2017 Index of Economic Freedom

South Africa

overall score62.3
world rank81
Rule of Law

Property Rights67.6

Government Integrity47.6

Judicial Effectiveness59.7

Government Size

Government Spending68.4

Tax Burden70.2

Fiscal Health70.0

Regulatory Efficiency

Business Freedom62.0

Labor Freedom58.9

Monetary Freedom75.8

Open Markets

Trade Freedom77.3

Investment Freedom40.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 54.9 million
  • GDP (PPP):
    • $723.5 billion
    • 1.3% growth
    • 2.1% 5-year compound annual growth
    • $13,165 per capita
  • Unemployment:
    • 25.1%
  • Inflation (CPI):
    • 4.6%
  • FDI Inflow:
    • $1.8 billion
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Performing far below its potential, South Africa’s economy has been stifled by political instability and a weakening rule of law. The judicial system has become vulnerable to political interference, and numerous scandals and frequent political infighting have severely undermined government integrity. Private-sector growth remains constrained by structural and institutional impediments caused by growing government encroachment into the marketplace.

Persistent uncertainties surrounding key government policies are additional impediments to private investment and expansion of the production base. Undermining overall macroeconomic stability, a combination of rising public debt, inefficient state-owned enterprises, and spending pressures contributes to increasing fiscal vulnerability.

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Background

Jacob Zuma of the African National Congress was elected president by the ANC-controlled National Assembly in 2009 and then reelected for another five years in May 2014. The ANC has dominated politics since the end of apartheid in 1994. South Africa is Africa’s second-largest economy and one of the world’s largest producers and exporters of gold and platinum. Yet many South Africans are poor, and the mining industry has been hurt by falling commodity prices and bitter labor strikes that have driven up production costs. Rates of formal-sector unemployment and crime are high, and the quality of public education is poor. Access to infrastructure and basic services is lacking.

Rule of LawView Methodology

Property Rights 67.6 Create a Graph using this measurement

Government Integrity 47.6 Create a Graph using this measurement

Judicial Effectiveness 59.7 Create a Graph using this measurement

Property rights are relatively well protected, and contracts are generally secure. The World Economic Forum’s 2015–2016 Global Competitiveness Index reports that South Africa benefits from strong institutions and a robust and independent legal framework. Corruption hampers the functioning of government, however, and enforcement of anticorruption statutes is inadequate. The process of tendering public contracts can be politically driven and opaque.

Government SizeView Methodology

The top personal income tax rate has been raised to 41 percent. The top corporate tax rate is 28 percent. Other taxes include a value-added tax and a capital gains tax. The overall tax burden equals 22.6 percent of total domestic income. Government spending has amounted to 32.4 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.0 percent of GDP. Public debt is equivalent to 50.1 percent of GDP.

Regulatory EfficiencyView Methodology

Progress in diversifying South Africa’s economic base has been limited and uneven, indicating a need for regulatory changes that would encourage more dynamic private-sector development. Labor market rigidity has contributed to persistently high unemployment rates. The government has abolished price controls on all but a handful of items such as coal, petroleum and petroleum products, and utilities.

Open MarketsView Methodology

Trade is important to South Africa’s economy; the value of exports and imports taken together equals 63 percent of GDP. The average applied tariff rate is 3.9 percent. Numerous state-owned enterprises distort the economy, and recent efforts to ban foreign ownership of land and facilitate expropriation discourage foreign investment. The financial sector is one of the largest among emerging markets and includes sophisticated banking and bond markets.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Mauritius74.70.0
2Botswana70.1-1.0
3Rwanda67.64.5
4Côte d'Ivoire 633.0
5Namibia62.50.6
6South Africa62.30.4
7Seychelles61.8-0.4
8Swaziland61.11.4
9Uganda60.91.6
10Burkina Faso59.60.5
11Benin59.2-0.1
12Mali58.62.1
13Gabon58.6-0.4
14Tanzania58.60.1
15Madagascar57.4-3.7
16Nigeria57.1-0.4
17Cabo Verde56.9-9.6
18Democratic Republic of Congo56.410.0
19Ghana56.2-6.8
20Guinea-Bissau56.14.3
21Senegal55.9-2.2
22Comoros55.83.4
23Zambia55.8-3.0
24São Tomé and Príncipe 55.4-1.3
25Mauritania54.4-0.4
26Lesotho53.93.3
27Kenya53.5-4.0
28The Gambia53.4-3.7
29Togo53.2-0.4
30Burundi53.2-0.7
31Ethiopia52.71.2
32Sierra Leone52.60.3
33Malawi52.20.4
34Cameroon51.8-2.4
35Central African Republic51.86.6
36Niger50.8-3.5
37Mozambique 49.9-3.3
38Liberia49.1-3.1
39Chad492.7
40Sudan48.8N/A
41Angola48.5-0.4
42Guinea47.6-5.7
43Djibouti46.7-9.3
44Equatorial Guinea451.3
45Zimbabwe445.8
46Eritrea42.2-0.5
47Republic of Congo 40-2.8
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