to rescue it from recession and unexpected unemployment rate.

Mkhabela said SA had capacity to create more jobs but had a lower-performing industrial base and should focus on building the economy in major industries such as automotive, chemicals and electronic sectors.

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“What is less well known is that 50 to 60% of the total workforce in industrial nations or developed countries work in small and medium-sized enterprises,” he said.

“South Africa needs to refocus on a winning strategy to reconstruct the business sector as it will help create more jobs needed.”

– lungas@citizen.co.za