+27 71 448 3496
leon@whyafrica.co.za

The case for investment in South Africa

Share Article
South Africa is home to the biggest mining operations in the world. Despite challenges, the country remains one of the top investment destinations among developing countries. Image credit: Leon Louw for WhyAfrica

The case for investment in South Africa

In the wake of global economic headwinds, eagle-eyed investors are turning to sector-specific quality assets in emerging markets to generate long-term, healthy returns.

By Alex Davidson

South Africa is one such example – the country’s diverse portfolio of investment sectors continues to provide a multitude of opportunities for local and Foreign Direct Investment (FDI).

South Africa-based companies account for 35 out of the 50 largest companies by US dollar turnover on the continent – the Johannesburg Stock Exchange (JSE) playing host to pan-African giants like MTN, Naspers, Anglo American Platinum, Standard Bank, and Shoprite.

The country’s post-pandemic recovery enjoyed a positive outlook at the end of 2021, with the local JSE All-Share Index enjoying its best performance in more than a decade, with FDI inflow from across the globe being R27.2-billion in the same period, widening from R22.7- billion in the previous quarter.

The first half of the year also saw an uptick in mergers and acquisitions (M&A) activity in the region, with significant deals having already been announced, including a joint venture between Sanlam and Allianz; Digital Realty’s acquisition of a majority stake in Teraco; Suez’s acquisition of EnviroServ; Heineken’s acquisition of Distell and Namibian Breweries, as well as the recent acquisition of Ethos Private equity by US Asset Manager Rohatyn Group.

Vibrant and mobile population (The case for investment in South Africa)

A large part of South Africa’s attractiveness as an investment destination is due to its highly favorable demographics which create a vibrant and upwardly mobile population.

Furthermore, the country has also worked to strengthen investor protection, adopting stringent auditing and reporting standards, legal frameworks, and a robust fiduciary environment bolstered by a solid financial services sector.

Additionally, the country has a well-established and effectively regulated banking system characterised by well-regulated, highly capitalised, liquid, and profitable financial institutions which are supported by a robust regulatory and financial infrastructure.

South Africa has sophisticated equity, insurance, and credit markets, bolstered by a robust savings industry and well-managed pension funds, which helped to earn the local financial sector its top-20 global rating as a financial hub.

Not without challenges (The case for investment in South Africa)

But the investment landscape in the country is not without impediments.

Business and investor confidence have both taken a knock in recent months in the wake of global supply chain disruptions, skyrocketing inflation, and structural issues in electricity generation resulting in widespread loadshedding. The CSIR estimates that load shedding results in lost economic output of about R700-million per load shedding stage, per day – the cost to the economy estimated between R60-billion and R120-billion in 2019 alone.

Another challenge is the country’s dilapidated rail network which is forcing more freight onto the country’s already overwhelmed roads, increasing risk, and resulting in transit delays.

South Africa’s rail network carried nearly 230 million tons of freight in 2017 and only 179 million in 2021, the lowest volume recorded over the past decade.

These are major deterrents for investors seeking opportunities in agriculture, agro-processing, consumer goods, retail, mining, manufacturing, and tourism – all of which are leading sectors in South Africa’s economy.

Challenges bring opportunities (The case for investment in South Africa)

However, these challenges also bring future investment opportunities – especially in renewable energy and digitisation.

Twenty-five renewable energy projects have been selected for development in the fifth bid window of the country’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which aims to secure more than 2,500MW of renewable energy primarily from onshore wind farms and solar photovoltaic plants.

As a testament to the appetite for sustainable energy solutions in South Africa, Standard Bank – for example – recently acted in its capacity as a mandated lead arranger and underwriter to support Scatec and H1 Holdings in bringing three renewable solar and battery storage projects valued at over R16-billion that each target 50MW of dispatchable generation capacity –these projects being the first of their kind to be financed in the country.

The carbon market in South Africa is also growing, with voluntary carbon credits directing private financing to climate-action projects that would not otherwise get off the ground. These projects support investment into the innovation required to lower the cost of emerging climate technologies.

We also project that South Africa’s technology, media, and telecommunication sectors are expected to see the most M&A activity in the foreseeable future, with investments in non-traditional sectors harnessed on digital infrastructure and Environmental, Social, and Governance (ESG) values.

Investors – especially foreign investors – are increasingly considering the long-term impact on the environment, society, and the performance of the businesses they are directing their money to.

