2014 Index of Economic Freedom

South Africa

overall score62.5
world rank75
Rule of Law

Property Rights50.0

Freedom From Corruption41.6

Limited Government

Government Spending69.1

Fiscal Freedom68.7

Regulatory Efficiency

Business Freedom74.5

Labor Freedom54.4

Monetary Freedom75.3

Open Markets

Trade Freedom76.1

Investment Freedom55.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 51.2 million
  • GDP (PPP):
    • $582.4 billion
    • 2.5% growth
    • 2.2% 5-year compound annual growth
    • $11,375 per capita
  • Unemployment:
    • 25.2%
  • Inflation (CPI):
    • 5.7%
  • FDI Inflow:
    • $4.6 billion
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South Africa’s economic freedom score is 62.5, making its economy the 75th freest in the 2014 Index. Its score is 0.7 point higher than last year, with improvements in investment freedom and freedom from corruption offset by declines in six areas including fiscal freedom, labor freedom, and monetary freedom. 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.

Over the 20-year history of the Index, South Africa’s economic freedom score has advanced by 1.8 points. Gains in market openness, measured through trade freedom and financial freedom, and the management of public finance have been corroded by declines in freedom from corruption, business freedom, and investment freedom that keep the economy “moderately free.”

South Africa achieved its highest economic freedom score in 2003 and has failed to show further progress. Its transition to a more open economic system, helped by a relatively competitive trade regime, has been undermined by the failure of structural reforms to diversify the economic base.

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Background

Jacob Zuma of the African National Congress was elected president by the National Assembly in May 2009. The ANC has dominated politics 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, formal-sector unemployment and crime are high, poverty is widespread, public education is poor, and much of the population lacks access to infrastructure and basic services. Economic policy is focused on controlling inflation and the budget deficit. Services contribute the most to GDP and employment. The government aims to increase black South African farmland ownership 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 41.6 Create a Graph using this measurement

Enforcement of anti-corruption statutes is inadequate. Public servants often do not declare their business interests as required by law. The ruling ANC allegedly charges fees for access to top government officials. The public procurement process is often politically driven and opaque, and the delivery of government services is undermined by poor administration. Property rights are relatively well-protected. Contracts are generally secure.

Limited GovernmentView Methodology

The top individual 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 27.3 percent of gross domestic income. Government expenditures equal 32 percent of GDP. Public debt amounts to around 42 percent of the domestic economy. Commodity market slowdowns and labor unrest are putting pressure on government finances.

Regulatory EfficiencyView Methodology

Incorporating a business takes five procedures and 19 days, and no minimum capital is required. However, obtaining necessary licenses still takes more than two months on average. 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 fuels and other basic products.

Open MarketsView Methodology

South Africa’s average tariff rate is 4.5 percent. Anti-dumping measures and other non-tariff barriers further impede trade. Foreign investment in several sectors of the economy is screened by the government. The evolving financial sector has been increasingly open and deregulated over the past decade and is one of the largest and most well-developed among emerging markets.

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
1Mauritius76.5-0.4
2Botswana721.4
3Cape Verde66.12.4
4Rwanda64.70.6
5Ghana64.22.9
6South Africa62.50.7
7Madagascar61.7-0.3
8Swaziland61.24.0
9Zambia60.41.7
10Uganda59.9-1.2
11The Gambia59.50.7
12Namibia59.4-0.9
13Burkina Faso58.9-1.0
14Gabon57.80.0
15Tanzania57.8-0.1
16Côte d'Ivoire 57.73.6
17Kenya57.11.2
18Benin57.1-0.5
19Seychelles56.21.3
20Djibouti55.92.0
21Mali55.5-0.9
22Malawi55.40.1
23Senegal55.4-0.1
24Niger55.11.2
25Mozambique 550.0
26Nigeria54.3-0.8
27Guinea53.52.3
28Mauritania53.20.9
29Cameroon52.60.3
30Liberia52.43.1
31Burundi51.42.4
32Comoros51.43.9
33Guinea-Bissau51.30.2
34Sierra Leone50.52.2
35Ethiopia500.6
36Togo49.91.1
37Lesotho49.51.6
38São Tomé and Príncipe 48.80.8
39Angola47.70.4
40Central African Republic46.7-3.7
41Chad44.5-0.7
42Equatorial Guinea44.42.1
43Republic of Congo 43.70.2
44Democratic Republic of Congo40.61.0
45Eritrea38.52.2
46Zimbabwe35.56.9
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