2018 Index of Economic Freedom

South Africa

overall score63.0
world rank77
Rule of Law

Property Rights67.7

Government Integrity45.4

Judicial Effectiveness65.9

Government Size

Government Spending68.1

Tax Burden62.5

Fiscal Health74.6

Regulatory Efficiency

Business Freedom65.1

Labor Freedom60.1

Monetary Freedom74.6

Open Markets

Trade Freedom71.6

Investment Freedom50.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 55.9 million
  • GDP (PPP):
    • $739.4 billion
    • 1.3% growth
    • 1.6% 5-year compound annual growth
    • $13,225 per capita
  • Unemployment:
    • 25.9%
  • Inflation (CPI):
    • 6.3%
  • FDI Inflow:
    • $2.3 billion
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South Africa’s economic freedom score is 63.0, making its economy the 77th freest in the 2018 Index. Its overall score has increased by 0.7 point, with significant improvements in investment freedom and judicial effectiveness outpacing declines in scores for the tax burden and trade freedom indicators. South Africa is ranked 4th among 47 countries in the Sub-Saharan Africa region, and its overall score is above the regional and world averages.

South Africa’s economic growth has decelerated because of declining global competitiveness, growing political instability, and weakened rule of law that in 2017 caused the country’s investment-grade credit rating to be downgraded to junk status, denting investor confidence. The government must maintain macroeconomic stability while facing a combination of rising public debt, inefficient state-owned enterprises, and spending pressures. The judicial system is increasingly vulnerable to political interference, and numerous scandals and frequent political infighting have severely undermined government integrity.

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Background

South Africa has a highly developed economy and advanced economic infrastructure. The African National Congress has dominated politics since the end of apartheid in 1994. The ANC-controlled National Assembly elected Jacob Zuma to five-year presidential terms in 2009 and 2014. He cannot seek reelection. South Africa is one of the world’s largest producers and exporters of gold, platinum, and other natural resources. It also has well-developed financial, legal, communications, energy, and transport sectors as well as the continent’s largest stock exchange. Low commodity prices have weakened economic growth, and allegations of extreme corruption against Zuma have contributed to political turmoil that helped to plunge the economy into recession in 2017. Rates of formal-sector unemployment and crime are high.

Rule of LawView Methodology

Property Rights 67.7 Create a Graph using this measurement

Government Integrity 45.4 Create a Graph using this measurement

Judicial Effectiveness 65.9 Create a Graph using this measurement

Although property rights are relatively well protected and contracts are generally secure, the government increased the property transfer tax in 2017. South Africa continues to benefit from strong institutions and a robust and independent legal framework, but pervasive corruption increasingly hampers the functioning of government, and enforcement of anticorruption statutes remains inadequate.

Government SizeView Methodology

The top personal income tax rate is 41 percent. The top corporate tax rate is 28 percent. Other taxes include value-added and capital gains taxes. The overall tax burden equals 30.6 percent of total domestic income. Over the past three years, government spending has amounted to 32.6 percent of total output (GDP), and budget deficits have averaged 3.6 percent of GDP. Public debt is equivalent to 50.5 percent of GDP.

Regulatory EfficiencyView Methodology

The development of a more dynamic private sector will require changes to improve the efficiency and flexibility of the regulatory environment. Union membership has declined in recent years, but the labor market remains rigid. The government has abolished price controls on all but a handful of items, such as coal, fuel, and utilities, but needs to reform state-owned enterprises.

Open MarketsView Methodology

Trade is significant for South Africa’s economy; the combined value of exports and imports equals 60 percent of GDP. The average applied tariff rate is 4.2 percent. Nontariff barriers significantly impede trade. Government openness to foreign investment is below average. The financial system has gradually been evolving, and the resilient banking sector remains relatively sound.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Mauritius75.10.4
2Botswana69.9-0.2
3Rwanda69.11.5
4South Africa630.7
5Uganda621.1
6Côte d'Ivoire 62-1.0
7Seychelles61.6-0.2
8Burkina Faso600.4
9Cabo Verde603.1
10Tanzania59.91.3
11Namibia58.5-4.0
12Nigeria58.51.4
13Gabon58-0.6
14Mali57.6-1.0
15Guinea-Bissau56.90.8
16Madagascar56.8-0.6
17Benin56.7-2.5
18Comoros56.20.4
19Ghana56-0.2
20Swaziland55.9-5.2
21Senegal55.7-0.2
22Kenya54.71.2
23Zambia54.3-1.5
24Mauritania54-0.4
25Lesotho53.90.0
26São Tomé and Príncipe 53.6-1.8
27Ethiopia52.80.1
28The Gambia52.3-1.1
29Guinea52.24.6
30Democratic Republic of Congo52.1-4.3
31Malawi52-0.2
32Cameroon51.90.1
33Sierra Leone51.8-0.8
34Burundi50.9-2.3
35Liberia50.91.8
36Niger49.5-1.3
37Sudan49.40.6
38Chad49.30.3
39Central African Republic49.2-2.6
40Angola48.60.1
41Togo47.8-5.4
42Mozambique 46.3-3.6
43Djibouti45.1-1.6
44Zimbabwe440.0
45Equatorial Guinea42-3.0
46Eritrea41.7-0.5
47Republic of Congo 38.9-1.1
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