Why Doing Business in South Africa is Good for Business
South Africa has been through a challenging decade, with the euphoria of the 2010 FIFA World Cup giving way to a period of uncertainty and instability during the state capture era and the unprecedented challenges of dealing with the COVID-19 pandemic.
As the dust settles and the national state of disaster is lifted along with the findings of the Zondo commission and other anti-corruption efforts being made public, South Africa has a unique opportunity to start afresh, and that’s something South Africans do very well.
At Commercial Space, we believe that a thriving economy and stable political landscape are essential elements that underpin the health of the property sector.
In this article, we share some of the reasons why we believe South Africa is back on track. We also believe now could be the best time to relocate your business in south Africa to invest in a well-run and digitally transformed major city like Cape Town.
Rising to new challenges beyond 2022
There’s no doubt that the world has experienced a political and economic whirlwind since the pandemic began in 2019.
Inflation, an alarming war in Europe, and a major shift in geopolitics are just some of the challenges that businesses all over the world are facing today. South Africa is fortunate to be relatively isolated from some of these major issues, but the country certainly has its share of challenges to address in the next few years.
- State capture is being addressed by the government but it’s still far from over. Citizens and the business community will need to keep exerting pressure and taking a stand against corruption in all aspects of life and business.
- The economy continues to grow at a rate that’s too slow to create the number of jobs needed to lift millions of South Africans out of poverty. On the other hand, slow and steady growth could form a good foundation for future prosperity if investment and government incentives succeed.
- The ongoing process of modernising and digitising the economy could be faster. While the government has a role to play, businesses and local authorities will need to take the lead in order to realise this outcome. The city of Cape Town is a forerunner in this regard.
From a more general perspective, South Africa’s pre-pandemic challenges like crime, service delivery, and high levels of poverty will need to be addressed as a matter of urgency in order to maintain social stability and ensure growth in the coming decades.
There’s no doubt that challenges abound, in South Africa as a whole and also in Cape Town. However, there are many signs that the situation is about to turn around.
Let’s take a look at some of the good news that business owners can look forward to in the years to come.
Business in South Africa – A slow but resilient economy
There have been plenty of criticisms of South Africa’s economy over the past decade, especially as the GDP growth rate has failed to exceed 5% in most years, but there are definite positives.
Dr Leila Fourie, Group CEO of the Johannesburg Securities Exchange, in a recent interview with Bruce Whitfield at Davos stated that “South Africa is the only emerging market that has improved its GDP deficit since 2019”. She went on to say that on a relative basis the country is a good opportunity for emerging market investors as SA is “far more stable and has growth potential through both the general commodities and green commodities with deep financial markets.
- Although the economy has been growing slowly, it has also been growing consistently, with a healthy bounce back since the national lockdown ended in 2020.
- From an investment perspective, this points to an economy that is slow but stable.
With the right investment and government assistance, the GDP growth rate could rise to 4% or higher and make a significant dent in our unemployment rate which is among the world’s highest.
The number of young people who are out of work is especially concerning and should be a major priority in 2022 and beyond. Surveys indicate that up to four out of five young jobseekers are unemployed and the country’s traditional job creating industries like mining and agriculture simply won’t produce enough new jobs to absorb them into the workforce.
In order to solve this pressing problem, the economy will need to not only grow but also evolve into a high tech, digitally connected, 21st century version of itself.
This means increased investments in IT infrastructure, the elimination of red tape, and access to financing for new businesses.
Cape Town remains SA’s shining hope
The city of Cape Town has shown great leadership in numerous areas over the past 10 to 15 years. Many commentators credit the DA for having created an efficient urban setting that has managed to attract foreign direct investment – even during a pandemic that effectively closed borders and crippled international travel.
The city’s current mayor, Geordin Hill-Lewis, has promised to emphasise measures that will increase the levels of investment and entrepreneurship in the region while maintaining the excellent service delivery that his government has become known for.
If the Mother City continues to grow and develop and expand its reputation as an international tech hub, the opportunities for new businesses -and for the commercial property sector as a whole – could be huge.
Defeating pessimism with realism
A country with so many unique challenges is bound to face difficulties now and then, and when times are tough it can be tempting to dwell on the negative.
Narratives focusing on the slow economy and government corruption are easy to find in the media and around dinner tables throughout the country, but things are seldom as bad as some people make out.
Taking a positive look at South Africa’s economy and the future of our society reveals many encouraging facts that make the country an ideal investment destination.
A young population
- Unlike many developed countries, South Africa’s population is young and growing.
- Access to education has increased substantially over the past few decades, creating millions of potential skilled workers, entrepreneurs and consumers.
A dynamic business community
- From the bustling flight route between Johannesburg and Cape Town to the huge number of business conferences and investment summits being held this year, the country’s business community continues to defy negative headlines as it works to develop and grow the economy.
An African financial powerhouse
- With the second largest economy on the continent and the biggest and most sophisticated financial sector by far, South Africa is still unrivalled in terms of its economic influence.
- With 80% of Africa’s pensionable income under management, SA has access to a large pool of capital and is an ideal location for investors looking to expand into the rest of Africa.
A growing tech industry
- The digital economy is the economy of the future. South Africa has made great strides when it comes to digital infrastructure and skills, and Cape Town is leading the charge.
- A number of large IT firms have decided to base their headquarters in urban tech hub developments such as Century City, in a trend that is set to continue thanks to the abundance of skills, talent, and beautiful natural surroundings that the Cape has to offer.
Ready to invest in SA? We’re ready to assist.
With prices still at competitive levels, the Cape Town commercial property sector is ripe for investment. If you’re considering buying an office, retail, or industrial property here in the near future, our team of area specialists would love to help you identify the ideal investment. Contact us today to get started.
