German-Southern Africa business outlook

The 2025 German-Southern African Business Outlook survey has shed light on a promising future for business relations between the two regions. The survey revealed that respondents are cautiously optimistic about future developments, with a majority expressing confidence in their business prospects. In a recent CNBC Africa interview, Dr. Benedikt Herles, EMEA Head of ESG Insights and Innovation at KPMG, discussed the key findings and insights from the survey. Dr. Herles emphasized that South Africa continues to be the top business destination for German businesses on the African continent for several compelling reasons. Notably, South Africa serves as an access hub for entering other sub-Saharan African markets and boasts a robust ecosystem of suppliers and business partners. Compared to other countries in the region, South Africa offers a superior regulatory and business environment, making it an attractive destination for German companies. The survey highlighted an optimistic outlook among the companies surveyed, with two-thirds expecting growing revenues and nearly half anticipating increased profits. Additionally, around half of the companies expressed interest in investing in South Africa and the region, with a focus on creating employment opportunities. This positive sentiment is further fueled by the post-2024 election optimism following the establishment of a government of national unity. Dr. Herles underscored the narrative surrounding Southern Africa, emphasizing the region's importance for German businesses looking to diversify geographically. With Africa offering significant growth opportunities driven by factors like natural resources and a young, skilled population, Southern Africa and South Africa, in particular, serve as vital entry points into these markets. Despite challenges such as crime, corruption, and infrastructure deficiencies, Dr. Herles noted the progress and positive momentum in addressing these issues. He highlighted improvements in visa application processing, stabilized currency, and declining interest rates as signs of advancement. The survey also indicated that the government of national unity was viewed positively by 77% of the surveyed companies, with expectations of a favorable impact on the business and economic climate. When discussing investments and reforms in South Africa, Dr. Herles pointed out that companies were looking for enhancements in areas such as infrastructure, renewable energy, and talent diversification. While acknowledging the existing challenges, he highlighted the investment opportunities in infrastructure improvements, particularly for partnerships that could benefit both German companies and South Africa. The survey results indicated that approximately half of the companies surveyed planned to invest in South Africa over the next three years, reflecting a continued interest in the market. Notably, German businesses in South Africa currently employ around 100,000 people, demonstrating the positive impact of investments on job creation and skilled labor utilization. On the topic of the African Growth and Opportunities Act (AGOA), Dr. Herles discussed the concerns and perceptions of the survey respondents. While AGOA was viewed positively by 28% of the companies surveyed, particularly in sectors like automotive, the overall reliance on the trade agreement was relatively limited. Dr. Herles emphasized the mutual benefits of AGOA, highlighting that it is a two-way street that benefits both the U.S. and South Africa. In the realm of Environmental, Social, and Governance (ESG) considerations, Dr. Herles emphasized the importance of renewable energy and talent diversification. He noted the significance of renewable energy, especially in the context of importing green hydrogen, where regions like Southern Africa, including countries like Namibia, could play a crucial role. The potential for collaboration between Germany and South Africa in renewable energy presented a mutually beneficial opportunity. Talent diversification was also identified as a critical aspect, with South Africa's young and skilled workforce offering a valuable resource for German companies facing demographic challenges in Central Europe. Dr. Herles highlighted the opportunities for German companies to tap into South Africa's talent pool, particularly in areas like digital infrastructure and IT centers. Looking ahead, Dr. Herles discussed the African Continental Free Trade Area (AFTA) and its potential impact on business operations in South Africa. While the survey indicated that 56% of respondents believed there would be no immediate impact on their businesses, Dr. Herles attributed this perception to the early stages of the agreement's implementation. He stressed that as AFTA evolves and its effects materialize, the perspectives of companies are likely to change. As the interview concluded, Dr. Herles mentioned the possibility of future surveys to track the evolving business landscape and sentiments of German companies operating in Southern Africa. The upbeat outlook reflected in the survey results underscores a promising future for German-Southern Africa business relations, marked by optimism, investment opportunities, and potential partnerships.