South Africa sinks in economic freedom ranking

South Africa has continued to slide down the global rankings for economic freedom, hitting its lowest point in 2012 – ranking 93rd out of 152 countries.

The index, compiled by the Fraser Institute, measures the degree to which the policies and institutions of countries are supportive of economic freedom, covering five broad areas:

  1. Size of Government: Expenditures, Taxes, and Enterprises
  2. Legal Structure and Security of Property Rights
  3. Access to Sound Money
  4. Freedom to Trade Internationally
  5. Regulation of Credit, Labour, and Business

According to the Economic Freedom of the World (EFW) data, total economic freedom in the world has increased since 1970, with the global average score (out of 10) moving up from 5.32 in 1980 to 6.84 in 2012.

2012 is the latest year with the most up-to-date information for all the countries measured by the group.

“Economic freedom is present when individuals are permitted to choose for themselves and engage in voluntary transactions as long as they do not harm the person or property of others,” the group said.

“In order to receive a high EFW rating, a country must provide secure protection of privately owned property, even-handed enforcement of contracts, and a stable monetary environment.”

Hong Kong and Singapore were ranked as the top two champions of economic freedom in the world, with other nations such as New Zealand, Switzerland, Mauritius, and the UAE in the top 10.

Top 10 economically free nations

# Country Score
1 Hong Kong 8.98
2 Singapore 8.54
3 New Zealand 8.25
4 Switzerland 8.19
5 Mauritius 8.09
6 United Arab Emirates 8.05
7 Canada 8.00
8 Australia 7.87
9 Jordan 7.86
10 Chile / Finland 7.84

At the other end of the scale, Venezuela was ranked bottom of the pile, along with the DRC, Zimbabawe, and Argentina.

10 worst countries for economic freedom

# Country Score
152 Venezuela 3.89
150 Republic of Congo / Zimbabwe 4.58
149 Argentina 4.92
148 Algeria 5.09
147 Iran 5.10
146 Chad 5.12
145 Burundi 5.21
144 DRC 5.24
143 Myanmar 5.28
142 CAR 5.29

South Africa – ranked 93rd with a score of 6.73 – is in the third quartile of the index, along with nations such as Mexico, Tanzania, Russia, India, Ghana, and Kenya.

South Africa’s strongest performance is in the second area – legal system and property rights – where the country ranks 60th overall. However, the country’s poorest area is in the size of the government, where it ranks 122nd.

South Africa

Area Score Rank
Legal System and Property Rights 5.9 60
Freedom to Trade Internationally 7.2 69
Regulation 7.0 82
Sound Money 8.1 88
Size of Government 5.4 122

Notably, the report rates South Africa poorly for government consumption – the lowest ranked indicator for the country across all areas. This component is measured as general government consumption spending as a percentage of total consumption.

“When government spending increases relative to spending by individuals, households, and businesses, government decision-making is substituted for personal choice and economic freedom is reduced,” the EFW said.

“When government consumption is a larger share of the total, political choice is substituted for personal choice. Similarly, when governments tax some people in order to provide transfers to others, they reduce the freedom of individuals to keep what they earn.”

Change over time

The Fraser Institute has been tracking data for its rankings since the 70s, and to account for updated and changing composition of data over time, the group has chain-linked the index for comparison between years.

The chain-linked index excludes countries added since 2000.

In the chain-index, South Africa has shown a ranking decline since 1980, where it ranked its highest at 31st.

This rank declined to 57th a decade later, before picking up again at the turn of the millennium to 41st. However, the country’s economic freedom rank then continued to slip to 70th, in 2012.

Ranking aside, however, the overall economic freedom score has improved since the 80s – climbing from a low point in 1990 (5.50), to its highest point in 2000 (7.08).

South Africa’s state of economic freedom has declined since 2011.

South African scores (chain-index, adjusted)

Year Score Rank
1980 5.85 31
1990 5.50 57
2000 7.08 41
2005 7.00 56
2010 6.83 68
2011 6.90 65
2012 6.86 70

More on South Africa

How South Africans use their phones when abroad

Most expensive schools in South Africa

South Africa’s best universities

South Africa among worst countries for the elderly

Must Read

Partner Content

Show comments

Trending Now

Follow Us

South Africa sinks in economic freedom ranking