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.
|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||2011||2012||2013|
|FDI Inward Flow (million USD)||4,243||4,559||8,188|
|FDI Stock (million USD)||159,391||163,510||140,047|
|Performance Index*, Ranking on 181 Economies||108||-||-|
|Potential Index**, Ranking on 177 Economies||34||-||-|
|Number of Greenfield Investments***||160||155||143|
|FDI Inwards (in % of GFCF****)||5.6||6.2||12.2|
|FDI Stock (in % of GDP)||39.7||42.5||39.9|
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.
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.
Companies have to appoint a South African resident as the company's legal representative. Moreover, foreign companies have to appoint an auditor.
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.
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.
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Last Updates: February 2015