2013 Index of Economic Freedom

South Africa

overall score61.8
world rank74
Rule of Law

Property Rights50.0

Freedom From Corruption41.0

Limited Government

Government Spending69.2

Fiscal Freedom70.5

Regulatory Efficiency

Business Freedom74.7

Labor Freedom55.6

Monetary Freedom75.8

Open Markets

Trade Freedom76.3

Investment Freedom45.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 50.6 million
  • GDP (PPP):
    • $555.1 billion
    • 3.1% growth
    • 2.7% 5-year compound annual growth
    • $10,973 per capita
  • Unemployment:
    • 24.9%
  • Inflation (CPI):
    • 5.0%
  • FDI Inflow:
    • $5.8 billion
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South Africa’s economic freedom score is 61.8, making its economy the 74th freest in the 2013 Index. Its score is 0.9 point lower than last year due to losses in half of the 10 economic freedoms including those measuring the control of government spending and freedom from corruption. South Africa is ranked 6th out of 46 countries in the Sub-Saharan Africa region, and its overall score is higher than the world and regional averages.

South Africa has been losing ground on economic freedom for five years. The economy continues to be “moderately free,” but the level of economic freedom this year is the second lowest in the country’s 19-year Index history. The foundations of economic freedom are neither well established nor strongly protected. The judicial system remains weak and vulnerable to corruption, undermining the rule of law and prospects for stable long-term economic development.

South Africa’s transition to a more open economic system has been facilitated by a relatively competitive trade regime, but structural reforms to diversify the economic base have achieved only marginal progress. With overall regulatory efficiency constrained by the lack of transparency, policies to sustain dynamic flows of investment are not firmly institutionalized. The government faces challenges in improving the effectiveness of budget management.

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Background

Jacob Zuma was elected president in May 2009 by the National Assembly. Zuma’s African National Congress has dominated politics in South Africa since the end of apartheid in 1994. South Africa is Sub-Saharan Africa’s largest economy and one of the world’s largest producers and exporters of gold and platinum. Mining, services, manufacturing, and agriculture rival similar sectors in the developed world. However, unemployment and crime are high, poverty is widespread, and public education is poor. Much of the population lacks access to infrastructure and basic services. The government aims to increase farmland ownership by black South Africans to 30 percent by 2014, but its affirmative-action mandates threaten private property rights.

Rule of LawView Methodology

Property Rights 50.0 Create a Graph using this measurement

Freedom From Corruption 41.0 Create a Graph using this measurement

The rule of law remains weak and uneven, but the legal system has gained more independence and provides relatively effective protection of property rights. Contracts are generally secure. However, the court system is slow, understaffed, underfunded, and overburdened. The courts impose undue burdens and costs on rights holders pursuing infringement cases. Corruption continues to undermine the foundations of economic freedom.

Limited GovernmentView Methodology

The top income tax rate is 40 percent, and the top corporate tax rate is 28 percent. Other taxes include a value-added tax (VAT) and a capital gains tax. The overall tax burden equals 23.8 percent of total domestic income. Government spending has increased to a level equivalent to 32 percent of GDP, and the budget balance has fallen into deficit, prompting a rate downgrade by some agencies. Public debt is about 40 percent of GDP.

Regulatory EfficiencyView Methodology

Establishing a business takes five procedures and 19 days, with no minimum capital required. The cost of completing licensing requirements has been reduced to about 30 percent of the level of average annual income, but obtaining necessary licenses still takes over 100 days. Labor regulations are not applied effectively, and the labor market lacks flexibility. Prices are generally set by the market, but the government controls the prices of certain products.

Open MarketsView Methodology

The trade-weighted average tariff rate is modest at 4.4 percent, but non-tariff barriers that include the use of anti-dumping laws undercut gains from the free flow of goods and services. Private investment continues to be hindered by non-transparent laws, and foreign investment faces additional restrictions that impede efficiency. The financial system has been gradually evolving, and the resilient banking sector continues to be sound.

Country's Score Over Time

Bar Graph of South Africa Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing South Africa to other economic country groups

Regional Ranking

rank country overall change
1Mauritius76.9-0.1
2Botswana70.61.0
3Rwanda64.1-0.8
4Cape Verde63.70.2
5Madagascar62-0.4
6South Africa61.8-0.9
7Ghana61.30.6
8Uganda61.1-0.8
9Namibia60.3-1.6
10Burkina Faso59.9-0.7
11The Gambia58.80.0
12Zambia58.70.4
13Tanzania57.90.9
14Gabon57.81.4
15Benin57.61.9
16Swaziland57.20.0
17Mali56.40.6
18Kenya55.9-1.6
19Senegal55.50.1
20Malawi55.3-1.1
21Nigeria55.1-1.2
22Mozambique 55-2.1
23Seychelles54.91.9
24Côte d'Ivoire 54.1-0.2
25Djibouti53.90.0
26Niger53.9-0.4
27Cameroon52.30.5
28Mauritania52.3-0.7
29Guinea51.20.4
30Guinea-Bissau51.11.0
31Central African Republic50.40.1
32Ethiopia49.4-2.6
33Liberia49.30.7
34Burundi490.9
35Togo48.80.5
36Sierra Leone48.3-0.8
37São Tomé and Príncipe 48-2.2
38Lesotho47.91.3
39Comoros47.51.8
40Angola47.30.6
41Chad45.20.4
42Republic of Congo 43.5-0.3
43Equatorial Guinea42.3-0.5
44Democratic Republic of Congo39.6-1.5
45Eritrea36.30.1
46Zimbabwe28.62.3
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