Despite facing various challenges, South Africa continues to attract attention from global investors, who maintain a “moderately positive” outlook on the country’s economic prospects.
According to PwC’s latest Economic Outlook, South Africa welcomed close to R100 billion in foreign direct investment (FDI) in 2024, representing 1.4% of its GDP. This influx of investment comes amid concerns about larger outflows from the country due to negative sentiment among consumers and business leaders.
Foreign investors are drawn to several key factors in South Africa, including its world-class financial services and communication industries, robust capital market, strong tertiary institutions, abundant natural resources, strategic geographical location, and a certain level of political and policy stability. Bloom Consulting’s analysis suggests that non-residents view South Africa’s public governance and business ecosystem as moderately positive.
PwC’s findings position South Africa in the middle among countries in terms of international perceptions. The Venture Capital & Private Equity Country Attractiveness Index 2023 ranks South Africa 66th out of 125 countries, placing it in similar territory with Malta, Croatia, and Slovakia.
Olusegun Zaccheaus, PwC West Africa Strategy& Leader, emphasises South Africa’s economic diversification and stability compared to many other African economies. He highlights the nation’s strong financial services sector and deep capital market, which are more sophisticated than most markets in Africa.
The cumulative value of foreign liabilities in South Africa, as reported by the SARB, reached nearly R3 trillion in 2022, with the manufacturing industry holding the largest share at 38.5%, followed by mining (24.2%) and financial services (20.0%).
Lullu Krugel, PwC South Africa Chief Economist, underscores the importance of foreign investment for local industries and the economy as a whole. FDI brings capital inflows, market expansion, cost reduction through economies of scale, and skills enhancement for domestic employees.
Potential foreign investors seek assurance of commercial sustainability, relevance in growth industries, and exportable capabilities from prospective investment targets in South Africa. Conducting thorough financial and commercial due diligence is crucial in demonstrating these attributes and attracting foreign investment.
In summary, South Africa remains an attractive investment destination despite challenges, offering opportunities for both investors and local businesses to thrive in a dynamic economic landscape.
