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flag South Africa South Africa: Investing

In this page: FDI in Figures | Why You Should Choose to Invest in South Africa | Procedures Relative to Foreign Investment | Investment Opportunities

 

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 appeal 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 of 2008-2009, which lead to a decline in FDI, investment flows recovered, rising from 37.5 billion R in 2012 to 79.1 billion R in 2013. In Africa, the country is second only to Nigeria and Mozambique in terms of FDI inflows. Globally, South Africa also ranks 15th among the most attractive economies for transnational companies for 2013-2014. In addition to structural issues in the electricity supply sector and logistics sector, industrial strikes, which regularly affect production, can also prove discouraging to investors. 

 

Country Comparison For the Protection of Investors

  South Africa Sub-Saharan Africa United States Germany
Index of Transaction Transparency* 8.0 5.0 7.0 5.0
Index of Manager’s Responsibility** 8.0 4.0 9.0 5.0
Index of Shareholders’ Power*** 5.0 9.0 5.0
Index of Investor Protection**** 8.0 4.5 8.3 5.0

Source: Doing Business - Last Available Data.

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 201120122013
FDI Inward Flow (million USD) 4,2434,5598,188
FDI Stock (million USD) 159,391163,510140,047
Performance Index*, Ranking on 181 Economies 108--
Potential Index**, Ranking on 177 Economies 34--
Number of Greenfield Investments*** 160155143
FDI Inwards (in % of GFCF****) 5.66.212.2
FDI Stock (in % of GDP) 39.742.539.9

Source: UNCTAD - Last Available Data.

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 labor market and poor or unclear regulations in some of the key sectors like telecommunications, the import-export process could be complex. 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 recognizing 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 to download these conventions.

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Procedures Relative to Foreign Investment

Freedom of Establishment
Guaranteed
Acquisition of Holdings
Possible.

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.

Learn more about Foreign Investment in South Africa on Globaltrade.net, the Directory for International Trade Service Providers.

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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.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
Economic Developments and Prospects in South Africa - African Economic Outlook
 
 

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Learn more about Investing in South Africa on Globaltrade.net, the Directory for International Trade Service Providers.

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Last Updates: February 2015