The Investment Climate Statement Chapter of the CCG is provided by the State Department. Any questions on the ICS can be directed to EB-ICS-DL@state.gov.
Topics include Openness to Investment, Legal and Regulatory systems, Dispute Resolution, Intellectual Property Rights, Transparency, Performance Requirements, State-Owned Enterprises, Responsible Business Conduct, and Corruption.
These statements highlight persistent barriers to further U.S. investment. Addressing these barriers would expand high-quality, private sector-led investment in infrastructure, further women’s economic empowerment, and facilitate a healthy business environment for the digital economy.
South Africa boasts the most advanced, broad-based economy on the African continent. The investment climate is fortified by stable institutions, an independent judiciary and robust legal sector committed to upholding the rule of law, a free press and investigative reporting, a mature financial and services sector, good infrastructure, and a broad selection of experienced local partners.
In dealing with the legacy of apartheid, South African laws, policies, and reforms seek to produce economic transformation to increase the participation of and opportunities for historically disadvantaged South Africans. The government views its role as the primary driver of development and aims to promote greater industrialization. Government initiatives to accelerate transformation have included tightening labor laws to achieve proportional racial, gender, and disability representation in workplaces, and prescriptive requirements for government procurement such as equity stakes for historically disadvantaged South Africans and localization requirements.
The COVID-19 pandemic has caused widespread disruption to economies and societies across the globe, and South Africa is no exception. Implementing one of the strictest economic and social lockdown regulations in the world, South Africa has limited the health impacts of the COVID-19 pandemic on its people, but at a significant cost to its economy. In a 2020 survey of over 2,000 South African businesses conducted by Statistics South Africa (StatsSA), over 8 percent of respondents have permanently ceased trading, while over 36 percent indicated short-term layoffs. Experts predict South Africa will have a -3 percent to -7 percent rate of GDP growth for the year.
Pre-COVID-19 lockdown numbers hovered just below zero growth as South Africa continued to fight its way back from a “lost decade” in which economic growth stagnated, largely as a consequence of corruption and economic mismanagement during the term of its former president. StatsSA released fourth quarter 2019 growth figures that indicated that South Africa entered a recession in the second half of 2019, the second recession in two years as the country had negative growth in the first two quarters of 2018. This lackluster performance led Moody’s rating agency to downgrade South Africa’s sovereign debt to sub-investment grade. S&P and Fitch ratings agencies made their initial sovereign debt downgrades to sub-investment grade a couple of years earlier. Other challenges include: creating policy certainty; reinforcing regulatory oversight; making state-owned enterprises (SOEs) profitable rather than recipients of government money; weeding out widespread corruption; reducing violent crime; tackling labor unrest; improving basic infrastructure and government service delivery; creating more jobs while reducing the size of the state (unemployment is over 29 percent); and increasing the supply of appropriately-skilled labor.
Despite structural challenges, South Africa remains a destination conducive to U.S. investment. The dynamic business community is highly market-oriented and the driver of economic growth. South Africa offers ample opportunities and continues to attract investors seeking a comparatively low-risk location in Africa from which to access the continent that has the fastest growing consumer market in the world.
To access the ICS, visit the U.S. Department of Department of State’s Investment Climate Statement website.