South Africa of today is one of the most sophisticated and promising emerging markets globally. The unique combination of a highly developed first-world economic infrastructure and a huge emergent market economy has given rise to a strong entrepreneurial and dynamic investment environment.
South Africa is the economic powerhouse of the African continent, with a Gross Domestic Product of 283 billion dollars which is four times that of its Southern African neighbors, and comprising 30 percent of the entire GDP of Africa.
The World Economic Forum’s Global Competitiveness Report 2008 and 2009 of the World Economic Forum, ranked South Africa 45th out of 134 global nations.
South Africa’s GDP grew at a healthy 5.2 percent in 2007 and a lower 3.1 percent in 2008, due to the impact of the global economic crisis.
South Africa is also one of the highest-ranking developing economies surpasses countries such as Hungary, Italy, Brazil, and Thailand.
The country leads the continent in industrial output as it is responsible for 40 percent of Africa’s total output and 45 percent of the continent’s total mineral production. It generates over 50 percent of Africa’s electricity.
Reasons to invest in South Africa
Macro-Economic Stability: South Africa’s economy has weathered adverse international conditions fairly well so far. The success of the first democratic election in 1994 put the economy on a growth path. The weakening of the international economy resulted in a slowdown in growth in South Africa during the first quarter of 2001.
Cost of Doing Business: The costs of doing business in South Africa are amongst the best in the world. The costs for labor, land, rental, human resources, transportation, and general living expenses do vary from province to province. Gauteng as the economic hub of South Africa is only marginally higher than the other provinces.
Skills: South Africa possesses a large resource base of skilled, semi-skilled, and unskilled labor. The South African government has introduced wide-ranging legislation to promote training and skills development. 21 universities and 50 Further Education and Training (FET) colleges will eventually replace the current 152 technical colleges.
Trade and Investment In South Africa: Trade and Investment South Africa’s core functions include providing coordination; developing and promoting exports and investment; and creating and changing policy.
Trade and Investment: South Africa provides core market intelligence in 44 offices in foreign countries within South Africa’s diplomatic missions worldwide. It is a major point of contact for investors and exporters, with expertise in helping them resolve practical, day-to-day problems encountered in doing business.
Foreign Direct Investment In South Africa: 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.
UNCTAD’s 2021 World Investment Report looks at South Africa’s performance for foreign direct investment (FDI) inflows. FDI inflows decreased by 39.4 percent in 2020 to USD 3.1 billion dollars, compared to the high inflow of USD 5.1bn in 2019.
Most of the investment is 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.
South Africa ranks 84th out of 190 economies in the World Bank’s 2020 Doing Business report. The country suﬀers from a high crime rate, increasing social unrest, and high levels of corruption. Investors are also worried about the lack of clarity concerning policy and structural reforms.
However, the government is working towards making South Africa a more attractive destination for foreign investors. Invest SA, a division of the Department of Trade and Industry, is currently rolling out several opportunities for business development across the country.
South Africa will probably struggle to attract the level of investment required to meet its post-COVID-19 recovery needs. The country fell into recession at the beginning of 2020 and was downgraded to junk status. This could affect the country’s ability to attract FDI in a world where company valuations are at historic lows.
What to consider if you invest in South Africa: South Africa is the most industrialized, technologically advanced, and diversified economy on the African continent. The country’s democracy is also well-established and the rule of law is observed. South Africa has large market potential and well-developed infrastructure and a competitive domestic economy.
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 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.
The country also enjoys a strategic geographical location, that makes it an ideal hub to access the sub-Saharan markets.
However, the economic stability of South Africa has been weakened by the strict lockdown, which has exacerbated social tensions such as widespread poverty and inequality. Investment is 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.
How can I invest in South Africa?
Nearly all business sectors are open to foreign investors. The Government has put in place various measures to encourage foreign investments, including simple tax rules and better regulatory policy on the competition.
The 12I Tax Incentive is designed to support Greenfield investments as well as Brownfield investments, while the Critical Infrastructure Programme aims to leverage investment by supporting infrastructure.
Some laws are approved without an initial analysis of the consequences they may have on certain economic sectors. Despite these measures and a developed economy, some elements indicate that the government may indicate that it is not convinced of the importance of FDI for growth in South Africa’s economy.
