South Africa

Executive Summary

South Africa boasts the most advanced, broad-based economy on the African continent. The investment climate is fortified by stable institutions, an independent judiciary, and a robust legal sector committed to upholding the rule of law; a free press and investigative reporting; a mature financial and services sector; good infrastructure; and experienced local partners.

In dealing with the legacy of apartheid, South African laws, policies, and reforms seek economic transformation to accelerate the participation of and opportunities for historically disadvantaged South Africans. The government views its role as the primary driver of development and aims to promote greater industrialization, often employing tariffs and other trade measures that support domestic industry while negatively impacting foreign trade partners. President Ramaphosa’s October 2020 Economic Reconstruction and Recovery Plan unveiled the latest domestic support target: the substitution of 20% of imported goods in 42 categories with domestic production within 5 years. Other government initiatives to accelerate transformation include labor laws to achieve proportional racial, gender, and disability representation in workplaces and prescriptive government procurement requirements such as equity stakes and employment thresholds for historically disadvantaged South Africans.

South Africa continued to fight its way back from a “lost decade” in which economic growth stagnated, hovering at zero percent pre-COVID-19, largely due to corruption and economic mismanagement. South Africa suffered a four-quarter technical recession in 2019 and 2020 with economic growth registering only 0.2 percent growth for the entire year of 2019 and contracting 7 percent in 2020. As a result, Moody’s rating agency downgraded South Africa’s sovereign debt to sub-investment grade. S&P and Fitch ratings agencies made their initial sovereign debt downgrades to sub-investment grade earlier.

As the country continues to grapple with these challenges, it implemented one of the strictest economic and social lockdown regimes in the world at a significant cost to its economy. In a 2020 survey of over 2,000 South African businesses conducted by Statistics South Africa (StatsSA), over eight percent of respondents permanently ceased trading, while over 36 percent indicated short-term layoffs. South Africa had a -7 percent rate of GDP growth for the year and the official unemployment rate in the fourth quarter of 2020 was 32.5 percent. Other challenges include: creating policy certainty; reinforcing regulatory oversight; making state-owned enterprises (SOEs) profitable rather than recipients of government money; weeding out widespread corruption; reducing violent crime; tackling labor unrest; improving basic infrastructure and government service delivery; creating more jobs while reducing the size of the state; and increasing the supply of appropriately-skilled labor.

Despite structural challenges, South Africa remains a destination conducive to U.S. investment as a comparatively low-risk location in Africa, the fastest growing consumer market in the world. Google (US) invested approximately USD 140 million and PepsiCo invested over USD 1 billion in 2020. Ford announced a USD 1.6 billion investment, including the expansion of its Gauteng province manufacturing plant in January 2021.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 69 of 175 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2019 84 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2020 60 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $7.8 Billion https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2019 $6,040 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $351.10

billion

2019 $351.4 billion www.worldbank.org/en/country
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2019 N/A 2019 $7.8 billion BEA data available at
https://apps.bea.gov/
international/factsheet/
Host country’s FDI in the United States ($M USD, stock positions) 2019 N/A 2019 $4.1 billion BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
Total inbound stock of FDI as % host GDP 2019 N/A 2019 1.3% UNCTAD data available at
https://stats.unctad.org/
handbook/EconomicTrends/Fdi.html    

* Source for Host Country Data: N/A

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 145,247 100% Total Outward 214, 998 100%
United Kingdom 45, 366 31.3% The Netherlands 93, 532 43.5%
The Netherlands 25, 615 17.6% United Kingdom 26, 163 12.2%
Belgium 15, 940 10.9% United States 15, 705 7.3%
Japan 8, 784 6.1% Mauritius 11, 226 5.2%
United States 8,784 6.1% Australia 7, 930 3.7%
“0” reflects amounts rounded to +/- USD 500,000.
Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries 149, 455 100% All Countries 139, 515 100% All Countries 9, 940 100%
United Kingdom 47, 384 32% United Kingdom 45, 104 32% United Kingdom 2, 280 X%
Ireland 21, 642 14% Ireland 20, 614 15% United States 1, 902 X%
United States 19, 735 13% United States 17, 834 13% Ireland 1, 028 X%
Luxembourg 15, 711 11% Luxembourg 15, 140 11% Italy 783 X%
The Netherlands 9, 283 6% The Netherlands 9, 034 6% Luxembourg 571 X%
Investment Climate Statements
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