Foreign investors are still keen on South Africa – here’s why

 ·29 Apr 2024

South Africa may face several headwinds, but global investors are still ‘moderately postive’ on the country.

According to PwC’s latest Economic Outlook, South Africa received close to R100 billion in foreign direct investment (FDI) in 2023, equalling 1.4% of GDP.

Although many expect South Africa’s investment outflows to be larger than inflows amid the widespread negative sentiment amongst consumers and business leaders, the nation has seen net FDI inflows (inflows minus outflows) almost every year since the global financial crisis.

Foreign investors are positive about South Africa’s world-class financial services and communication industries, deep capital market, strong tertiary institutions, natural resources, geographical location, and a certain level of political and policy stability.

The perception of non-residents for South Africa’s public governance and business ecosystem is ‘moderately positive,’ according to nation branding experts Bloom Consulting.

PwC said that this data shows that South Africa is near the middle of the pack among countries regarding international perceptions.

In addition, the Venture Capital & Private Equity Country Attractiveness Index 2023 produced by the IESE
Business School ranked South Africa 66th out of 125 countries, placing South Africa in similar territory with Malta, Croatia and Slovakia.

“Despite its challenges, the South African economy is more diversified and stable compared to many other African economies,” said Olusegun Zaccheaus, PwC West Africa Strategy& Leader.

“The country has a very strong financial services and deep capital market, which is more sophisticated than most markets in Africa.”

“South Africa’s banking industry offers clients access to a comprehensive suite of financial instruments and services alongside a robust banking regulatory framework that ensures the safety and soundness of financial institutions and their clients.”

Data from the SARB shows that the cumulative value of foreign liabilities (inward investment stock) totalled nearly R3 trillion in 2022 (the latest data).

The manufacturing industry holds the largest share, accounting for 38.5% of liabilities, followed by mining (24.2%) and financial services (20.0%)

“South Africa’s factory sector is home to production facilities owned by some of the world’s largest producers of vehicles, food products and building materials, amongst others,” said PwC.


To understand the economic benefits of FDI, PwC looked at the contribution of R5 billion brownfield capital investment in a local automotive manufacturing facility.

The investment updates the existing factory to produce a new model line.

With 58% of the money spend locally, it would create R3.5 billion in additional national GDP, creating/sustaining 9,000 jobs during the upgrade process and contribute R63 million to the fiscus.

“South African businesses need to be awakened to the possibilities that foreign investment offers them and the country as FDI can play a significant role in business and economic development,” said Lullu Krugel, PwC South Africa Chief Economist.

“It provides local industries and the economy with capital inflows, expansion of business into new markets, cost reduction through economies of scale, and skills enhancement of domestic employees.”

“At a macroeconomic level, FDI adds to the country’s GDP, increases employment and household income, and contributes taxes to the fiscus.”

On a company level, the advantages of FDI include the expansion of the business into new markets, cost reduction through the economies of scale and skills enhancements of domestic employees through exposure to new technologies.

What investors want

According to PwC, potential foreign investors are looking for three main things from prospective investment targets in South Africa:

“A demonstrated track record of commercial sustainability across all the systemic crises the country has experienced over the last 30 years. This can be achieved through conducting financial due diligence (FDD),” said the group.

“Demonstrating that they are well positioned to maintain their performance into the future. That means having relevance in a growth industry underpinned by strong fundamentals. This can be achieved through conducting a commercial due diligence (CDD).”

“Demonstrating capabilities that can be exported to solve emerging issues in other territories.”

Read: Upgraded shopping mall in South Africa opening next month – with a boost for government pensions

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