South African companies have to appoint a legal representative and an auditor under the Exchange Control Regulations. Any acquisition or disposal by a non-resident entity of shares in a South African resident, an unlisted company requires approval from the South African Reserve Bank (SAR).
No government approval is required for foreign investors to establish a new business or invest in South Africa. The investor will be required to appoint a consultant, auditor, and legal advisor to register a company on his/her behalf. The company should be registered within 21 days and must also register with the tax office.
However, in case the foreign company is of national interest, the South African government provides temporary space for a limited period, say up to 2 years.
On the Possibility of Buying Land and Industrial and Commercial Buildings
At the moment there are no restrictions on the ownership of land by foreign nationals or entities in South Africa. Nevertheless, according to the proposed regulation contained in the Land Holdings Bill, foreign nationals will no longer be able to own certain types of land in South Africa although they will be allowed to enter into long-term leases on all types of land.
Investment Opportunities In South Africa: The Key Sectors of the National Economy includes Mineral exports, the industrial sector which includes railway rolling stock, synthetic fuels, and mining equipment and machinery, tourism, financial services, health, fruit production, energy (electricity, renewable, petrol), transport infrastructure, telecommunication and information technologies, and the wholesale and retail trade.
Sectors Where Investment Opportunities Are Fewer: These are monopolistic and key sectors in which the so-called “state-owned” enterprises are only allowed to operate. It includes electricity generation, transport, diamond mining, forestry, and military equipment.
Top Investment Opportunities in South Africa 2021: South Africa is a land of many opportunities for South Africans and foreign investors alike. The country is rich in natural resources with gold as one of the leading minerals in the country. Politically, South Africa has survived significant upheavals to become a rainbow nation. As an investor, you can create wealth by investing in these top investment opportunities in South Africa.
Millions of people in South Africa wish to own homes or buildings. The real estate market is not yet fully exploited. There exists an excellent opportunity for real investors interested in low-cost and low-marguerites homes, writes Nkululeko Mkhulubane.
South Africa’s population is increasing daily, and the demand for food is high. The pressure for enough food supply calls for agricultural investment for future food security. With vast unfarmed acres of land in South Africa, agripreneurship can give rise to new farmers and fast-growing crops.
Some of the opportunities in the South African agricultural sector include Fish Farming, Cannabis Farming, Cattle Farming, Beekeeping, Poultry Farming, Fruits Farming
As South Africa fights COVID-19, it promotes the use of technology in meeting people’s daily needs. Telemedicine will fill the healthcare gap brought about by the restrictions on patients visiting hospitals due to the pandemic. Patients can receive prescriptions and advice from professional doctors through a phone call, live chat, or video call.
E-Sports and Gaming
South Africa boasts of many sporting activities from Rugby, Athletics, horse racing, football, among other games. There are very few websites that offer e-sports and Gaming. With an increasing youth population, there is a need to establish more e-Sports and gaming companies in South Africa.
South Africa has a broken education system, especially for the younger students living in slums or shanties. Rural areas lack modern infrastructure, and home learning is news to them, which cannot happen. Virtual education provides both poor and abled students with a decentralized education model at affordable costs.
South Africans experienced a sudden knock from the JSE and lost so many points compared to the previous years before COVID-19 struck the world. This is the perfect year to invest in stock markets with companies such as eToro South Africa. The macro picture of the South African stock market contains obstacles.
South Africa lacks a formal address system in many urban settings. Lack of correct and verified addresses makes business conduct challenging and frustrating. As the population grows, it strains the limited transport infrastructure and makes the movement of goods difficult. The good news is that you can start up a delivery company in the urban areas using your truck or car.
Cybersecurity and Data Storage
When COVID-19 struck the world, many businesses and companies turned to work from home. This jeopardized many company’s information since every data was open to hackers. There is a need to create potential solutions for damages and losses caused to companies. South Africa also needs local data storage, which can be an investment opportunity.
South Africa is a land of many opportunities for both local and international investors. Invest in virtual education, agriculture, logistics, cryptocurrencies, telemedicine, eSports, and Gaming. Educate yourself on South Africa’s crypto regulations to avoid getting on the wrong side of the law while investing.