Foreign Direct Investment in South Africa

Overview by

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

Source: UNCTAD

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.

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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.

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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.

Find Investment Service Providers in South Africa on

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Investment Opportunities

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 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

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