Sud-àfrica flag Sud-àfrica: Invertir a Sud-àfrica

Inversió estrangera directa (IED) a Sud-àfrica

FDI in Figures

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 data published in UNCTAD's 2021 World Investment Report, FDI inflows decreased by 39.4% in 2020 to USD 3.1 billion, compared to the high inflow of USD 5.1 billion recorded in 2019. In 2020, FDI stocks declined to USD 136 billion compared to USD 151 billion in 2019. Data from the OECD shows that in the first half of 2021, FDI inflows reached USD 1.64 billion, up from USD 234 million year-on-year. The country has traditionally been a key investor; however, this trend has been reversed by the pandemic: outward investment was negative in 2020 (by almost USD 2.0 billion) and in H1/2021, as South African multinationals repatriated capital from abroad.
The Ramaphosa-led ANC administration encourages foreign investors as they are responsible for job creation and wealth-creating economic growth. 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. Beijing Automotive Industry holding, BMW, Nissan and Mainstream Renewable Energy have been the largest investors in recent years. In addition, the Musina/Makhado SEZ, along principal north–south route into the Southern African Development Community and close to the border with Zimbabwe, offers a strategic location to attract FDI. The country currently counts with five Industrial Development Zone (IDZ).

South Africa ranks 84th out of 190 economies in the World Bank's latest Doing Business report. The country has many attractive assets for investors such as an important demography; a diversified, productive and advanced economy; abundant natural resources; a transparent legal system, and a certain political stability. The government offers various sector-specific investment incentives, such as tax allowances to support in the automotive sector and rebates for film and television production.
However, South Africa suffers from a high crime rate, increasing social unrest (strikes and demonstrations), high levels of corruption, and structural issues in electricity supply and logistics. Investors are also worried about the lack of clarity concerning policy and structural reforms. Investment potential is hampered by legal uncertainties which discourage foreign investors, despite the promulgation of the Protection of Investment Act in December 2015, which reinforces legal guarantees for foreign investors. However, the government is working towards making South Africa a more attractive destination for foreign investment. InvestSA - a division of the Department of Trade and Industry - is currently rolling out several OSS (a single-window mechanism to coordinate and support deals by assisting with permit approvals, licensing and registration processes) across South Africa with the aim of making it a more investor-friendly country.

 
Foreign Direct Investment 201820192020
FDI Inward Flow (million USD) 5,4505,1253,106
FDI Stock (million USD) 138,562145,247136,735
Number of Greenfield Investments* 109130103
Value of Greenfield Investments (million USD) 4,8124,1153,852

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.

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What to consider if you invest in South Africa

Strong Points

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 business climate is good and state financial management is competent.
  • The country enjoys a good-sized and active stock exchange.
  • South Africa has shifted from its traditional industries to production and financial services, which are the main contributors to GDP.
  • The tourism and retail sectors have a great potential.
  • The mining sector is a major part of the economy.  It is the world's largest producer of chrome, manganese, platinum, vanadium and vermiculite. It is the second largest producer of ilmenite, palladium, rutile and zirconium. It is the world's third largest coal exporter. South Africa is also a huge exporter of diamonds and iron ore (U.S. Geological Survey).
  • The country also enjoys a strategic geographical location, that makes it an ideal hub to access the sub-Saharan markets.
Weak Points

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 (17% 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:

  • Increased labour strikes in recent years, which rating agencies have warned could further lower South-Africa's credit rating
  • Violence and corruption continue to hinder the economy, while income inequality remains high
  • Access to electricity is insufficient because of a lack of investment.
  • Lack of high-skilled labour force, high unemployment (30%), rigidity of the labour market
  • Immigration laws make the employment of foreign workers more complicated.
  • Import-export process may be difficult.
  • Economy depends on the ore prices and FDI inflows.
  • Market entry is very competitive, as the market is very mature.
Government Measures to Motivate or Restrict FDI
Nearly all business sectors are open to foreign investors. Government approval is not required and there are few restrictions on how or how much foreign entities can invest. Additionally, the Government has put in place various measures to encourage foreign investments, including simple tax rules, investment incentives, a better regulatory policy on competition and protection of intellectual property. Below are a few examples of these measures: 

  • The 12I Tax Incentive is designed to support Greenfield investments as well as Brownfield investments.
  • The Capital Projects Feasibility Programme (CPFP) is a cost-sharing grant that contributes to the cost of feasibility studies likely to lead to projects that will increase local exports and stimulate the market for South African capital goods and services.
  • The Critical Infrastructure Programme (CIP) aims to leverage investment by supporting infrastructure, thus lowering the cost of doing business. The South African Government is implementing the CIP to stimulate investment growth in line with the National Industrial Policy Framework (NIPF) and Industrial Policy Action Plan (IPAP).

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.

Bilateral investment conventions signed by South Africa
South Africa is a signatory to 50 bilateral investment treaties (BITs). To see the conventions, click here.

Find out more about Investment Service Providers in South Africa on GlobalTrade.net, the Directory for International Trade Service Providers.

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Actualitzacions: May 2022

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