Foreign Direct Investment in South Africa
FDI in Figures
Being largely a free-market economy, South Africa encourages foreign investment in both private and public sectors. Factors attracting FDI into the country include: transparent regulatory framework, large population, access to raw materials and political stability.
According to the UNCTAD World Investment Report, the potential apeal for foreign investment in South Africa is strong compared with other countries in the world, but performances are poor in terms of FDI attraction. Since the global financial crisis which affected the world at the end of 2008 - beginning 2009, South Africa is suffering from the lack of foreing investor interest and the net capital export is higher than the income.
Country Comparison For the Protection of Investors
|South Africa||Sub-Saharan Africa||United States||Germany|
|Index of Transaction Transparency*||8.0||4.8||7.0||5.0|
|Index of Manager’s Responsibility**||8.0||3.4||9.0||5.0|
|Index of Shareholders’ Power***||8.0||5.0||9.0||5.0|
|Index of Investor Protection****||8.0||4.4||8.3||5.0|
Source: Doing Business
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. **** The Greater the Index, the Higher the Level of Investor Protection.
|Foreign Direct Investment||2007||2008||2009|
|FDI Inward Flow (million USD)||5,695||9,006||5,696|
|FDI Stock (million USD)||110,415||68,007||125,085|
|Performance Index*, Ranking on 141 Economies||113||80||79|
|Potential Index**, Ranking on 141 Economies||67||72||-|
|Number of Greenfield Investments***||56||116||108|
|FDI Inwards (in % of GFCF****)||9.9||14.5||4.0|
|FDI Stock (in % of GDP)||38.6||24.6||44.0|
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field 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. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
Why You Should Choose to Invest in South Africa
- Strong Points
- South Africa has high market potential, developed infrastructures and a reasonably competitive domestic economy. The country has put into place economic reforms, which have led to macro-economic stability, tax and customs reduction. It also has a large and active stock exchange.
South Africa has shifted from its traditional industries to production and financial services which are the main contributors to the GDP. Tourism and the retail sector have great potential.
- Weak Points
- South Africa has a certain amount of weaknesses: High rate of criminal violence and corruption, a highly regulated labour market and poor or unclear regulations in some of the key sectors like telecommunications. These factors contribute negatively to foreign investment.
- Government Measures to Motivate or Restrict FDI
- Nearly all the business sectors are open to foreign investors. No government approval is required, and there are almost no restrictions on the form or the extent of foreign investment. Other measures taken by the government are simple tax rules, investment incentives, a better regulatory policy on competition, protection of intellectual rights. We can quote :
- The Foreign Investment Grant up to 15% of the value of new machinery and equipment;
- The Skills Support Program which provides up to 50% of training costs and 30% of workers salaries;
- The Strategic Industrial Project program which offers tax allowances; and
- The Small and Medium Enterprise Development Program which offers tax free grants.
With 23.5% unemployment, Jacob Zuma recognising that the recession had delayed economic recovery and the private sector's capacity to create new opportunities, announced the remittance of some 303 million dollars in order to help company heads and employees who were in trouble due to the crisis.
- Bilateral Investment Conventions Signed By South Africa
- South Africa is a signatory to 35 conventions. UNCTAD allows you to visualize the list of conventions signed by South Africa, and and to download these conventions.
Procedures Relative to Foreign Investment
- Freedom of Establishment
- Acquisition of Holdings
Companies have to appoint a South African resident as the company's legal representative. Moreover, foreign companies have to appoint an auditor.
- Obligation to Declare
- No government approval is required for foreign investors to establish a new business or invest in South Africa apart from the approval required under the exchange control regulations.
The investor will be required to appoint a consultants, auditors, and/or legal advisors to register a company on his/her behalf. The company should be registered within 21days; it should also register for tax.
- Competent Organization For the Declaration
South African Reserve Bank (SARB)
- Requests For Specific Authorizations
- Virtually all sectors are open to foreign investors. Very few restrictions apply only to foreign companies.
For example, a foreign bank establishing a branch in South Africa may be required to employ a certain minimum number of local residents in order to obtain a banking license and may be obliged to have a minimum capital base.
Restrictions also exist regarding the ownership of immovable property by foreign companies. Foreign companies are required to register as external companies before immovable property may be registered in their names.
- Investment Aid Agency
Trade and Investment South Africa (TISA)
The New Partnership for Africa's Development
- Tenders, Projects and Public Procurement
South African Government Information, Tenders
Tenders.co, Tenders in South Africa
Cape Business News, Trade Offers
Tenders Info, Tenders in South Africa
DgMarket, Tenders Worldwide
- Other Useful Resources
Doing business with South Africa
Any Comments About This Content? Report It to Us.
Afribiz.net provides premium content, resources, tools, insights, and strategy for doing business and investing in Africa.
Afribiz Division, Conceptualee, Inc. on 27 Dec 2010 related to Foreign Direct Investment in South Africa
How2Go Consultoría de Internacionalización on 4 Jun 2014 related to Foreign Direct Investment in South Africa
The Rand – the Facts…the Fallacies and the Truth…And why it is critical to understand the Rand and what drives it in order to survive doing import and export business involving the South African Rand.
James Paynter, Dynamic Outcomes Inc. on 25 May 2012 related to Foreign Direct Investment in South Africa
This provides an overview of the benefits of becoming a premium member of the Frontier Market Network
Frontier Market Network on 13 Sep 2013 related to Foreign Direct Investment in South Africa
Internationalization Consulting, BrazilHow2Go specializes in bilateral internationalization of companies from Europe and America, formed by a team of...
Business network for Africa, South AfricaThe Frontier Market Network is a powerful business platform that allows members to access a range of unique business...
Accurate Forex Forecasting, South AfricaNeed a highly probable forecast on the expected outlook for the next few days, weeks, months and years for the...
Africa Business & Investment, South Africa