Being a responsible investor is surely gaining momentum in South Africa, with ESG factors being a mainstay in most valuations and portfolio formations. This is expected to be a recurring trend into the future and South African businesses will have to quickly adapt to stay relevant within the investor landscape.

South Africa has large market potential, well developed infrastructure, and a competitive domestic economy. The country’s democracy is well-established, and there is a strength within key institutions viz. the Judiciary and the Reserve Bank, which brings calm, confidence and reassurance to seasoned emerging market investors.

As a productive pole, it is the most industrialised, technologically advanced, and diversified economy on the African continent. This makes the country an exciting investment destination for investors looking for long-term returns and impact investing opportunities.

Alex Davidson, Standard Bank, Global Markets Head of SA Clients

The case for investment in South Africa

WhyAfrica reports about, and publishes newsletters, magazines and research reports about natural resources and the primary sectors of African economies, and the infrastructure, equipment and engineering methods needed to extract and utilise these resources in an efficient, responsible, sustainable, ethic and environmentally friendly way, so that it will benefit the people of Africa.

Furthermore, WhyAfrica promotes Africa as an investment and travel destination, analyses the continent’s business environment and investment opportunities, and reports on how the political economy of African countries affects its development.         

WhyAfrica provides you with business intelligence that matters. Africa is our business, and we want it to be yours too. To subscribe to WhyAfrica’s free newsletter or digital magazine, and for more news on Africa, visit the website at www.whyafrica.co.za or send a direct message. WhyAfrica launched its first ever digital magazine in November 2021.

The company will undertake its annual road trip through South Africa, Zimbabwe, Zambia, the DRC, Malawi, Tanzania and Kenya in 2023. If you are interested in sponsorship or advertising opportunities, please contact me at leon@whyafrica.co.za. We have a wide range of different packages and combo deals to give your company the greatest exposure to a rapidly growing, African readership.  

The 2022 Southern Africa Road trip issue of WhyAfrica’s magazine is now available in print. The magazine was distributed in South Africa, Namibia, Zambia, Zimbabwe, and Botswana during WhyAfrica’s 2022 Southern Africa Overland Road Trip, the company’s new and innovative platform. WhyAfrica has expanded its product range and now offers its readers, followers, advertisers, subscribers and partners the following:

  • Daily 24/7 online articles on WhyAfrica’s website (FREE)
  • Daily updates on WhyAfrica’s social media platforms (FREE)
  • Newsletters delivered to a handpicked audience every two weeks (FREE)
  • Two printed magazine per year distributed at large events and during our road trips across Africa featuring original, in-depth articles (FREE) with great, on-site photographs by the WhyAfrica team (FOR SALE UPON REQUEST)
  • Four digital magazines per year (FREE)
  • Live updates, video clips, articles, and podcasts during and after WhyAfrica’s annual road trips (Southern Africa in 2022, East Africa in 2023 and West Africa in 2024) (FREE)
  • Sponsorship and advertising opportunities for the annual WhyAfrica Overland Road Trips (PAID FOR)
  • A library where companies doing business in Africa can display scientific or research papers (PAID FOR)
  • A product section where companies doing business in Africa can display new offerings or services (PAID FOR)
  • Media partnerships with, and a presence at, most of the major conferences and exhibitions in the African mining, energy, agriculture, infrastructure, water management, ESG, environmental management, tourism, development, and conservation sectors (FREE)
  • WhyAfrica connects potential investors with new ventures in Africa and suppliers and service providers with existing companies in Africa (PAID FOR)
  • WhyAfrica assists companies in generating content focused on the wider African business community (PAID FOR)
  • Partnerships with companies doing business in Africa (PAID FOR)
  • Partnerships with companies thinking about expanding into Africa (PAID FOR)
  • In 2023 WhyAfrica members will have access to our in-depth articles about the African political economy, research, and country reports about the countries we visit on our road trips, and trends in the sectors that we cover (PAID FOR)
  • A WhyAfrica book is in the pipeline and if all goes according to plan, should be published towards the end of 2023 (PAID FOR)
  • The WhyAfrica consultancy arm assists and advises companies doing business in Africa through utilising our extensive global business network (PAID FOR)

 Become part of the WhyAfrica community. Tell us your story. Expand your footprint across Africa and partner with us to make the most of your African experience. 

The case for investment in South Africa

 

Share Article

Sectors

AgricultureEnvironmental Management & Climate ChangeEnergyESGInfrastructureMiningPolitical EconomyTourism and ConservationWater Management