November 1, 2000

November 1, 2000 | News Releases on Foreign Aid and Development

Economic Freedom Advances in Sub-Saharan Africa, Survey Shows

WASHINGTON, NOV. 1, 2000-One of the poorest regions in the world, Sub-Saharan Africa, became economically freer during the past year, The Heritage Foundation and The Wall Street Journal report today in their annual "Index of Economic Freedom."

The survey showed 18 of the 36 African countries rated granted their citizens more economic liberty, while 11 imposed new restrictions and seven stayed the same. Sub-Saharan Africa posted the second biggest gain of the five regions graded in the 2001 Index-behind North America/Europe and ahead of Latin America/Caribbean.

"This represents an important reversal for a region that has seen economic freedom decline every year since the Index was first published in 1995," note Index editors Gerald P. O'Driscoll Jr., director of Heritage's Center for International Trade and Economics, Kim R. Holmes, a Heritage vice president and director of the think tank's Davis International Studies Institute, and Melanie Kirkpatrick, assistant editorial page editor of The Wall Street Journal.

Two African nations tied for most-improved status: the Ivory Coast-which lowered tariffs, reduced inflation and cut government spending-and Mozambique, which, among other improvements, lowered tax rates. Less government regulation helped Cape Verde improve as well, and Rwanda is now "mostly unfree."

But Sub-Saharan Africa remains by far the least economically free of all regions: None of the 36 countries graded received a "free" rating, and only five- Benin, Mali, Botswana, Namibia and Mauritius-were found to be "mostly free." The decline in Zimbabwe's score caused it to slip into the "repressed" category, where it joined Guinea-Bissau. South Africa's score worsened as well, with increased government regulations bumping it to the "mostly unfree" category, along with 28 other African nations.

The editors suspended grading for six African nations- Angola, Burundi, Congo, Sierra Leone, Somalia and Sudan-due to the unreliability of data caused by either their civil unrest or "prolonged state of anarchy." They will be included in future editions once "political stability returns."

Many African nations saw their scores improve as a result of their success at lowering inflation, the editors note. The most dramatic example is Mozambique (from 45 percent in 1997 to 0.6 percent in 1999), but others managed to stabilize their currencies as well, including Benin, Cameroon, Congo, Ghana, Kenya, Mali, Nigeria, Rwanda, Tanzania and Togo.

The Index's findings also show the folly of linking economic growth in poor countries with foreign aid from industrialized nations. "The people of Angola, Chad, Haiti and Ukraine are not poor because wealthy people in the West do not share their riches," the editors write. "They are poor because their governments pursue destructive economic policies that depress free enterprise or allow corrupt practices to derail the rule of law."

The Index ratings reflect an analysis of 50 different economic variables, grouped into 10 categories: banking and finance; capital flows and foreign investment; monetary policy; fiscal burden of government; trade policy; wages and prices; government intervention in the economy; property rights; regulation; and black-market activity. Countries are rated one to five in each category, one being the best, five the worst. These ratings are then averaged to produce the overall Index score.

Over the years, the Index of Economic Freedom has emerged as a reliable indicator of national prosperity. The report notes a strong relationship between economic freedom and per capita income. World Bank data show that per capita income for "mostly unfree" or "repressed" economies averaged about $2,800 in 1998-a figure that quadruples to $11,054 for "mostly free" economies and doubles again (to $21,206) for "free" economies. "Countries with the most economic freedom also have higher rates of economic growth and are more prosperous than those with less economic freedom," the editors observe.

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