An Investors Guidebook: Prospects In South Africa To Take Note Of In 2019

South Africa continues to be an investment hub, particularly for investors in Africa, thanks to positive future prospects and strong financial and legal framework. In the recent press release by PWC, economists estimate a 75 percent probability of improved economic growth in the next 5 years under the new presidency. With newly tipped economic growth, political stability and much-anticipated government plans, it is no surprise that the country maintains its position as a favoured investment destination as the year continues. Over the past year, South Africa saw its private equity funds growing to R103 billion, accounting for 3.2 percent of its GDP. As the year presses on, there are a few industries in particular that are rising to the forefront and proving to be popular prospects if you are considering going the investment route.

Infrastructure And Construction

Real estate is booming in South Africa, mostly fuelled by the high demand for it across the board. Lack of infrastructure continues to be a hindering factor in economic growth, not just in South Africa but across Africa, according to RMB’s Where to Invest in Africa. With the construction industry predicted to grow by 2.4 percent in 2019, real estate can guarantee you a market and continuing demand. With the government plans to plug billions into public infrastructures such as schools, roads, and housing, the door has been opened for construction firms to bid for multiple projects and its investors to make a tidy profit. If you prefer to go completely private, private investment in real estate by developers is becoming quite common as investors respond to the increasing need.

Agriculture Technology And The Farming Industry

The growth of agriculture technology (or smart farming as it is popularly referred to) has been unprecedented worldwide. A report by BIS Research in 2018 estimates the global smart farming industry will grow to a value of $23.14 billion by 2022 and a staggering 19 percent growth rate, making it a hotspot for investment across the world and not just in South Africa. While the farming industry in South Africa has consistently performed well (with production pegged at R273, 344 million for 2016/17), there remain existing barriers for farmers wishing to gain financing. The agriculture sector has seen a steady growth of 2.2 percent since 1994 and is one of the most important sectors in the economy’s growth plan. This is because there are numerous linkages to the other well-performing sectors (and not so well performing ones) in South Africa, including the exploration of alternative energy.

Precious Metals Mining

While the mining industry in South Africa has declined recently, the demand for precious metals, including gold, continues to skyrocket with a 4 percent increase in 2018, according to the World Gold Council. The second half to 2018 saw increased investment in both bars and coins, including ones issued by the South African government such as the 1/4 oz gold Krugerrand. With more companies withdrawing and the production volume dropping to 100t, there has been a lack of investment into the industry to facilitate the development for it to remain on par with its global counterparts.

The Renewable Energy Industry

Interest in renewable energy is increasing thanks to the growing efforts in finding eco-friendly sources of energy and reducing the impact on the wider environment. Approximately, 30% of South African citizens do not have access to electricity, which provides the perfect spark for investors. Programmes in South Africa, particularly the South African Renewable Energy Program (REI4P) have been incredibly successful, and are now being used in other countries across Africa. Although the government has committed itself to funding renewable energy in the years ahead, most of the investment up until now has been privately funded. On the plus side, transaction and technological costs have meant reduced costs for investors along with a Power Purchase Agreement, which guarantees the sale of energy generated for the next 20 years. Returns have declined to single digits but have remained stable, which means that as an investor you can have a low but almost guaranteed return annually.

With so many investment opportunities available for both domestic and foreign investors, there are multiple opportunities to net a great return from your capital and your interest in the South African economy.

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