South Africa’s latest ranking in the Economic Freedom of the World index is not a statistic to be dismissed lightly. It serves as a mirror reflecting decades of policy decisions that have progressively restricted the opportunities for ordinary people to improve their lives.
In the 2026 report, released a few weeks ago by the Free Market Foundation in collaboration with Canada’s Fraser Institute, South Africa fell to 87th place out of 165 jurisdictions. Our overall score stands at 6.63 out of 10. We have slipped from 83rd the previous year and, more tellingly, we are less free today than we were at our peak around the year 2000.
This is not an abstract ranking. Economic freedom measures the extent to which individuals can make their own decisions regarding work, trade, investment, and exchange without excessive interference. The index assesses five areas: the size of government, the legal system and property rights, sound money, freedom to trade internationally, and regulation.
Only sound money has remained roughly steady compared to a quarter of a century ago. Elsewhere, the trend has been downward. Government spending consumes more than a third of GDP and routinely exceeds revenue. Labour regulations remain among the most rigid. Property rights and the impartial enforcement of contracts continue to face pressure.
These are not minor technicalities; they are the rules that determine whether a young person in a township can open a spaza shop, employ a helper, or expand without being overwhelmed by compliance costs.
The evidence linking economic freedom to prosperity is unequivocal. Countries that score higher like Mauritius, Seychelles, Cabo Verde in the African context or Costa Rica AND Chile if one look further abroad, enjoy higher average incomes, lower poverty rates, longer life expectancy, and greater personal freedom.
This relationship holds across cultures and political systems. When people are free to own property, trade, innovate, and retain the rewards of their efforts, investment follows, productivity increases, and living standards improve. Conversely, when that freedom is restricted, growth stagnates and unemployment becomes structural.
South Africa’s experience confirms this pattern. Real GDP per capita has increased only modestly since the early 1990s, while several African peers that improved their economic freedom scores have more than doubled their average incomes over the same period. We started off richer than most of them but have been overtaken in relative dynamism by countries that regarded liberty as a practical foundation rather than a secondary concern.
The problem is not a shortage of entrepreneurial energy among South Africans. From informal traders to small manufacturers, millions already demonstrate daily the capacity for discovery and problem-solving that economists of the Austrian School identified as the engine of progress. The problem lies in a policy environment that actively suppresses that energy.
Labour laws designed for large, organised workplaces impose costs that small employers cannot absorb. Licensing requirements, sector-specific interventions, and the constant threat of new regulatory burdens increase the cost of formal employment.
An expansive state claims an ever-larger share of the social product, crowding out private investment and necessitating higher taxes or increasing debt. Protectionist impulses and industrial policies that favour connected interests further distort the benefits of specialisation and voluntary exchange.
These policies are based on a familiar yet flawed premise: that a small group of officials can plan the economic lives of millions more effectively than those individuals can plan for themselves. Both history and data refute this premise. Value is subjective, and no central authority can fully comprehend the constantly shifting preferences and knowledge dispersed among individuals.
Attempts to impose top-down solutions produce shortages, unemployment, and the gradual erosion of the very institutions—namely, secure property, predictable rules, and open trade—that allow cooperation to flourish.
We have travelled far enough down the road of state interventionism. The result is anaemic growth, a labour market that excludes millions from formal opportunities, and a ranking that places us behind jurisdictions that once looked to us as an example.
The alternative is not complicated, though it requires political courage. Reduce the size and scope of government so that more resources remain in private hands. Liberalise labour markets to allow employers and jobseekers to contract freely, including through time-bound exemptions that reopen opportunities for the long-term unemployed.
Secure property rights in practice. Remove barriers to trade and entry so that ordinary South Africans can compete and innovate without first seeking permission from the state. These reforms do not require perfect conditions or new industrial master plans; they require only the recognition that prosperity is created by free people interacting voluntarily, not by the state directing their lives.
South Africans are not uniquely incapable of growth. We are, however, uniquely burdened by a consensus that regards economic freedom as optional rather than essential. The latest EFW ranking serves as a clear warning. Without widespread liberalisation, we will continue to endure the predictable consequences of restricted choice: stagnant incomes, high unemployment, and the gradual constriction of opportunity.
The path to a different future lies in expanding the freedoms that evidence shows are effective. Anything less will see us continue down the road to serfdom.
Zakhele Mthembu, BA Law LLB (Wits), is Policy Officer at the Free Market Foundation.