South Africa buoyed by diversified economy - CNBC Africa

South Africa buoyed by diversified economy

Southern Africa

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South Africa still remains the gateway to business in Africa. PHOTO: Getty Images

“The South African economy is very diversified, our capital markets are still top rated in the world, so is our regulatory environment – because of that and the infrastructure as well, which is a real driver of sustainable economic growth, South Africa still surpasses the rest of the continent,” Ernst & Young Africa Business Center associate director Sylvester Taku told CNBC Africa.

“In the case of South Africa, one third of [FDI] is in automotive, in renewable energy and the services sector, so it’s quite diversified, whereas in countries like Angola and Nigeria, it’s still predominantly in the oil and gas sector, which is capital-intensive.”

According to the Ernst & Young Africa By Numbers report, Africa remains a multifaceted and challenging environment in which to do business, and making well informed choices about which markets to enter is crucial.

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“The report has been based on interviewing executives in 38 different countries to survey what is happening in that space. The drivers would be the political stability that has been happening in sub-Saharan Africa, the reduction in poverty, the youthful population and the growth of that population,” Taku explained.

“The facts actually show that South Africa still remains the gateway to Africa and some of those reasons are obvious. South Africa is coming from a very high base, in terms of looking at FDI numbers and the growth rate which is at 22.4, and is still growing by that much.”

A range of countries have experienced constant, robust growth for over a decade. Taku however believes that in order for this to continue, a number of constraints and challenges need to be overcome.

“Into the continent, the biggest constraint is infrastructure development. Africa still has a huge gap if you compare it with other emerging economies in terms of infrastructure so that is the biggest concern. Regional integration is also an important factor that needs to happen faster for this growth to continue and be sustainable,” he said.

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