Why Africa Ranks Low in Economic Freedom

Dear Advocate of Reasoning,

The latest Economic Freedom of the World report by the Fraser Institute revealed a disturbing trend: global economic freedom has declined for the third consecutive year. Africa, in particular, fares poorly, with countries like Algeria, Libya, and Nigeria ranking near the bottom.?This means doing business and creating wealth in these countries is more difficult than their counterparts at the top of the index.

One major obstacle to economic freedom in Africa is regulatory bottlenecks. Algeria's mixed economic system, for instance, is characterised by strong government intervention and socialist influences. This has led to monopolistic practices, stifling innovation and hindering foreign investment. Also, Nigeria's complex bureaucratic procedures for commercial activities pose significant barriers, while weak enforcement of property rights further discourages investment.

Protectionism is another major challenge facing African economies. Countries like Libya and Nigeria impose restrictive import licensing systems and tariffs, which limit market access and reduce competition. These policies may be intended to protect local industries, but they ultimately harm consumers by restricting access to affordable goods and services.

To address these challenges, regional initiatives like the African Continental Free Trade Area (AfCFTA) hold great promise. By creating a unified continental market, the AfCFTA can help mitigate trade bottlenecks and promote economic diversification. However, implementation remains slow, with only 47 of 54 countries ratifying the agreement.

To accelerate AfCFTA implementation, policymakers must prioritise private-sector participation and address bureaucratic bottlenecks. This requires aligning national policies with continental goals and introducing policies that protect business growth and promote imports.?

To read more on this topic, read this piece by our in-house editorial intern, and we invite you to check out our website for more pro-freedom and thought-provoking articles.

Stay free and keep reasoning!