While many Germany-headquartered companies view South Africa comparatively positively, key concerns, such as logistical challenges, should be addressed to further enhance the country’s attractiveness to German and other foreign investors, says professional services firm KPMG.

According to KPMG Germany and the Southern African-German Chamber of Commerce and Industry’s (AHK Southern Africa’s) ‘German-Southern African Business Outlook 2025’ report, German companies operating in South Africa and the Southern Africa region are optimistic about their business outlook for this year.

About 64% of the companies surveyed anticipate increased sales, with 48% expecting higher profits. The report also notes a strong willingness to invest, with 44% of companies surveyed planning to invest in South Africa in the next three years.

However, despite the positive outlook, the report also highlights areas of concern that affect overall investment attractiveness.

Businesses have identified infrastructure relating to logistics, such as transport and ports, as requiring expansion and modernisation, says KPMG global transfer pricing services associate director Christian Wiesener.

He notes that logistics remains a central concern, owing to the significant distances between South Africa and destination markets.

To address these concerns, specific measures are required to increase port access and reliability, as is improved rail transport.

Further, targeted incentives aimed at underdeveloped regions could attract investment that would further result in development.

Another key area is consistent energy supply, which has been highlighted as a requirement for successful operations in South Africa, particularly in energy-intensive sectors such as manufacturing.

Wiesener explains that German companies are willing to invest in infrastructure projects such as alternative energy and water projects. As German and other European groups have significant interest in supporting renewable-energy-related initiatives, the prioritisation of similar programmes in South Africa would be well received.

Although tax certainty is also perceived as a challenge, Wiesener notes that this has improved significantly over the past few years.

“Rising costs, owing to the need for private investment into infrastructure such as access roads and back-up electricity supplies, threaten to make investments unprofitable,” he adds, underscoring the importance of targeted public-private partnerships in this respect.

Trade agreements are a competitive advantage that bolsters South Africa’s investment appeal, particularly the African Continental Free Trade Area (AfCFTA) and the African Growth and Opportunity Act (AGOA), which German multinational enterprises (MNEs) view favourably.

The AfCFTA Agreement focuses on enabling intra-Africa trade to the advantage of manufacturers such as those in South Africa where sales to group- or third-party distributor partners present opportunities.

MNEs operating in countries that are members of the AfCFTA can benefit from the agreement, which allows for free trade without customs within the region. This could result in lower costs to consumers and competitive advantages to local producers.

“The AfCFTA is mostly beneficial for trade within Africa, but if Africa-based subsidiaries of Germany-based groups are successful, this would likely benefit the whole group,” Wiesener clarifies.

Meanwhile, the AGOA grants 40 countries in sub-Saharan Africa duty-free access to the US market. The agreement is set to expire in September this year, and its renewal remains uncertain, however.

Wiesener says the agreement is “undoubtedly beneficial to South Africa, as well as other African nations”, therefore, if it lapses, the consequences could be “detrimental”.

South Africa, however, retains several competitive advantages, and some products may eventually be exempt from US tariffs, potentially offsetting some of the impact should AGOA lapse.

Additionally, US President Donald Trump’s 10% tariff measure applies to many countries, but it does not seem to negatively affect German interests in South Africa.

“Germany or the EU may well be willing to enter into new agreements, should AGOA not be renewed,” Wiesener adds.

German companies have maintained a presence in Southern Africa for many years and, as long-term investors, they have demonstrated an interest in fostering stable, transformed and developed communities. This highlights their broader interest in sustainable regional growth, he concludes.