South Africa Must Boost GDP Growth and Reforms to Attract Foreign Investment – Bank of America

South Africa has significant potential to attract foreign investment, but economic experts from Bank of America caution that stronger GDP growth and more decisive reforms are necessary to gain investor confidence.

Foreign Investors Wary Despite Strong Private Sector

Bank of America, one of the world’s largest financial institutions, recently hosted international and local investors in South Africa. The conference, held at Sun City, provided insights into the country’s economic landscape.

While foreign investors were impressed by South Africa’s world-class private businesses, concerns remain about slow economic reforms and policy uncertainty.

Tatonga Rusike, Chief Africa Economist for Bank of America, revealed that the bank downgraded South Africa’s 2025 GDP growth forecast from 1.6% to 1.4%. This adjustment follows slower-than-expected economic changes, global uncertainty, and concerns over political stability within the Government of National Unity (GNU).

“Growth is improving but remains fragile,” Rusike noted, adding that National Treasury’s estimates are slightly more optimistic at 1.9%.

Political Uncertainty and Fiscal Policy

South Africa’s political climate has also raised red flags. The Democratic Alliance (DA) recently opposed the 2025 National Budget due to a planned VAT hike, causing tension within the GNU.

The DA’s potential departure from the GNU could pave the way for leftist parties with less business-friendly policies, adding to investor concerns. However, some analysts believe centrist policies could remain intact if smaller, pro-business parties step in.

Despite these tensions, foreign investors remain unconcerned about the budget delay itself, as the government is maintaining a focus on debt management and fiscal responsibility.

Trade Relations with the U.S. Under Scrutiny

Bank of America experts also highlighted South Africa’s strained trade relationship with the United States.

The recent 30% tariff imposed by the U.S. on South African exports poses a major challenge, particularly since trade with the U.S. accounts for 2% of South Africa’s GDP. Additionally, upcoming reviews of the African Growth and Opportunity Act (AGOA) could impact duty-free access to U.S. markets.

A critical concern is that South African automobile exports, which make up 60% of AGOA trade, will also face a 25% tariff hike.

While behind-the-scenes negotiations between South Africa and the U.S. are ongoing, uncertainty around tariffs could affect interest rates and economic stability.

What Foreign Investors Want

Michael Jacks, Head of Research in South Africa for Bank of America, emphasized that GDP growth and reforms in state-owned enterprises (SOEs) are top priorities for foreign investors.

Key industries drawing investor attention include:

• Telecommunications: Capex control and strategic price increases are boosting confidence.

• Metals and Mining: Gold remains attractive amid global uncertainty, while platinum group metals (PGMs) are expected to rebound.

• Retail: Growth is projected, particularly in e-commerce, with major players like Foschini, Shoprite, and Tiger Brands drawing investor interest.

• Financial Services & AI: Companies like Capitec and Discovery are gaining international recognition for their innovation and strong financial performance.

Despite broader economic challenges, many investors see value in South Africa’s private sector, with a net 80% of managers identifying more investment opportunities than risks.

Growth and Reforms Key to Attracting Investment

South Africa has the potential to become a major investment hub, but it must accelerate GDP growth and push through key economic reforms. Improving trade relations, stabilizing political uncertainty, and advancing infrastructure development will be critical to securing long-term investor confidence.

As global markets remain uncertain, South Africa must take bold steps to enhance its economic landscape and ensure a competitive edge in the global investment arena.

{Source BusinessTech}

Follow Joburg ETC on Facebook, Twitter , TikTok and Instagram

For more News in Johannesburg, visit joburgetc.com