European Union (EU) investors in South Africa are thinking twice about their decisions for future investment in the country due to the July civil unrest that cost the economy more than R50 billion and thousands of jobs.
These were the results of a survey of 82 European companies operating in South Africa conducted by the EU Chamber of Commerce and Industry in Southern Africa between November 2021 and March 2022.
The Chamber said yesterday that EU companies operating in South Africa found a strongly negative perception of the current investment climate, with last year’s unrest being considered much more detrimental to investor confidence than Covid-19.
It said that the ability of the government to deliver efficient services, address corruption, and resolve the ongoing electricity shortfall were also seen as particularly problematic.
The Chamber’s chairman Rui Marto said the study was seeking to understand investment performance and plans of EU businesses operating in South Africa, and to identify the priority challenges they face in doing business in the country.
Marto said the on-the-ground reality, as expressed by EU businesses in South Africa, raised numerous challenges.
“This includes serious concerns around economic governance and the delivery of critical services, such as transport infrastructure and electricity; as well as extreme difficulties in accessing critical labour and skills from either within or outside of South Africa,” he said.
“To overcome these barriers will require substantial public investment and reforms. These will take time to deliver results. In the short term, more must be done to raise the incentive for investing and doing business in South Africa.”
There are 1 055 EU companies active in South Africa employing more than 350 000 workers across the industry spectrum such as manufacturing, services, wholesale and retail industries.
More than 60 percent of the respondents have operated in South Africa for more than 10 years, and over half have regional headquarters in the country.
European firms account for the largest share of foreign investment in South Africa.
The survey found that the current macroeconomic environment is not seen as conducive to investment, with the country’s modest economic growth rate and the value of the rand highlighted as challenges.
Safety and security issues also remained a priority concern.
Marto said that the ongoing engagement between the EU Chamber and stakeholders in South Africa is focused on key priorities that will unlock greater economic cooperation.
He said EU companies were calling for immediate policy considerations, including a relaxation of restrictions on accessing international skills and knowledge, work permits, and limiting the use of international inputs.
“EU companies are calling for deeper partnerships with the private sector in the production of renewable energy and the provision of transport services, most notably in rail and at seaports,” he said.
“Changes to South Africa’s BEE (black economic empowerment) codes to enable smaller international investors to contribute to South Africa’s economic transformation through increased investment in skills development rather than through changes in ownership.”