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- GDP (PPP):
- $704.5 billion
- 1.5% growth
- 2.4% 5-year compound annual growth
- $13,046 per capita
- Inflation (CPI):
- FDI Inflow:
South Africa’s transition to a more open economic system has been facilitated by relatively competitive trade and investment regimes, but structural reforms to diversify the economic base have been only marginally successful. Social instability is exacerbated by violent strikes and a lack of employment opportunity.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 61.9 (down 0.7 point)
- Economic Freedom Status: Moderately Free
- Global Ranking: 80th
- Regional Ranking: 7th in Sub-Saharan Africa
- Notable Successes: Trade Freedom and Monetary Freedom
- Concerns: Rule of Law and Management of Public Finance
- Overall Score Change Since 2012: –0.8
The lack of transparency constrains regulatory efficiency. Policies to sustain dynamic investment are not firmly institutionalized and occasionally are even derailed. Budget management needs to be more effective. The judicial system’s susceptibility to corruption undermines the rule of law and prospects for stable long-term development.
Jacob Zuma of the African National Congress was elected president by the National Assembly in 2009 and reelected by an ANC-dominated parliament 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, although strikes in 2014 brought platinum mining to a halt. Mining, services, manufacturing, and agriculture rival similar sectors in the developed world. Yet many South Africans are poor. Rates of formal-sector unemployment and crime are high, and the quality of public education is low. Access to infrastructure and basic services is lacking. In 2012, the government completed a National Development Plan that aspires to end poverty and reduce inequality by 2030.
Allegations of corruption among civil servants persist at all levels despite an excellent anti-corruption regulatory framework. The process for tendering public contracts is often politically driven and opaque. Responding to criticism of courts by government ministers in 2015, the chief justice and other key judges staunchly defended judicial independence. Property rights are relatively well protected, and contracts are generally secure.
The top personal income tax rate is 40 percent but will be 41 percent for 2016. 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 24.7 percent of total domestic income. Government spending amounts to 31.7 percent of GDP, and the budget is in deficit. Public debt equals about 46 percent of annual domestic output.
Establishing a business involves five procedures, and no minimum capital is required, but obtaining necessary licenses still takes over two months. Labor regulations are not applied effectively, and the labor market lacks flexibility. Although the government has eliminated most price controls, it has implemented capital controls and housing subsidies in an attempt to gain more control of the domestic economy.
South Africa’s average tariff rate is 4 percent. Imports of some agricultural products face additional barriers. State-owned enterprises operate in several sectors of the economy. Non-transparent laws continue to hinder private investment, and foreign investment faces additional restrictions that impede efficiency. The financial system has gradually been evolving, and the resilient banking sector remains relatively sound.