One of America’s biggest banks has an important message for South Africa

Experts from Bank of America say that if South Africa wants to draw foreign investors, it needs to show much bigger GDP growth and push through promised reforms.

Bank of America is the second-largest bank in the United States and the world by market capitalisation, just behind JPMorgan Chase.

Its South African office recently hosted foreign and local investors who wanted to understand the country’s conditions. This included a conference in Sun City, meetings with executives, and tours.

Bank of America’s experts said that foreign investors were impressed by South Africa’s world-class private businesses, but many still had reservations about putting their money in the country.

Tatonga Rusike, Chief Africa Economist for Bank of America, said that the group downgraded its GDP growth forecast for 2025 from 1.6% to 1.4%.

This comes off the back of slower-than-expected economic reforms, slow global growth and global uncertainty.

However, Rusike said that GDP growth is still on an upward trend following two years of sub-1% growth. Growth is seen at more than 1.5% over the medium term. National Treasury’s estimates are more optimistic at 1.9%.

But these growth prospects are now at risk, with the economist pointing to renewed uncertainty around the Government of National Unity (GNU).

Severe tensions have arisen between the DA and ANC after the former rejected the 2025 National Budget because it included a one-percentage-point hike in VAT over two years.

While the tensions could lead to a reconfiguration of the GNU—and not a complete breakdown—only time will tell how this would look, or how the GNU would then play out.

The DA is seen as centrist and business-friendly. If the party leaves the GNU, this could open the door for more leftist parties to enter with anti-business and more populist views.

However, it could maintain a centrist position if the hole is filled by smaller parties of a similar disposition.

Ironically, Rusike said that South Africa’s delayed budget itself wasn’t a concern to foreign investors, as the overall fiscal framework still focused on keeping debt costs from going up.

Relationship with the United States

Rusike said that South Africa’s relationship with the United States is on the back foot, which is a concern.

Although the bank has yet to analyse the recent 30% tariff the USA imposed on South Africa, the economist said it does pose risks.

South Africa’s exports to the USA account for 2% of GDP, so any increase in tariffs is a serious matter.

Access to the African Growth and Opportunity Act (AGOA) is also a factor to watch. AGOA allows South Africa duty-free access to the world’s largest economy, but is set for review in September.

However, alongside the 30% tariff announced by the USA on Wednesday, all international auto exports will also be subject to a 25% tariff. South African automobiles account for 60% of AGOA exports.

Rusike noted that South Africa is negotiating with the United States in the background, which could lead to compromises and improved relations over time.

However, this does nothing to address the global uncertainty around the tariffs, which risks keeping South Africa’s interest rates at their current level, despite lower inflation.

What foreign investors want

Michael Jacks, Head of Research in South Africa, said that foreign investors are mainly looking at GDP growth and reforms when shopping for investment opportunities in South Africa.

He said key reforms in state-owned companies are essential. Reforms in Transnet could significantly boost industrial companies.

Fortunately, many companies in South Africa are expecting strong double-digit growth over the next year. This is not necessarily due to economic growth but rather innovations, such as increased use of FinTech.

Jacks added that investors are particularly positive on telcos due to capex remaining under control and positive responses to price increases.

Looking at metals, investors are also bullish on gold. Prices are expected to remain high amidst high global uncertainty. Cash generation for gold miners is high, with returns expected to be strong.

Investors also believe that PGM prices have reached their bottom, with increases incoming due to supply shortages and low EV penetration.

Retailers are also expected to benefit from growth, even if this driven by online sales and not volume growth. Consumer credit from retailers has also been down for two years, giving them room to increase.

Bank of America strategist John Morris added that a net 80% of managers see more buys than sells in South Africa.

Many investors also wanted to meet with major retailers in South Africa, including Foschini, Shoprite, Tiger Brands, and others.

There was also much more talk about AI, with many more companies “walking the talk,” as Shoprite, Discovery, and Capitec are using AI to improve their businesses.

Morris added that foreigners were especially blown away by Capitec and Discovery, with the private sector seen in an extremely positive light despite the country’s economic struggles.