There are positive perceptions among potential investors to South Africa, and continued interest among existing investors in the country, despite impacts such as the Covid-19 pandemic and the July 2021 civil unrest; however, it is critical that challenges be addressed to engender even more interest.

This was highlighted by European Union (EU) Chamber of Commerce and Industry of Southern Africa chairperson Rui Marto on June 14, presenting the key findings of two studies undertaken by the chamber between November 2021 and March this year.

Marto outlined that the surveys showed a strong interest in the country from both existing and potential investors, which presents an opportunity for the country to attract further investment from Europe and to deepen existing relations.

However, the on-the-ground reality that has been expressed by EU businesses in the country reveals numerous challenges, which must be addressed.

The first survey looked at potential investors, consisting of 323 businesses in Europe across 18 EU member States. It aimed to assess the overall perception of the country as an investment destination, relative to other emerging markets, and identify the country’s main perceived strengths and weaknesses.

The target of the survey was business people in Europe who are not currently in South Africa, but it did not exclude those with previous linkages with the country.

The second survey looked at 82 businesses in Europe across 11 EU member States. It aimed to understand their investment performance and plans and to identify the priority challenges they face in doing business in South Africa.

The first survey showed that South Africa remains top in comparison to other emerging markets for potential investors.

It indicated that the country is perceived by businesses in Europe to be more business-friendly than nine other comparative countries, including Malaysia, Brazil and China.

The size of the domestic market, the availability of raw materials and the country’s economic infrastructure were rated most positively by potential investors.

The cost and regulation of labour were also perceived as strengths.

Corruption was notable as the weakest contributor to the business environment in South Africa – with fewer than 40% of respondents agreeing that existing levels of corruption are low.

According to the second survey, about 60% of respondents reported an increase in turnover in the last two years, with five companies recording investments of more than R100-million over this period.

Moreover, 32% of respondents increased the number of employees over the past two years, while 73% are planning to increase the number of employees over the next two years.

However, companies are concerned that there is a lack of skills in the country, therefore, 40% of respondents said they had plans to expatriate staff over the next two years.

There are also concerns around the impact of transformation policies on companies, mainly in terms of black economic empowerment and employment equity.

The survey found that while 76% of respondents were impacted by the Covid-19 lockdown and pandemic, only 29% said the pandemic negatively impacted on their decision for future investment.

Therefore, despite the severe impact of the pandemic, the country is still perceived positively as an investment destination.

However, in terms of the July 2021 civil unrest, 57% of respondents found that their normal business activity was negatively affected, and 52% said this has negatively impacted on their decisions on future investment.

The surveys indicate that strengths for the country are its financial system, availability of high-quality products and market size.

However, weaknesses include the inefficiency of government services, energy supply constraints, corruption, the political environment, labour costs and low economic growth.

Marto said the chamber was engaging with the South African government, the Department of Trade, Industry and Competition and The Presidency to unpack and try to resolve the issues these surveys had found.

He noted that the government entities had been receptive to the chamber’s inputs.

He elaborated that immediate policy considerations that should be looked at include a relaxation of restrictions on accessing international skills and knowledge and those limiting the use of international inputs.

Moreover, he called for deeper partnerships with the private sector in the production of renewable energy and the provision of transportation services, most notably in rail and at seaports.

He also highlighted the need for changes to the country’s empowerment codes to enable smaller international investors to continue contributing to the country’s economic transformation through increased investment in skills development rather than through changes in ownership.