As South Africa continues to face stagnant economic growth, spurred by political and economic instability, the country’s multinational enterprises (MNEs) are expected to not only increase their foreign investment outflows, but also to set up corporate offices abroad, a new survey reveals.

South Africa’s top 20 MNEs have operations in a combined 502 countries and, although the list is expanding, MNEs outside of the top 20 are also increasing their foreign stakeholding.

A survey by North-West University School of Economics and the Columbia Center on Sustainable Investment, revealed that at the end of the 2015 financial year, the 20 foremost South African nonfinancial MNEs had a shared total of nearly $50-billion in foreign assets, almost $49-billion in foreign sales and more than 220 000 employees abroad.

Petrochemicals group Sasol led the way with $9-billion in foreign assets, followed by recently expanding retail giant Steinhoff, with $8.7-billion, and miner Gold Fields, with $5.4-billion.

These three firms, with the addition of MTN and AngloGold, dominated the list, accounting for more than two-thirds of the asset-share. Mining, represented by four firms, was the largest contributing sector, accounting for 23% of foreign assets, followed by four firms in retail at 20% and Sasol, alone in the energy and chemicals sector, at 18%.

Most of South African MNEs are driven by horizontal, or market-seeking foreign direct investment (FDI). For these firms to increase their market share, expansion occurs in roughly similar foreign markets rather than in the domestic market, as growth prospects abroad are more attractive.

Hence, the geographical footprint of South African MNEs is primarily present in sub-Saharan Africa. Of the more than 1 000 foreign affiliates controlled by the top 20 firms, 443 reside in sub-Saharan Africa, followed by Europe where there are 225 foreign affiliates.

All the top 20 MNEs are publicly-owned and listed on the JSE, with seven firms also having secondary listings on foreign stock exchanges. These include Gold Fields, AngloGold and Harmony Gold which are also all listed on the NYSE.

Executively, South Africa’s top 20 MNEs still have a predominantly South African “feel” to them, with 81% of the board members being South African nationals. Only three firms – Sasol, Sappi and Datatec – are headed by a foreign CEO.

FDI flows and stock have increased considerably since the turn of the century, notably owing to South Africa’s trade liberalisation, since the abolition of apartheid. However, with more pressure resulting from the recent passing of new investment legislation in South Africa, this could slow down.

“Many are fretful of political risk being a core hindering factor in doing business . . . also of note is the uncertainty regarding the supply of electricity in the country,” the report stated.

Another contributing factor is the ‘brain drain’ being experienced in South Africa.

Broad-based black economic empowerment was also raised as an area of concern.

A first-of-its-kind for South Africa, the survey was conducted from November 2015 to April 2016 and forms part of a long-term study of the global expansion of emerging market nonfinancial MNEs.