South Africa: Investing in South Africa
According to UNCTAD’s World Investment Report 2024, FDI flows to Africa reached USD 5.2 billion in 2023, down from USD 9.2 billion recorded one year earlier. At the end of the same period, the total stock of inward FDI stood at USD 124 billion. Compared to other countries in the African continent, the potential attractiveness of South Africa is high; however, its performance is relatively weak for FDI attraction, despite progress owing to investment potential in infrastructure. According to the South African Reserve Bank, the country’s positive net international investment position (IIP) fell from ZAR 2,050 billion in June 2024 to ZAR 1,924 billion in September. This decline was due to a larger increase in foreign liabilities compared to foreign assets. The market value of South Africa’s foreign liabilities rose by 4.6%, from ZAR 6,788 billion in June to ZAR 7,101 billion in September. Traditionally, European countries are active investors in South Africa (United Kingdom, Netherlands, Belgium, Germany and Luxembourg), as well as the United States, Japan, China, and Australia. Most of the investments are directed to the financial, mining, manufacturing, transportation and retail sectors. In 2024, three energy producers announced separate green hydrogen projects in South Africa worth a combined USD 7.1 billion (UNCTAD).
South Africa has the most advanced and broad-based economy in sub-Saharan Africa, bolstered by stable institutions, an independent judiciary, a free press, a robust financial sector, and experienced local partners. It remains an attractive investment hub, with well-regulated capital markets, a strategic position for regional trade, strengths in industrial sectors, and a strong legal system. However, the country faces challenges from a "lost decade" of stagnation due to corruption and mismanagement, slow post-COVID recovery, and persistent issues like policy uncertainty, lack of regulatory enforcement, SOE financial strain, corruption, violent crime, labour unrest, inadequate infrastructure, and a shortage of skilled labour. Moreover, persistent "load-shedding," known as rolling blackouts in South Africa, poses a significant challenge to investment, as unreliable power access severely hampers economic growth and remains a primary worry for investors. South Africa imposes few restrictions on foreign private ownership and offers various incentive programs to attract foreign investment. Key legislation governing foreign ownership includes the Investment Act, the 2019 Competition Amendment Act, and the Companies Act. Foreign investors can establish domestic entities or register foreign-owned companies, typically through subsidiaries or private companies with at least one director and shareholder. While foreign companies can purchase South African assets and engage in takeovers, national security provisions allow for reviews of such transactions. The 2019 Competition Amendment Act enables blocking mergers involving foreign firms if they pose national security concerns, particularly in sectors like energy, mining, banking, insurance, and defence. South Africa ranks 59th among the 132 economies on the Global Innovation Index and 111th out of 184 countries on the latest Index of Economic Freedom. Lastly, the country scored 41/100 in the latest Corruption Perception Index (83rd out of 180 countries).
Foreign Direct Investment | 2020 | 2021 | 2022 |
FDI Inward Flow (million USD) | 3,062 | 40,948 | 9,051 |
FDI Stock (million USD) | 133,127 | 174,783 | 173,584 |
Number of Greenfield Investments* | 103 | 119 | 160 |
Value of Greenfield Investments (million USD) | 6,662 | 5,275 | 26,777 |
Source: UNCTAD, Latest available data
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Country Comparison For the Protection of Investors | South Africa | Sub-Saharan Africa | United States | Germany |
Index of Transaction Transparency* | 8.0 | 5.5 | 7.0 | 5.0 |
Index of Manager’s Responsibility** | 8.0 | 3.5 | 9.0 | 5.0 |
Index of Shareholders’ Power*** | 8.0 | 5.5 | 9.0 | 5.0 |
Source: Doing Business, Latest available data
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.
South Africa has large market potential, well developed infrastructure and a competitive domestic economy. The country's democracy is also well-established and the rule of law is observed. As a productive pole, it is the most industrialised, technologically advanced and diversified economy on the African continent.
South Africa's main assets are:
The economic stability of the country has been weakened by the strict lockdown, which has exacerbated social tensions such as widespread poverty and inequality. Investment (13% of GDP) is also at a standstill due to a lack of business confidence and the postponement of public capital expenditure linked to the diversion of funds for emergency needs.
Other problems may discourage foreign investors:
For a list of other government incentives for FDI, please visit the Department of Trade and Industry's website.
Despite these measures and a developed economy, some elements may indicate that the government is not convinced of the importance of FDI. Thus, some laws are approved without an initial analysis of the consequences they may have on certain economic sectors.
Any Comment About This Content? Report It to Us.
© eexpand, All Rights Reserved.
Latest Update: February 2025