About nine months after South Africa’s national elections, German companies in South Africa and the Southern African region are optimistic about their business prospects for the current year, according to a survey by KPMG Germany and Southern African-German Chamber of Commerce and Industry (AHK Southern Africa) titled the ‘German-Southern African Business Outlook 2025’.

KPMG Wirtschaftsprüfungsgesellschaft and AHK Southern Africa surveyed member companies with business activities in South Africa and the Southern African region, including countries such as Angola and Botswana.

Ninety-eight companies participated in the survey, which was conducted between November 11 and December 31, 2024. The questions focused on the economic outlook of members’ companies in the region, as well as the challenges and business opportunities they face.

In South Africa, 64% of the companies surveyed said they expect sales to increase this year. In the Southern Africa region, the figure is 58%.

Profit expectations are also positive, with 48% of companies in South Africa and 35% in the other countries in the region expecting higher profits.

The fundamentally positive assessment is also reflected in a strong willingness to invest, with the survey indicating that 44% of German companies are planning to invest in South Africa in the next three years, 10% of them planning investment of at least €3-million.

In the other countries of Southern Africa, however, investment momentum is significantly lower with only a fifth of companies citing investment plans and only 3% wanting to invest more than €3-million.

Regarding the economic climate, the survey indicates an ambivalent picture.

Almost eight out of ten respondents – 77% – believe the outcome of the elections will have a positive impact on the economic climate. However, 65% expect only moderate improvements.

"Following the Parliamentary elections in South Africa in May 2024, the new Government of National Unity was formed. Local companies are cautiously optimistic that reforms could come from this government and that their businesses will grow in 2025.

“In recent years, problems with energy and water supply and transport logistics as well as rising costs coupled with falling productivity have put a strain on the business activities of many companies," said KPMG Germany managing partner international business Andreas Glunz in a media release.

"The new government now has the opportunity to create the conditions for growth through infrastructure programmes and a sustained fight against corruption and crime."

Almost one in two companies – 46% each – see the systematic fight against corruption and crime as the most important tasks of the new South African multi-party government, while 39% see the expansion and modernisation of infrastructure as a crucial field of action, 28% a stable energy supply.

Sales growth is the top priority for 71% of the companies surveyed in South Africa, while 61% want to expand their market share and 42% are aiming to reduce their costs.

"South Africa is an attractive location for the German economy. Many companies are focusing on the medium-term prospects and potential in the country – and these are huge," said AHK Southern Africa CEO Simone Pohl in the release.

"Many of our more than 500 member companies have been in the country for a long time and are correspondingly resilient and operating successfully.”

Additionally, every second company – 50% – sees reliable political framework conditions as the most important influencing factor for their future business development in South Africa.

The survey indicates that 47% seek reduction of bureaucratic hurdles, while one in three respondents – 35% – are convinced that stricter anti-corruption measures would have a positive impact on their own business.

"The current reform efforts in South Africa are opening up new opportunities for economic growth. If the government continues to pursue its course consistently, the country can further consolidate its position as a leading business location in sub-Saharan Africa.

“German companies are ready to actively shape this change and make long-term investments," commented AHK Southern Africa president Peter van Binsbergen in the release.

A reliable energy and water supply, 30%, and an improved security environment, 29%, also received high approval ratings.

GATEWAY
For 44% of companies, access to other markets in sub-Saharan Africa represents a decisive locational advantage for South Africa.

In addition, 38% of respondents rate the existing ecosystem of suppliers as positive, while 35% appreciate the regulatory and business environment.

"For many German companies, South Africa is the first port of call for tapping into other markets in sub-Saharan Africa. But overall, the German economy is still underrepresented on the African continent of opportunity despite the increasing global geopolitical challenges," Glunz said in the release.

"The fundamentals are impressive. With 1.3-billion people and an average age of around 19 years, one-sixth of the world's population lives there. The continent has a rapidly growing population, an increasing middle class, untapped markets and an abundance of labour, natural resources and solar energy."

Meanwhile, a third of the companies surveyed, 33%, expect the African Continental Free Trade Area of 55 African countries, which has been in place since 2021, to have a positive impact on their business in Southern Africa.

Additionally, just over a quarter of companies, 28%, report positive or even very positive effects from the African Growth and Opportunity Act, while more than half of the companies, 54%, report that the Act had no impact on them.

Hardly any companies perceive a negative impact.

This trade agreement grants 40 countries in sub-Saharan Africa duty-free access to the US market and it currently runs until September.

The survey reveals that the bilateral trade volume peaked in 2022 at €24.1-billion, while in 2024 the trade volume between Germany and South Africa reached a value of €19.60-billion.