South Africa needs investment: IRR shows how to get it

No issue is more pressing than South Africa’s long-term failure to attract investment. For no other issue are the consequences so severe. The country’s anaemic growth, and the socio-economic consequences that arise from it, trace to South Africa’s poor investment performance.

Turning this around is imperative for the future of the country. The rate of investment in South Africa stands far below that of its global peers. As a proportion of GDP, investment in South Africa stands at less than 15% of GDP, in stark contrast to its peer economies, which routinely achieve rates in excess of 30%. The 30% level, incidentally, is what the National Development Plan envisaged.

How South Africa has come to this point and what can be done are addressed in the latest study from the Institute of Race Relations, “Open(ing) for business”: South Africa’s investment malaise and how to escape it.

In a webinar coinciding with the publication of the report on Tuesday, the author of the study, IRR Project and Publications Manager Terence Corrigan, will discuss the contents with Anlu Keeve, Economic Policy Analyst and Research Coordinator at the IRR.

The report draws on the IRR’s extensive work over decades in understanding the South African economy, and on conversations with South African and foreign businesspeople and analysts.

“What we are seeing is the cumulative impact of bad policy and sub-par administration over decades. More than this, there has been a dogged, largely ideological refusal to change tack,” says Corrigan.

The study argues that South Africa’s economy is a complex one, and depends on a series of enablers of increasing sophistication, each requiring a set of competencies in governance. At the most basic, extractive industries and trade require “good enough governance”, such as the maintenance of infrastructure and security. More advanced activities, such as manufacturing and capital-intensive long-term investments demand “good governance”, an ability to furnish stable, nuanced but clearly articulated policy, human capital development and so on.

Beyond these, a third level, “developmental governance” involves direct state intervention and support for key sectors and industries – the phenomenon of “picking winners”.

The study shows that the glaring deficiencies at all levels have skewed the environment into one that makes investment inherently risky, raises its costs, and lowers the prospects of rewards.

In addition, numerous policy choices have had the effect of discouraging investment. Broad-Based Black Economic Empowerment, for example, adds an additional layer of cost and complexity to doing business. This places South Africa at a severe disadvantage to many peer economies, and makes it a poor investment prospect for investors, local and international.

Concerningly, the study’s analysis of the political environment, particularly the Government of National Unity, suggests little imminent improvement, or, for the most part, much appetite for any such effort.

Fortunately, much of this can be turned around.

“Despite the despondency that grips South Africa over the state of its economy, the elements for success are there” comments Corrigan. “South Africa remains the most sophisticated economy in Africa. Its infrastructure, although in need of rehabilitation, is an enormous asset. It has mineral resources, an excellent climate, and cultural and linguistic links that simplify its interactions with global markets. It has a private sector that has survived in a challenging environment – and there is every reason to believe that it would thrive in an enabling environment. What is needed is to get the country’s politics and policies aligned with a pro-growth agenda.”

This study argues that it is within South Africa’s power to put itself on a high-investment and elevated-growth path, and explores how this can be achieved.

Details of next week’s webinar:

Date: 14 October 2025

Title: South Africa needs investment: IRR shows how to get it

Time: 10:00

Participants: IRR Project and Publications Manager Terence Corrigan, IRR Economic Policy Analyst and Research Coordinator Anlu Keeve

Register to join: https://streamyard.com/watch/6wnvfiVYjzFi

Media contact: Terence Corrigan IRR projects and publications manager Tel: 066 470 4456 Email: terence@irr.org.za  

Media enquiries:

Anneke Burns

IRR Public Relations

+27 71 423 0079

anneke@abpr.co.za