Successfully investing in South Africa

published on May 16, 2018

  

​​How do you assess the current economic situation in South Africa?

The Republic of South Africa is one of the largest economies in the continent and the most developed among the African countries. For companies looking to invest in southern Africa, the market is a good place to start.

 
The recent, surprising change of the leader of the ruling political party ANC raises hope that more effective measures against problems of the country, especially corruption, will be implemented in future. It is expected that the new government led by businessman Cyril Ramaphosa will focus on the economic development and growth of the country.

 

How would you describe the investment climate in South Africa? Which sectors offer the largest potential?

The investment climate is marked by openness to foreign investors and South Africa is consistently ranked as one of the top 5 African countries on the World Bank's Ease of Doing Business Index (2018: anticipated 82th position worldwide). Ramaphosa's government has promised to make the country more attractive to investors again. Also the interest of potential investor countries in the new South African president expressed during the Annual Meeting of the World Economic Forum in Davos suggests that the foreign investment trend will be growing.
A large part of foreign investments is focused on the energy industry; here, primarily on renewable energy projects, which have been successfully implemented as part of state tenders for several years now. Traditionally, also the automotive and mining industries are strong.

 

What challenges do German companies face during their business ventures into South Africa?

The main challenges facing German companies operating in South Africa include the "Broad-Based Black Economic Empowerment" laws (B-BBEE legislation) and the difficulties related to obtaining a work permit. In the case of companies exceeding certain size thresholds, in specific sectors of the economy, and especially in the case of public-sector contracts, German investors will not be able to avoid the challenges of the B-BBEE laws. In such cases, it will be essential to cooperate with a South African partner who will meet the legal requirements. The legal situation as regards immigration law continues to be uncertain and the posting of workers from Germany should be planned way ahead and be well thought out.

 

What importance do Germany and Europe have for the South African economy?

Germany and Europe have traditionally had close trade relations with South Africa. The country continues to be by far the most important trading partner of the European Union and Germany among all African countries. South Africa's exports to Europe include mainly motor vehicles and car parts, machinery, as well as chemical and agricultural products – especially grapes and wine.

Over 600 German companies have a presence in South Africa. German and European products and services are highly respected and sought-after despite the increasing competition from Asian companies.

 

In your opinion, how will South Africa develop?

In our opinion, South Africa will see again a significantly stronger growth than in the past years under the Zuma government. Although the necessary political reforms are being introduced very slowly, we expect that this process will speed up after the elections next year. The focus on incentivising local production and on the local labour force, however, will not change, whatever the outcome of the elections.         

 

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Anna-Lena Becker, LL.M.

+27 21 4182 367

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