South Africa is the leading African country on this year’s Legatum Prosperity Index, which analyses countries around the globe for their effectiveness in creating a climate conducive to prosperity. More than 100 countries came under scrutiny, including 19 from Africa. Rankings are based on 22 key indicators and 44 sub-indicators.
The Legatum Prosperity Index goes beyond GDP as a measure of national prosperity. It investigates and gives details of personal and policy choices that can increase the prosperity of individuals and nations around the globe – here the definition of prosperity encompasses both material wealth and quality of life.
The index is produced by the Legatum Institute, an independent policy, advocacy and advisory organisation within the Legatum investment group of companies, whose mission is to research and promote the principles that drive global prosperity. This is so that policymakers, individuals, academics, the media, and other relevant parties can better understand how prosperity is created and so implement steps towards its attainment.
Legatum derives its rankings based on the prevalence of conditions that foster prosperity in a given country – those factors that promote economic competitiveness and a better quality of life. These are known as drivers, compared to restrainers, which retard prosperity. Importantly, rankings do not indicate the actual prosperity of a country, but rather how effectively it is cultivating the practices that create prosperity.
Conclusions are drawn from statistical analysis of more than 40 years of data in fields such as sociology, economics and political science, as well as theory, experience and lessons learned from history, and life satisfaction survey data for the 104 countries.
South Africa leads the African continent in terms of drivers of economic and personal growth and wellbeing, followed by Botswana (45) and Namibia (55). These are also the only three African countries not ranked in the bottom quartile, an indication that the continent still faces many challenges. Coming in at number 38 out of 104, South Africa shares its slot with Costa Rica and Poland.
Botswana was described as well-governed and in spite of severely high levels of HIV infection, has achieved one of the world’s fastest rates of income growth, while Namibia was found to have no obvious weaknesses and one major strength, equality of opportunity.
Australia took the top spot, with Austria and Finland close behind. Yemen is last on the list, just ahead of Central African Republic, Mali and Zambia. These countries’ unfavourable ranking, and others low down the order, is due mainly to extreme poverty while there are some, such as Zimbabwe, that are affected by political instability. This hampers capital investment and consequently accumulation of wealth. Other factors include poor governance, low average life expectation, and high dependence on foreign aid.
Legatum’s senior vice-president Dr. William Inboden said, “True prosperity consists of more than money. It also includes happiness, health, and liberty. The prosperity index shows that in addition to economic success, a society’s prosperity is based on strong families and communities, political and religious liberty, education and opportunity, and a healthy environment.”
Africa’s biggest economy
South Africa, Africa’s biggest economy, achieved a ranking of 41 in economic competitiveness and 43 in comparative liveability. On the economic side the country scored particularly highly on entrepreneurship, because of the improved ease of starting a business. It also scored highly on religious life in the liveability category, indicating that South Africans enjoy high levels of both religious faith and religious freedom.
South Africa’s other strengths were in the area of education, with a population that is relatively well-educated compared to most other African countries. With its abundance of natural resources South Africa has also managed to avoid excessive dependence on revenue derived from export of commodities, as these account for just 4.1% of GDP.
A few weaknesses were identified, such as below-par commercialisation of innovation for an economy of this size – at 0.5% of GDP this is less than average. Legatum felt that the low number of R&D researchers is a possible reflection that highly-skilled professionals are at a premium, but noted that the high number of patents is positive. South Africa is known worldwide for its many ingenious inventions, such as the pool-cleaning Kreepy Krauly and the electronic device widely used during cricket and tennis games to measure the speed of the moving ball.
With regard to liveability, South Africa has benefited from a stable political environment over the past 14 years, and political rights and civil liberties are upheld. However, income levels are still low and unemployment is high. Legatum cited public health as the country’s biggest challenge, especially in the fight against HIV and Aids.
Besides religion, another factor that contributed positively to South Africa’s liveability score is the 30% proportion of women in parliament, which indicates an important role for women in society.
Several new indicators were introduced for the second index. These include the number of regional trade agreements signed, which is regarded as a driver of economic growth, as well as business ownership rate which is an indicator of entrepreneurship, and net migration, which links to levels of income and life satisfaction.
To ensure fairness, Legatum used different key drivers according to a country’s level of development. For emerging countries with average incomes of less than $10 000 per annum per person, raising incomes is a priority because it is the single strongest indicator of how content the population will be. Therefore indicators such as levels of education, commercialisation of innovation and costs of starting a business were more relevant.
The index did find, however, that many poorer countries, particularly in Africa, have high levels of wellbeing because of traditional social support through religion and the community. This compensates, to a degree, for a lower standard of living. Higher levels of optimism were also evident in these countries – many people believe that by working hard they will forge ahead in life.
For countries with per capita income of more than $20 000, continued economic growth is a focus and here the drivers include entrepreneurship, invested capital and commercialisation of innovation.
In richer countries, a key element of continued prosperity and quality of life is the move beyond material wealth and into other areas which improve life satisfaction. Drivers here include charitable giving, political rights and civil liberties, equality of opportunity, and good health.
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