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The Global Economic Governance (GEG) Africa programme was created to strengthen the influence of pro-poor African coalitions at global economic governance for a through policy research and stakeholder engagement.
The Dynamics of Investment In Africa Image: Flickr, GovernmentZA
Friday, 16 November 2018 16:44

The Dynamics of Investment In Africa

Written by  Samantha Munro

Having been one of the largest investors in Africa, South Africa has provided an entry point for investors outside of the continent, playing a dominant role in aiding investment across other African countries, promoting and providing economic growth, skills, capital and trade across the continent.

The extent to which South African companies have invested in the rest of Africa is therefore important in order to understand South Africa’s development role in the value chain, local linkage creation and corporate and social investment activities. Furthermore, contextualising and understanding investment can provide the necessary information to advance South Africa’s trade and investment interests at negotiating forums. Research was therefore conducted to examine FDI trends into Africa by examining publicly available data and undertaking a scoping analysis on South Africa’s largest publicly listed companies to identify where South African companies have an operational or investment presence and the extent of their investments across the continent, using foreign direct investment (FDI) as a proxy by which to measure this.

Investment trends in Africa

While Africa’s share of global FDI inflows has grown since the early 2000s, inward investment stock has remained relatively stagnant since, with Africa contributing less than 3% of global inflows and stocks in 2017. Distribution of FDI across Africa over the last 10 years has been concentrated predominately in North Africa (30%), followed by West Africa (26%), Southern Africa (19%), Central Africa (13%) and East Africa (11%). The share of inward FDI stocks within Africa is, however, concentrated within a few countries with South Africa, Morocco, Egypt and Nigeria making up almost 50% of FDI contributions.

In terms of intra-African investment, South African investment has historically been the biggest investor on the continent, with investment concentrated within countries of close geographic proximity or with strong historical and cultural connections. More recently, South Africa has expanded to East and West African countries with strong investment growth in Mauritius, Ghana, DRC, Liberia and Kenya. However, despite investment growth in some countries, South Africa is facing increasing competition from other global investors given that its share of inward FDI stock has fallen. This is largely attributed to the fact that China more than doubled its FDI stock from $23 to $53 billion in Africa from 2011-2016, while South Africa’s investment only increased by $1 billion over the same period. Morocco and Japan were also identified as countries with rising investment presence.

Trade evidence further revealed that South Africa acts as a regional services and distribution hub for other African countries, particularly in manufacturing goods. However, South Africa is also facing increased competition from intra-African trade and other developing economies in Asia.

A Company Perspective on South African Investment

The scoping analysis revealed that The South African Customs Union (SACU) and the broader Southern African Development Community (SADC) are distinct focus areas of investment for South African companies. In terms of operational presence, Namibia had the largest number of South African operating companies followed by Zambia and Botswana. Investment presence, based on number of principal joint ventures (JVs) and subsidiary and associate investments, revealed Namibia, Mauritius, Botswana and Mozambique to be key hotspots for South African companies.


In terms of sector representation, sectors which had a high operational presence across more than 30 countries, based on 2017/18 data, included media, food and beverage, chemicals and insurance. Countries with large sectoral representation from South Africa included Ghana, Namibia and Zambia. Investment in the form of JVs, subsidiaries and associated companies is conquered by the telecommunications and chemical sectors. There was also a high degree of co-location between banks, industrial goods and services, insurance, media, retail and technology sectors.

In terms of social investment and sustainable development, the performance of corporate social responsibility (CSR) initiatives seem to be mixed, with very limited investment reported. CSR programmes in other African countries are not implemented with a long-term perspectives and are often limited to charity or brand building, in contrast to their home-based CSR initiatives., in South Africa.

Implications and policy recommendations

Through its investment into other African countries, South Africa has and can continue to make significant economic contribution to other local African economies. This has also had positive repercussions for South Africa in terms of providing a gateway for investment and trade. Evidence shows that South African exports to the rest of Africa are predominately manufactured goods, making the country an important regional distribution hub for goods imported from the rest of the world. However, given the increased competition facing South Africa, this may potentially erode South Africa’s influence as foreign investors deviate trade and value chains to other African countries directly. South Africa therefore needs to draw on its historical role and ensure deeper liberalisation of trade in goods and services into the rest of Africa. South African companies can also expand their CSR contributions to re-enforce this.

Furthermore, given the scale of funds from competing investors, it is pivotal that policy makers engage more effectively with South African private sector so that funds can be leveraged more strategically across Africa and more bi-lateral agreements can take place.

Author: Samantha Munro, DNA Economics