South Africa must stop scaring off investors

South Africa should attend to the issues that are currently scaring off investors, which would benefit economic growth and South Africans as a whole.

The South African Chamber of Commerce and Industry (SACCI) recently said the country should particularly focus on foreign investors, given South Africa’s insufficient savings record.

SACCI said South Africans’ wellbeing will depend on growing the economy, restoring business and investor confidence, and creating employment. 

These comments come after the release of the SACCI Business Confidence Index (BCI) for May 2025, which showed a slight improvement.

Since February 2025, the SACCI BCI has lost momentum as the global attention also shifted towards South Africa in April and May 2025. 

The BCI dipped by 8.6 index points in April to 114.9 but clawed back 0.9 points in May 2025 to measure 115.8.

Notwithstanding lower business confidence in May 2025, the BCI was still 8.0 index points compared to May 2024.

Between April and May 2025 (short-term), six of the fourteen sub-indices improved, six declined, and two remained neutral. 

SACCI explained that the most positive short-term impacts on business sentiment in May 2025 came from the stronger rand exchange rate, higher share prices on the JSE, and high US dollar gold and platinum prices.

However, there were also several factors depressing business confidence in the country, with both local and global factors weighing on sentiment.

This includes international exposure with lower merchandise imports, fewer overseas tourists, decreased real value of building plans passed, and reduced manufacturing output between April and May 2025.

Nevertheless, year-on-year, the SACCI BCI continued to show improved confidence levels. In April and May 2025, the BCI was 6 and 8 index points, respectively, higher than in the corresponding months a year ago. 

This was driven by factors like an increase in inward tourists that saw more new vehicles sold, lower inflation, and higher world prices for precious metals.

In contrast, weakened merchandise export volumes and the lower real value of building plans passed weighed negatively on the business climate.

South Africa must take action

SACCI explained that, in the short term, the financial environment supported the business climate, but subdued real economic activity dampened it. 

Over the medium term, the sub-indices on real economic activity and the financial environment were evenly poised on having a positive effect on business confidence.

However, despite the positive BCI outcome for May, SACCI said it is evident that the performance of 0.8% year-on-year economic growth recorded in the first quarter of 2025 is far below what is needed to address unemployment and accommodate inclusiveness. 

“South Africa should attend to matters that scare off investors – especially foreign investors, given South Africa’s insufficient savings record,” it said.

“Lately, South Africa has been marred by various local and global diversions that negatively impacted the economy and business.” 

“With unity in diversity, South Africans should work together for the advancement of all the citizens of the Republic.”

Economists from FNB recently warned that South Africa’s economy remains stuck in a low-growth trajectory, and decisive action is needed to address this.

Considering this prevailing weakness in private sector investment and subdued business confidence, FNB revised its 2025 growth forecast for South Africa down to 1.0%, from 1.3% previously. 

However, positively, the economists still expect growth to rise towards 2.0% by 2027.

They said this growth will be supported by ongoing structural reforms and cyclical tailwinds, including easing inflation and interest rate cuts, which should bolster household consumption.

“Overall, our near-term forecasts balance weak investment trends with a gradual recovery in consumer spending,” they said. 

“However, risks remain tilted to the downside, particularly for fixed investment, given the still-fluid macroeconomic and policy environment.”