Out-Law / Your Daily Need-To-Know

Zuma says South Africa open for increased investment from Germany

19 Nov 2015, 1:05 pm

South African president Jacob Zuma has told business leaders in Germany that he "recognises the importance" of foreign direct investment and he called on German firms to step up investment in his country for the benefit of the whole continent.

During a visit to Berlin, Zuma told industry representatives that South Africa is “a regional manufacturing and services hub... [that] now seeks to partner German companies in the industrial and infrastructure development of the African continent”.

Germany is South Africa’s “strategic and long term partner”, with 600 German firms operating in the country and employing more than 100,000 South Africans, Zuma said.

The president said South Africa is “becoming a frontier for new sectors for investment such as the green economy, oil and gas, shipbuilding and the ocean economy amongst others”. “These sectors offer German companies opportunities to invest and to partner our companies in South Africa,” he said.

Zuma told German industry leaders, including representatives of the sub-Saharan Africa Initiative of German Business (SAFRI), that South Africa is “establishing a one stop ‘inter-departmental clearing house’ to attend to investor complaints and problems”. In addition, trade and industry minister Rob Davies is creating “a specialised unit that will fast track, unblock and reduce red tape in government”.

SAFRI is a cooperative partnership supported by the Association of German Chambers of Commerce and Industry, the Federation of German Industries, the Federation of German Wholesale, Foreign Trade and Services and the German-African Business Association.

Last September, SAFRI chairman Heinz-Walter Grosse told the first ‘German-African Business Summit’, supported by Deutsche Bank that it was "time to focus more clearly on Africa as a highly promising economic partner and future market”.

Grosse said: "The interest of the German business community in Africa is growing. Over the last 10 years exports have risen by 64% to around €23 billion. Even more impressively, German direct invest-ment in the continent rose by almost 25% in the years 2009 to 2012.”

However, Grosse said “challenging issues” remained, including “inadequate infrastructure, corruption and a lack of transparency”.

Earlier this year, Germany’s KfW Development Bank finalised a loan for €200 million to help fund a record-breaking locomotive purchase programme in South Africa by the state-owned freight logistics group, Transnet. KfW said the promotional loan, backed by a partial guarantee from Germany’s federal government, would contribute 20% to financing Transnet’s procurement of 240 out of a total 1,064 electric locomotives.

In August, the African Export-Import Bank (Afreximbank) said KfW planned to establish a specific line of credit “to fund renewable and energy-efficient projects” in Africa. Afreximbank said both institutions “agreed to work together in an environmentally sustainable manner by targeting an initial pipeline of $1bn commencing in 2016”.

According to KfW research published last May (5-page / 208 KB PDF), South Africa is “a favoured destination for German direct investment” with more than €600m flowing into the country in the fourth quarter of 2014.

KfW said: “In many areas, South Africa is far more advanced than other emerging economies. This includes its infrastructure, which is excellent particularly by African standards. A well-developed road and rail network and modern seaports and airports ensure that logistics within and along its borders remain manageable. Further investment in the upkeep and expansion of transport routes is planned. Mobile communication networks cover nearly 100% of the national territory.”

“The independent legal system offers a reliable framework for business activities,” KfW said. “The financial sector is fully developed and draws on a long tradition of over 100 years. Furthermore, the independent central bank and banking supervisory authority ensure stability in the financial system.”

Potential “definitely exists” for German engineering and technology firms in South Africa, KfW said. “The energy sector will continue to require significant funds in the future as well and the segments of renewable energies and energy conservation will continue to be growth markets.”

KfW said although other countries in southern Africa “have caught up”, South Africa can “still be useful as a stepping stone” for German investors.