South Africa ranks 81st among 165 jurisdictions in Economic Freedom

16 October 2024

South Africa ranks 81^st out of 165 countries and territories included in the Economic Freedom of the World: 2024 Annual Report(EFW), released today by the Fraser Institute, Canada, in conjunction with its local partner, the Free Market Foundation (FMF). This data is based on the year 2022.

Last year, based on data from 2021, South Africa ranked 85^th. 

According to the FMF, South Africa’s modest climb in the rankings, although welcome, is not cause for an overly optimistic view of the underlying fundamentals in the country. 

“Unfortunately, as is indicated in the summary scores themselves, the relative improvement in South Africa’s ranking was largely driven by comparative declines in economic freedom amongst other countries and not by meaningful reform in our own jurisdiction,” explained David Ansara, Chief Executive Officer (CEO) at the FMF. “Therefore, whilst we are happy to see South Africa climb the rankings, we would certainly prefer gains in relation to our scores.”

Matthew Mitchell, senior fellow at the Fraser Institute and a contributor to the report said “After decades of slow but steady increases, global economic freedom peaked in 2019 but has declined in each of the three years since then, which hasn’t happened since we began measuring economic freedom more than 25 years ago.”

Economic freedom—the degree to which individuals are allowed to make their own economic choices such as what to buy, where and how to work, and how to start and run a business—is fundamental to prosperity. The index measures economic freedom through openness to trade, tax and regulatory burdens, government spending, the protection of persons and their property, and citizens’ access to sound money.

In 2022 (the latest year of available data), Hong Kong was the most economically-free jurisdiction in the world (although it’s score has declined in recent years), followed by Singapore (2^nd), Switzerland (3^rd), New Zealand (4^th) and the United States (5^th). 

The rankings of other major countries include Canada (8^th), Japan (11^th), the UK (12^th), Germany (16^th), Taiwan (19^th), Korea (32^nd), France (36^th), Mexico (65^th), India (84^th), Brazil (85^th), China (104^th) and Russia (119^th).

The 10 lowest-ranked countries are Yemen (156^th), Libya (157^th), Iran (158^th), Argentina (159^th), Myanmar (160^th), Algeria (161^st), Syria (162^nd), Sudan (163^rd), Zimbabwe (164^th) and Venezuela (165^th).

People living in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer lives.

For example, per-person GDP in countries in the top quartile of economic freedom was US$52,877 in 2022 compared to US$6,968 for bottom quartile countries.

And poverty rates are lower. In the top quartile, 1 per cent of the population experienced extreme poverty (living on less than US$2.15 per day) compared to 30 per cent in the lowest quartile. 

Finally, life expectancy is 80.5 years in the top quartile of countries compared to 64.9 years in the bottom quartile. 

“Where people are free to pursue their own opportunities and make their own economic choices, they lead more prosperous, happier and healthier lives,” Mitchell said.

The Fraser Institute produces the annual Economic Freedom of the World report in cooperation with the Economic Freedom Network, a group of independent research and educational institutes in nearly 100 countries and territories. It’s the world’s premier measurement of economic freedom, having been cited about 14,000 times and used in nearly 1,000 peer-reviewed academic studies. 

This report is authored by late-professor James Gwartney of Florida State University; and Robert A. Lawson and Ryan Murphy, both of Southern Methodist University. It also includes contributions by Matthew D. Mitchell, Fraser Institute; Kevin Grier and Robin Grier, Texas Tech University; and Daniel J. Mitchell, Center for Freedom and Prosperity. 

Here is how South Africa scored in the key components of economic freedom (from 1 to 10 where a higher value indicates a higher level of economic freedom):

Size of government: rose from 6.10 in last year’s report to 6.17

Legal system and property rights: rose slightly 6.76 to 6.78

Access to sound money: fell from 7.86 to 7.60

Freedom to trade internationally: rose from 6.42 to 6.96

Regulation: fell slightly from 6.74 to 6.73

“An analysis of these key components suggests that economic freedom remains stagnant in South Africa. Sadly, albeit predictably, this stagnation has been reflected in sluggish economic growth and accelerating unemployment,” said Ansara.

If the Government of National Unity (GNU) is to succeed, South Africa requires a fundamental change in policy direction towards economic freedom,” Ansara concluded.

In order to advance the cause for economic freedom in South Africa, the FMF has initiated its Liberty First policy agenda (libertyfirst.co.za), leveraging the insights of the EFW to make practical proposals for reform. 

Over the next five weeks, the FMF will be releasing one paper per week addressing how South Africa could improve its performance in each of the EFW categories.

Issued by Anneke Burns, FMF Publicist, 16 October 2024