Countries with high levels of economic freedom have vibrant economies with a multiplicity of trading partners all over the world. That is what free markets do — they enable people to produce, trade and invest across borders without state interference or political privilege. These countries do not rely on trade favours. They are not vulnerable to the withdrawal of a single agreement. They are resilient because they are free.
SA’s policy failure
SA is not in that position. It has become dependent on a trade preference for which it no longer qualifies. The African Growth & Opportunity Act (Agoa), granted at the discretion of the US government, requires participating countries to uphold the rule of law, protect property rights and pursue broadly market-orientated policy. SA has steadily violated these conditions.
Mineral rights have been nationalised. Security of land tenure has been weakened. Employment and ownership are subject to racial quotas. Ministers have been given wide discretionary powers over licensing, procurement and investment. These interventions have eroded the legal and institutional foundations required to attract foreign direct investment and enable competitive enterprise.
Economic freedom is the fundamental right of every person to control his or her labour and property. It exists when individuals are free to exchange, contract and invest without arbitrary state interference. It requires secure rights, clear rules and limited government. Where these conditions prevail, trade flourishes through voluntary exchange and merit, not diplomatic lobbying.
SA has chosen another path. Production is discouraged, redistribution prioritised and entrepreneurship made conditional on political compliance. As a result, the economy has grown less competitive and more dependent. Agoa, originally a supplementary advantage, has become essential to maintaining certain exports. At the same time, SA’s own policies have placed its Agoa eligibility at risk.
Economic freedom and trade performance
According to the Fraser Institute’s Economic Freedom of the World report, Singapore ranks first out of 165 countries. SA ranks 94th. Singapore has no natural resources, yet it maintains high levels of economic freedom. Consequently, its trade-to-GDP ratio exceeds 340%. SA’s is just 56%.
This disparity is not accidental. Economies that protect free markets attract investment, expand production and build diverse trading relationships. SA, having dismantled many of these foundations, has become increasingly dependent and vulnerable.
That kind of dependency does not exist in countries with high levels of economic freedom. The government’s focus on preserving Agoa eligibility by diplomatic means, rather than through comprehensive economic reform, fails to confront the root of the problem.
No country should place itself in a position where the loss of a single trade agreement poses a serious economic threat. The problem is not merely that Agoa may be withdrawn. The problem is that SA lacks the economic resilience to withstand its loss. Such vulnerability arises when governments undermine the legal and economic foundations that allow markets to function and grow.
There is no substitute for economic freedom. SA must stop begging for favours and start restoring the fundamental rights to labour, property and trade. Without this the country will remain vulnerable, dependent and stagnant.
• Davie is president of the Free Market Foundation and author of “Jobs for the Jobless” and “Unchain the Child”.
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