European companies want to invest in South Africa, but serious concerns about government efficiency, energy supply, corruption and the current political climate are undermining business confidence.
The European Union (EU) is South Africa’s largest source of foreign direct investment. More than 1,000 EU companies are active in South Africa, with participation rates increasing faster than those of the US, UK and China. It is estimated that these European companies directly employ around 350,000 South Africans.
Surveys were conducted which looked at EU businesses’ perceptions of South Africa’s investment climate.
Split into two surveys, the first survey analysed more than 300 European companies not yet operating in South Africa, with the majority viewing the country’s investment climate as favourable. South Africa is rated as more business-friendly than nine other Asian and African peers, including Malaysia, Brazil and China, according to the survey results.
South Africa is a large market, with abundant raw materials, good infrastructure and cheap labour that are most appreciated by potential investors. On the other side of the spectrum of issues that make potential investors most hesitant are concerns about corruption, political instability and unskilled labour.
These concerns are supported by 82 EU companies already operating in South Africa, with their experience covered in a parallel study.
Existing investors cite government efficiency, energy supply, corruption, political environment and economic growth as the issues with the biggest negative impact on South African investment.
The survey results noted “EU companies operating in South Africa have a strongly negative perception of the current investment climate,”
“The ability of government to deliver efficient services, address corruption, and resolve the ongoing electricity shortfall are seen as particularly problematic.”
The discovery comes three months after the African National Congress (ANC) and South African President Cyril Ramaphosa announced that their investment conferences had secured commitments worth more than R1 trillion.
The investigation also takes into account the impact of the Covid-19 pandemic and the July unrest that swept through parts of KwaZulu-Natal and Gauteng, killing more than 350 people after it hit. These riots hurt South Africa’s prospects more than the pandemic, with most EU investors seeing the turmoil as having a negative impact on the country’s future investment decisions. surname.
The two investigations, conducted between November 2021 and March 2022, took place as Eskom sheds the heaviest load on planned maintenance coupled with an unexpected power outage that caused severe stress in the system of electricity generation in South Africa.
By Palesa Bacwadi
Main Image: Credible Carbon