German companies operating in SA and the broader Southern African region are cautiously optimistic about their business prospects for 2025.
According to the German-Southern African Business Outlook 2025 survey conducted by KPMG Germany and the Southern African-German Chamber of Commerce and Industry (AHK Southern Africa), this sentiment is largely driven by expectations of improved political stability and investment opportunities.
The survey, conducted between November and December 2024, captures sentiment among German firms in the region, particularly after the formation of a government of national unity (GNU).
The findings suggest while German businesses remain engaged in the region they continue to face structural challenges that require urgent attention.
Despite economic headwinds, 64% of German companies operating in SA expect an increase in sales in 2025, with 48% anticipating higher profits.
The outlook in the broader Southern African region is slightly more subdued, with 58% of respondents expecting revenue growth and 35% predicting increased profitability.
Investment sentiment also remains strong, particularly in SA, which is regarded as the primary entry point into the African market for German businesses.
“SA remains a key trading partner for the German economy and the gateway to the region [Africa],” Simone Pohl, CEO of AHK Southern Africa, told journalists this week.
The survey indicates that 44% of German companies plan to invest in the country within the next three years and 10% intend to invest at least €3m.
However, investment momentum is significantly lower elsewhere in Southern Africa with only 20% of firms planning expansions and a mere 3% considering large-scale investments over €3m.
Dr Benedikt Herles, head of ESG insight and innovation for Europe, the Middle East and Africa (Emea) at KPMG, shares this sentiment, emphasising the strategic importance of SA as an investment destination.
“We are pushing this country corridor heavily. German companies are massively underrepresented on the African continent, especially in Sub-Saharan Africa, and we believe there are tremendous opportunities, growth opportunities on the African continent for German companies,” he said.
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
— Peter van Binsbergen, President of AHK Southern Africa.
The survey found 44% of respondents see SA’s access to other Sub-Saharan African markets as a major strategic advantage. Additionally, 38% value the country’s well-developed supplier networks and business partnerships, while 35% cite its regulatory and business environment as a key attraction.
“Africa offers interesting growth opportunities, and SA is by far still the largest economy, is by far the most developed economy [on the continent]. So it makes sense to invest in SA first and from here we can essentially target other African markets,” Herles said.
However, the perception of SA’s current economic climate remained mixed.
“If you look at the overall view on the current climate in this country, I would say it’s rather neutral. When it comes to the judgment of the economic climate in SA, 22% of them say it’s good and 26% say it’s bad,” Herles noted.
While 77% of German businesses expect SA’s economic environment to improve under the new government, only 12% foresee significant improvements.
The challenges identified in the survey highlight deep-rooted structural barriers that continue to hinder business confidence and expansion.
The most pressing concerns for German businesses in SA remain corruption, crime and weak infrastructure.
A total 46% of respondents identified corruption and crime as the most urgent priorities for the government to tackle.
Thirty-nine percent of companies emphasised the need for infrastructure expansion and modernisation, particularly in transportation, water supply and electricity.
Another 28% stressed the importance of a stable energy supply, as businesses continue to grapple with load-shedding.
It makes sense to invest in SA first and from here we can essentially target other African markets.
— Dr Benedikt Herles, Emea head of ESG insight and innovation at KPMG
Beyond structural reforms, currency fluctuations and commodity price volatility have also played a role in dampening trade activity between Germany and SA.
“ SA is exporting more to Germany than the other way around. German exports to SA have been stable for many years now, and both the exports of Germany to SA, as well as [that of] SA to Germany, have been declining from 2022,” Herles said.
He attributed the declines to currency effects in 2022, declining commodity prices, and post-Covid-19 economic adjustments.
“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,” said Peter van Binsbergen, president of AHK Southern Africa.
“German companies are ready to actively shape this change and make long-term investments,” he said.
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