2021 Index of Economic Freedom

South Africa

OVERALL SCORE59.7
WORLD RANK99
Rule of Law

Property Rights59.6

Judicial Effectiveness57.1

Government Integrity50.6

Government Size

Tax Burden63.9

Government Spending65.9

Fiscal Health53.4

Regulatory Efficiency

Business Freedom61.5

Labor Freedom59.4

Monetary Freedom76.8

Open Markets

Trade Freedom72.6

Investment Freedom45.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 58.6 million
  • GDP (PPP):
    • $804.7 billion
    • 0.2% growth
    • 0.8% 5-year compound annual growth
    • $12,999 per capita
  • Unemployment:
    • 28.2%
  • Inflation (CPI):
    • 4.1%
  • FDI Inflow:
    • $4.6 billion

South Africa’s economic freedom score is 59.7, making its economy the 99th freest in the 2021 Index. Its overall score has increased by 0.9 point, primarily because of an improvement in judicial effectiveness. South Africa is ranked 9th among 47 countries in the Sub-Saharan Africa region, and its overall score is above the regional average but below the world average.

South Africa’s economy remained in the ranks of the mostly unfree again this year, the third in a row after nearly a quarter of a century in the moderately free category. To regain momentum toward greater economic freedom, the government would have to prioritize improvements in the judicial system and confront persistent labor market rigidities that trap more than one-third of workers in the informal economy.

IMPACT OF COVID-19: As of December 1, 2020, 21,644 deaths had been attributed to the pandemic in South Africa, and the economy was forecast to contract by 8.0 percent for the year.

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Background

The African National Congress (ANC) has dominated politics in South Africa since the end of apartheid in 1994. Corruption scandals forced two-term president Jacob Zuma to resign in 2018. He was replaced by current President Cyril Ramaphosa, who secured a five-year term in 2019 when the ANC won the elections but also attracted its lowest-ever percentage of the vote. The government is considering land reform measures that include expropriation without compensation. South Africa has a highly developed economy and an advanced infrastructure. One of the world’s largest exporters of gold, platinum, and other natural resources, it also has well-established financial, legal, communications, energy, and transport sectors as well as the continent’s largest stock exchange. Rates of formal-sector unemployment and crime are high.

Rule of LawView Methodology

Property Rights 59.6 Create a Graph using this measurement

Judicial Effectiveness 57.1 Create a Graph using this measurement

Government Integrity 50.6 Create a Graph using this measurement

The legal system protects property rights relatively well, and contracts are generally secure. Judicial processes are competent and reliable, but courts are understaffed and underfunded. Corruption hampers the functioning of government. Public procurement lacks transparency and competitive bidding. South Africa has a robust anticorruption framework, but enforcement is inadequate, and some corrupt officials act with impunity.

Government SizeView Methodology

The top individual income tax rate is 45 percent, and the top corporate tax rate is 28 percent. Other taxes include value-added and capital gains taxes. The overall tax burden equals 28.4 percent of total domestic income. Government spending has amounted to 33.7 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.9 percent of GDP. Public debt is equivalent to 62.2 percent of GDP.

Regulatory EfficiencyView Methodology

The higher cost of obtaining electricity is a setback for new businesses. South Africa recently introduced a national minimum wage, and labor force participation was up in 2019. In 2020, despite years of poor performance, the government pledged to continue subsidizing the state-owned Eskom electricity utility for a total amount of nearly 5 percent of GDP over the next 10 years.

Open MarketsView Methodology

South Africa has six preferential trade agreements in force. The trade-weighted average tariff rate is 6.2 percent, and 176 nontariff measures are in effect. Recent cases involving attempts to ban foreign ownership of land and enable expropriation are discouraging foreign investment. Over 70 percent of adult South Africans have formal banking accounts. In 2020, temporary measures to relieve bank capital requirements were taken to support banking-sector liquidity.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Mauritius772.1
2Rwanda68.3-2.6
3Botswana67.6-2.0
4Seychelles66.32.0
5Cabo Verde63.80.2
6Namibia62.61.7
7Côte d'Ivoire61.72.0
8Tanzania61.3-0.4
9South Africa59.70.9
10Benin59.64.4
11Ghana59.2-0.2
12The Gambia58.82.5
13Nigeria58.71.5
14Uganda58.6-0.9
15Gabon58.11.4
16Senegal580.0
17Madagascar57.7-2.8
18Togo57.53.4
19Niger57.32.6
20Guinea56.50.0
21Burkina Faso56.5-0.2
22Djibouti56.23.3
23Mauritania56.10.8
24São Tomé and Príncipe55.9-0.3
25Comoros55.72.0
26Mali55.6-0.3
27Eswatini55.1-0.2
28Kenya54.9-0.4
29Guinea-Bissau54.91.6
30Angola54.22.0
31Lesotho53.5-1.0
32Cameroon53.4-0.2
33Malawi530.2
34Sierra Leone51.73.7
35Ethiopia51.7-1.9
36Mozambique51.61.1
37Republic of Congo50.78.9
38Chad50.40.2
39Zambia50.4-3.1
40Burundi49.90.9
41Equatorial Guinea49.20.9
42Liberia49.20.2
43Democratic Republic of Congo49-0.5
44Central African Republic48.8-1.9
45Eritrea42.33.8
46Zimbabwe39.5-3.6
47Sudan39.1-5.9
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