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South Africa, the continent’s most industrialised economy, continues to be an attractive emerging market investment destination for global business leaders, thanks to the continuing presence of “stable governance and a robust legal framework”.
This is according to findings contained in Kearney’s 2023 Foreign Direct Investment (FDI) Confidence Index, an annual survey of global business executives, released on Monday.
The index, which ranks the markets most likely to attract investment, found that within sub-Saharan African region, South Africa remains a strong investment destination.
It was one of four African markets out of 25 to be ranked on the FDI Confidence index focusing on the investment prospects for emerging markets, earning 17th spot, alongside Egypt (14), Morocco (16) and Ghana (25).
China earned the most attractive spot on the emerging market rankings, followed by India, the United Arab Emirates, Qatar, Thailand and Saudi Arabia, all featuring as the top six emerging markets attracting the attention of global business leaders.
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Source: Kearney FDI Confidence Index
“South Africa stands out as an investment hub in the emerging market landscape. With its sophisticated infrastructure, skilled workforce, as well as aggressive expansion of South African businesses into growing African markets, the country offers an enticing opportunity for investors,” the report said.
“Despite facing domestic challenges, South Africa continues to foster an environment conducive to investment, as the most advanced and broad-based economy in sub-Saharan Africa with relatively stable institutions and a rule of law.”
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Global outlook positive
Developed markets continue to have a stronghold on investor confidence. However, on the global outlook, investors are reportedly cautiously optimistic.
The survey shows that 76% of business leaders surveyed are looking to increase their FDI over the next three years, up from 67% in the previous survey.
Further, most of the business leaders surveyed believe FDI will “become more important for corporate profitability and competitiveness in the coming years”.
However, serious concerns around risks such as volatile commodity prices, continued geopolitical tensions, and inflation threaten investor confidence for all surveyed economies.
ESG a growth point
Environmental, sustainability and governance (ESG) commitments continue to be key for investors across both developed and emerging markets, a trend that has only grown stronger post the Covid-19 pandemic.
“An impressive 94% of respondents have developed strategies to achieve their ESG goals, and 89% view their ESG commitments as a source of competitive advantage,” the report found.
“Furthermore, 73% reported stronger ESG commitments over the past three years, with 67% stating that the pandemic accelerated their implementation timelines.”
According to the report, to increase their appeal to investors, local businesses must invest more in strengthening their performance in ESG, as this can increase a country’s competitiveness among its peers, granting it access to new markets and partnerships.
“By focusing on sustainable practices, environmental conservation, and social responsibility, South African enterprises can not only improve their competitive advantage but also contribute to the country’s long-term growth and development,” it said.
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