South Africa is ranked 88th out of 153 nations, according to the 2013 Economic Freedom of the World report, which was released on Wednesday by the Free Market Foundation.
The report assists academics and economies in examining and improving economic policy.
“Economic freedom, as we define it in the index, is based on the liberal classical tradition, so we’re looking at security of property rights, security of contract, and the ability to freely exchange. It’s very much a market-orientated understanding of economic freedom,” Free Market Foundation associate Neil Emerick told CNBC Africa.
The Economic Freedom Index, which was put together in 1996, examines 150 countries around the world, scoring them from one to 10. The index also aims to become an objective element of data that researchers can work with.
South Africa has dropped 40 places in the last 30 years according to the index, but is nevertheless faring better than its African counterparts.
“South Africa is certainly one of the most free in Africa. I think we were recently overtaken by Botswana. Africa is a very interesting point at the moment,” Emerick added.
“This year we did a little study on Africa and it’s very interesting to see that of the 27 countries that we looked at, 20 of those African countries improved their economic freedom. Only seven actually reduced their economic freedom, South Africa was one of them.”
Mauritius is the only exception of all the African countries, raking sixth out of 150 countries.
“What you’re interested in is correlating whether economic freedom actually produces any outcomes that you’re interested in like economic growth, lower unemployment, longer life, health education. The good news is that economic freedom does create all those good things,” said Emerick.
“In fact this year, the author of the index did a research of the academic literature and in 400 of those surveys, two thirds of those that cited the index actually said that it correlated with a good outcome, which included economic growth but also interesting things like biodiversity and women’s rights.”
Though South Africa is the largest economy in Africa, with a GDP of roughly 384.3 billion dollars as of 2012, some of its policies lack the necessary tightening and streamlining to better contribute to the economy.
“South Africa does a lot right: we have privately-owned banks, good courts that we can trust in terms of property rights, but the bad policies, the rankings where we are particularly poor, are well known to everybody. They’re labour law, we’re also very poorly ranked in deviation of tariffs, so standardised tariffs would be a better approach,” Emerick explained.