Sunday, June 27, 2010

Africa's islands of prosperity

Amidst the plentiful despair in Africa, it's useful to remember that the entire continent is not one big basket-case. Most people probably don't realize it, but Africa is home to at least two post-colonial success stories whose development has far more to do with an embrace of the free market than the work of aid organizations or self-proclaimed development experts.

The first is Botswana:

(click to enlarge)

While the photo looks like it could be from certain parts of the U.S., it's actually Botswana's capital of Gaberone. Ranked #28 in the Heritage Foundation's 2010 Index of Economic Freedom, Botswana averaged about 9% annual GDP growth from 1966 to 1999. Among the economy's features include:
  • Trade unions represent a minority of workers
  • Public debt is only 5.1% of GDP
  • There are very few tariff or non-tariff barriers to trade
  • Foreign exchange controls were abolished in 1999
  • The corporate tax rate is a low 15%
  • There are no prohibitions on foreign ownership of companies
  • Corruption is rated as the lowest in Africa by Transparency International
The other country is Mauritius:

Capital city of Port Louis

Mauritius enjoys an even higher economic freedom ranking than Botswana, clocking in at #12. Among the economy's features include:
  • Annual GDP growth averaging 5-6% of GDP since independence in 1968
  • Goal to become a duty-free island in the next four years
  • Duty has been eliminated for several products and decreased for more than 1850 products including clothing, food, jewelry, photographic equipment, audio visual equipment and lighting equipment
  • A corporate tax rate recently reduced to 15%
  • A well-developed legal and commercial infrastructure
  • Among the lowest rates of corruption in Africa
In short, both countries are getting many of the basics right, and demonstrate that African failure is not pre-ordained or inevitable. It must also be acknowledged that this is a highly simplistic picture of the two economies, and that both have benefited from historical and cultural factors. That said, their prosperity and embrace of economic freedom cannot be dismissed as mere coincidence.

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