Successfully investing in South Africa

last updated on 6 October 2025 | reading time approx. 5 minutes

How do you assess the current economic situation in South Africa? »
How would you describe the investment climate in South Africa? Which sectors offer the largest potential? »
What challenges do German companies face during their business ventures into South Africa? »
Should companies fear land expropriation in South Africa? »
In your opinion, how will South Africa develop? »

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

The economic situation in South Africa remains challenging, but there are also positive developments.

One major challenge is the new US tariffs on South African exports, which are likely to have a significant impact on key industries. The 30 percent tariff will hit the manufacturing industry, the automotive sector and agriculture particularly hard, making it difficult for South African companies to remain competitive in the US market.

Economic growth forecasts for 2025 vary between 1.0 percent and 2.1 percent, which represents a significant improvement on the growth rate of 0.6 percent in 2024. However, the unemployment rate remains very high at around 33 percent.

On a positive note, the electricity supply has stabilized and improved noticeably in recent months. This is boosting productivity, which could support the economic recovery. In addition, the National Unity Government is ensuring political continuity and economic stability.

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

For German companies looking to invest in the sub-Saharan region, South Africa remains an attractive business location and a gateway to other markets on the continent.

Energy sector

The renewable energy sector, as well as batteries and inverters, continues to offer good market opportunities. Although South Africa is currently spared from load shedding, rapidly rising electricity prices continue to make independent power supply solutions attractive.

Infrastructure & construction

The infrastructure sector offers enormous growth potential, and the government plans to involve the private sector more heavily in this area. This could create numerous new investment opportunities for foreign companies.

Mining & raw materials

South Africa's traditionally important mining sector continues to offer great opportunities for international investors. Rising raw material prices, particularly due to strong demand from China, and growing interest in platinum – a key component of hydrogen propulsion technology – could lead to sustained growth in the raw materials industry.

Digitalization

Another growing sector is digitalization, which is advancing rapidly, particularly in agribusiness, healthcare, education, information and communication technology (mobile networks, cloud solutions), trade, and e-logistics.

Other key industries

There is also promising potential in the following areas:

Manufacturing (food processing and packaging, beverage industry, fertilizer production)
Automotive
Petrochemical
Medical
Telecommunications.

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

Among the challenges facing German companies in South Africa are Broad-Based Black Economic Empowerment (B-BBEE), immigration law, and the country's volatile currency.

B-BBEE aims to integrate previously disadvantaged part of the population more fully into the South African economy. German companies should address B-BBEE at an early stage, as an appropriate B-BBEE structure requires time, expert advice, and often a local B-BBEE partner. Although B-BBEE certainly poses a challenge for German companies, it is an integral part of South Africa and should also be seen as an opportunity to participate in the country's transformation.

Even though the legal situation in the area of immigration law has improved over the past year, work visas and employee secondments must be planned and organized well in advance.

The entry into force of the German Supply Chain Due Diligence Act (LkSG) on 1 January 2023, poses a further challenge for German companies with South African suppliers. This is because they will have to rethink their global supply chains and, if necessary, reorganize them. The following due diligence obligations under the LkSG are particularly important for South Africa: prohibition of unequal treatment in employment and worker safety. With regard to worker safety, the risk of inadequate training plays an important role in South Africa.

Should companies fear land expropriation in South Africa?

The debate surrounding land expropriation in South Africa has been a highly political and controversial issue for years. The new expropriation law was published in January 2025, but has not yet come into force. The issue of expropriation without compensation is particularly contentious.

The law creates a clear legal framework that provides comprehensive protection for companies and investors in South Africa. It stipulates that expropriations may only be carried out for public purposes or in the public interest. As a general rule, fair and adequate compensation must be paid, striking a fair balance between the public interest and owners’ rights.

The law only provides for expropriation without compensation in exceptional cases. This applies to situations where an adequacy test shows that zero compensation is justified. Examples include:

Unused land held purely for speculative purposes.
Abandoned land whose owner can no longer be traced.
State-owned land that is not being used for its original purpose.

The law is not expected to have any direct negative impact on German companies investing in South Africa.

In your opinion, how will South Africa develop?

There is great hope that the new multi-party government will reduce bureaucracy and fight corruption. The new government has helped to reduce political uncertainty and create a broad coalition of different parties. Through cooperation between different parties, attempts are being made to strengthen social cohesion and find long-term solutions to economic inequalities.

Progress on the issue of work visas is welcome. The large backlog of applications is shrinking, even if this results in a high number of rejections, some of which are incorrect. The newly introduced points system for work visas is also welcome. New remote working visas will have a positive impact on the economy. This visa allows foreigners to live in South Africa and work remotely for a foreign employer.

South Africa will remain the key market entry point for the African continent. Despite ongoing corruption and mismanagement, South Africa remains a preferred investment location due to its strong independent judiciary and high level of legal certainty.