South Africa drops in global economic rankings as fear of investors’ exit looms

South Africa has failed to improve its position in the latest Global Economic Freedom of the World report, ranking 83rd out of 165 countries for the second consecutive year.

• South Africa ranked 83rd out of 165 countries in the Global Economic Freedom report, unchanged from last year.
• The Free Market Foundation warned that high government spending, weak policing, and rigid labour laws are holding back growth.
• Data shows the poorest in free economies earn up to nine times more than those in unfree economies.
• Experts argue that South Africa must reduce government size, secure property rights, and embrace open trade to avoid stagnation.

The result, compiled by Canada’s Fraser Institute, paints a picture of a country struggling to break free from structural weaknesses that continue to hinder growth, job creation, and prosperity.

According to Neil Emerick, Deputy Chairman of the Free Market Foundation (FMF), the result is a “sobering position in the middle that underscores the country’s lack of meaningful progress.”

“South Africa is once again ranked 83rd in the world for economic freedom, unchanged from last year and far behind the countries that are pulling ahead in growth, jobs, and prosperity,” Emerick stated, according to Business Tech.

“Unless we tackle the size of government, secure property rights, and open ourselves to trade, we’re condemning ourselves to stagnation.”

Evidence and inequality myths

The FMF emphasised that the index provides clear evidence of the impact of policy choices, encompassing areas such as taxes, investment, law and order, inflation, and trade.

Emerick highlighted how freer economies consistently provide greater opportunities for both consumers and producers.

“Free markets are just going to produce better and higher-quality outcomes than governments are able to do,” he said.

The report also sought to challenge the narrative that economic freedom worsens inequality. Emerick argued that while income shares for the poorest remain similar, the absolute income levels are far higher in free societies.

“The poorest 10% of people in free economies earn on average about $7,500 (R128,916) a year, compared to under $1,000 (R17,188) in unfree economies,” he explained.

“That’s a ninefold difference, and we know it’s true because we only need to see which direction the boats travel. People flee unfree societies for freer ones because life is better.”

South Africa’s strengths and weaknesses

While South Africa performed relatively well in areas such as sound money, trade freedom, and private banking, major weaknesses were exposed.

“Our government consumption is high, our top marginal tax rates are among the worst in the world, and that discourages our top taxpayers from staying,” Emerick said.

In terms of law and order, the country performed well in the courts but struggled in policing and enforcement, ranking 138th.

“That’s hugely important because if you fail on property rights and contract enforcement, nothing else matters. You can’t have a functioning market without those basics,” Emerick warned.

Labour regulation also remains a stumbling block. South Africa ranked 140th in hiring and firing practices, with restrictive work regulations undermining flexibility.

“The index is essentially pointing to the same problems South Africans read about in the newspapers every day. We know what we need to fix – we just need to get around to fixing it,” Emerick said.

For him, the real lesson is that economic freedom is about far more than growth statistics.

“People in freer societies are healthier, live longer, and report greater life satisfaction. If South Africans can connect the dots between freedom and their own daily lives, they might start demanding the reforms that will actually improve their prosperity.”