The Economic Freedom of the World 2026 annual report reveals that South Africa's economic freedom has been declining, with the country ranking 87th out of 165 countries. This ranking is based on an absolute score of 6.63 out of 10, which enables comparison with past years. The report highlights that South Africa's overall Economic Freedom of the World score has trended slowly downward since its peak in 2000, indicating that the country is less free now than it was at the turn of the century.
The Economic Freedom of the World index is composed of independently published data from five categories of economic freedom: Size of government; Legal system and property rights; Sound money; Freedom to trade internationally; and Regulation. South Africa's score in the sound money category is not lower than it was 25 years ago, but the country's inflation rate continues to fluctuate disproportionately above target, currently over 4%. This has exacerbated problems with everything else in the economy.
The size of government in South Africa is a significant concern, with general government spending over a third of final production, as measured by GDP. The level of government spending exceeds the government's willingness or ability to raise tax revenue, leading to rising government debt. This has put pressure on the central bank to monetise government debt, which can lead to inflation. Increased inflation also puts upward pressure on market interest rates, affecting economic activity generally for the worse.
The report highlights that the remarkably low scores for the legal system and property rights category are of far greater impact on productivity and the standard of living, especially compared with more prosperous countries. Without secure private property rights, there are no other rights, and the individual has no standing against government oppression. A failure to provide impartial courts and nurture a legal system of integrity breeds disrespect for the law in general.
The proliferation of laws and regulations in South Africa has also detracted from a citizen's ability to lead a peaceful and productive life. Bad law has bad consequences, and too many laws make it increasingly difficult to focus on what is important in life. The report points to broad areas of regulatory overreach that hamper business activity and destroy the labour market, leading to an anaemic economy and a third of the labour force being officially unemployed.
Economic freedom is an essential ingredient in creating the conditions in which people's lives and property are respected, and where people can live safely to work and build prosperous communities. While governments cannot create lasting prosperity, they can create the conditions in which people can thrive. The decline in South Africa's economic freedom is a concern, and policymakers should take note of the report's findings to promote prosperity and civility.
The benefits of economic freedom transcend culture and political structure, and countries with greater economic freedom are more prosperous, with higher average incomes and lower poverty rates. The correlation between economic freedom and personal freedom is also high, with countries with the highest levels of economic freedom tending to have the highest levels of personal freedom.
Key points
- South Africa ranks 87th out of 165 countries in the Economic Freedom of the World 2026 report.
- The country's economic freedom has been declining since its peak in 2000.
- The report highlights concerns with the size of government, legal system and property rights, and regulation in South Africa.
