In 2023, under President Cyril Ramaphosa, South Africa ranked 94th out of 165 countries for economic freedom, its lowest ranking since 1994, according to the World Economic Freedom Report. (Leon Sadiki/Bloomberg via Getty Images)
In a recently published policy charter, the liberal think tank Free Market Foundation called for the Government of National Unity (GNU) to be smaller than the previous administration.
The charter, titled “Freedom First: South Africa's Policy Agenda for the 2024-2029 Parliamentary Term”, charts a path for the new government, including proposed policy changes that will benefit the poor, the unemployed, the private sector and South Africa's economy in general.
Martin van Staden, head of policy and lead author of the charter, said the charter was based on findings from the Economic Freedom of the World Report (EFW), which showed South Africa ranking 94th out of 165 countries in economic freedom in 2023, its lowest ranking since 1994. In 2000, it was ranked 47th.
Van Staden said this showed South Africa was “steadily heading in the wrong direction”.
The EFW report found that countries with free markets have richer citizens.
“Countries with freer markets are better off for the poor than countries where the government plays an active role in the economy,” he said.
Recommendations from the FMF aim to propel South Africa towards the top of the EFW rankings by supporting economic and human prosperity, which often involves reducing government intervention.
The size of government is a top priority among the Free Market Foundation's recommendations, Van Staden said, advocating for a large increase in the private sector wage bill and a large reduction in the public sector wage bill.
This could be achieved by reducing the number of ministers and deputy ministers, he said.
“Our bloated cabinet should be reduced from around 30 ministers,
“Currently, the number of deputy ministers has been reduced to around 10 ministries, and in ministries where it is not strictly necessary, the number of deputy ministers has been significantly reduced,” he said.
Van Staden also said non-standard taxes should be phased out because they make the cost of living higher for ordinary consumers, and that there should be a moratorium on further tax increases for the remainder of this parliament's term.
Furthermore, rather than introducing taxes, governments should address revenue shortfalls through self-financing, reducing civil servant salaries, and limiting government obligations.
“The reality is that you can't create economic growth by taking scarce money from the economy and giving it to politicians and bureaucrats.”
The foundation also advocates for greater privatization, allowing communities and businesses to compete with government agencies.
“The first thing is to ensure that communities and businesses can freely compete with existing state-owned enterprises like Eskom and Transnet. These companies should not have any legal or regulatory monopoly.”
“If Eskom can generate electricity from coal then the private sector should be allowed to do so. If Transnet can build and operate railways then the private sector should be allowed to do so,” he said.
Regarding state-owned enterprises that have been severely affected by corruption, financial mismanagement and poor governance, the Free Market Foundation recommended that governments should gradually reduce their stakes in state-owned enterprises so that they are left with minority stakes.
Van Staden said there should be a five-year moratorium on the creation of new state-owned enterprises.
The Foundation raised issues relating to the legal system and property rights, as well as calling for greater independence and the role of the South African Reserve Bank, and freedom of international trade as a mechanism for boosting the economy.
Van Staden said regulations needed to be considered to tackle the high unemployment rate in the country.
“There are policy barriers. “Inequality between employers and prospective employees. That is why the Free Market Foundation proposes allowing jobseekers to avoid harmful labour laws of their own volition through the introduction of a Job Seeker Exemption Certificate.”
Regarding the controversial National Health Insurance, which was passed into law before the May 29 election, van Staden said the government should not interfere in individuals' health care decisions. He said the bill should be repealed and medical aid schemes should instead be allowed to offer lower-cost products, something the law prohibits.
“Health schemes and health insurance should be able to offer low-cost products to help the poor access quality private health care. Currently, the law prohibits schemes from having low-cost benefit options.”
Additionally, Van Staden said the controversial Basic Education Amendment Bill should be repealed and governing bodies should regain the power to set policy for public schools. The government should not interfere with parents who home-school their children and the bill should not apply to private schools.
As GNU takes shape, the foundation's chief executive officer, David Ansara, said the government needed to consider liberal policies if it wanted to govern South Africa in a new way.
“I think over the last 30 years we've witnessed very ideological policies by the ANC government – socialism, redistribution policies, very high taxes, protectionist policies – and that has had real-world consequences.”
“Whether we like it or not, we need to reduce the deficit, reduce the size of government spending and the debt burden, and liberalize the labor market, because we cannot continue for long with millions of people willing to lose their jobs.”
