This article was first published by Business Day on 6 October 2026
Without ever setting foot in South Africa, one could learn from the Economic Freedom of the World 2026 annual report that SA suffers from high crime, precarious property rights, mismanagement of government resources, barriers to international trade and financial transactions, and heavy business regulation, especially with regard to labor relations. The numbers can take us even deeper, offering policymakers insight into what their priorities should be if their goal is to promote prosperity and civility.
Historical data show unambiguously that countries with greater economic freedom are more prosperous with higher average incomes and lower poverty rates. Although economic freedom is not the same as political freedom, the two are highly correlated: countries with the highest levels of economic freedom also tend to have the highest levels of personal freedom. That means you have greater freedom in how you live, thereby allowing you to be more creative and more productive in your vocation – and better informed and more prudent in your daily choices.
The benefits of economic freedom transcend culture and political structure, which is not to say that culture and its political manifestations are not important. It means that whatever the culture, and whatever political structures exist that allow for greater economic freedom, that society will be more prosperous, more harmonious, have a cleaner environment, and be less corrupt than it would have been otherwise.
This year’s Economic Freedom of the World (EFW) shows that South Africa ranks 87th out of 165 countries. That puts it a little bit below the middle of the pack, which is where it has been hovering for several years. The EFW gives an absolute score of 6.63 out of 10, which enables us to compare the current situation to those in past years. Since its peak in the year 2000, South Africa’s overall EFW score has trended slowly downward; SA is less free now than it was at the turn of the century.
The EFW index is composed of independently published data from five categories of economic freedom: 1) Size of Government; 2) Legal System and Property Rights; 3) Sound Money; 4) Freedom to Trade Internationally; and 5) Regulation. These are all manifestations of government policy and, of the five, only Area 3: Sound Money, is not scored lower than it was 25 years ago. That is good news but does not suggest that inflation and its commensurate currency weakness are not a problem.
When the inflation target is 3% rather than zero, the currency is programmed to lose value and is also less reliable as a unit of account. But when the inflation rate continues to fluctuate disproportionately above target – currently over 4% – problems with everything else in the economy are exacerbated. And while inflation problems are always central bank problems, one can look more widely for sources of events and conditions that influence Reserve Bank decisions.
It is natural first to look at Area 1: Size of Government for motivational sources of inflation. General government in South Africa annually spends over a third of final production, as measured by GDP. Further, the level of government spending exceeds the government’s willingness or ability to raise tax revenue. Government debt has been rising annually by over 5 percent of GDP in recent years. Pressure on a central bank to monetize government debt has always been a great motivator to inflate the currency.
Increased inflation also puts upward pressure on market interest rates thereby impacting economic activity generally for the worse. Increased budget deficits put governments in greater competition for loanable funds against businesses and individuals. This reduces the amount of capital available to private sector investment and operations. And as the size of government grows, it becomes harder to argue that the government puts those borrowed funds to higher valued uses than those now forgone in the private sector.
Of much greater impact on productivity and standard of living, especially compared to more prosperous countries, are the remarkably low scores for Area 2: Legal System and Property Rights. These aspects of life are foundational. Without secure private property rights, there are no other rights. To speak of “human rights” while attacking private property rights is to commit intellectual fraud, a fraud that feeds authoritarianism in both government and the mob. Without private property rights, the individual has no standing against government oppression. And in such a culture, the destiny of a citizen is that of gradual enslavement by those who covet political power.
A fatal flaw of governments is not that they do too much but rather that they fail to provide those few services and protections for which they are seen as essential. When a government fails to provide its communities with a reasonable quality of police protection and hinders the ability of citizens to protect themselves from ubiquitous crime, it becomes unseemly for a government to rationalize putting resources into any other activity. As a government grows beyond its competence, its legitimacy dissipates.
A failure to provide impartial courts and to nurture a legal system of integrity breeds disrespect for the law in general. Such a culture of disrespect can breed a loss of individual self-restraint without which policing becomes increasingly futile.
Respect for law also diminishes when laws and regulations proliferate in a manner that detracts from a citizen’s ability to lead a peaceful and productive life. Bad law has bad consequences – and too many laws makes it increasingly difficult to focus on what is important in life.
Area 5: Regulation points to broad areas of regulatory overreach that hamper business activity and destroy the labor market. The more a government tries to control, the less there will be that it can control. When people are not free to start and run their own businesses, or free to hire the best employees, or free to seek the most beneficial work, it should be no surprise that the economy is anemic and that a third of the labor force is officially unemployed. How do people survive, officially?
While governments cannot create lasting prosperity, they can create the conditions within which people’s lives and property are respected, and where people can live safely to work and build prosperous communities in mutual respect and cooperation with their neighbours. Economic freedom is an essential ingredient in all of this.
