Southern Africa has faced a confluence of economic and social challenges in recent years. These have been especially notable in South Africa, the region’s largest economy, where political upheaval has coincided with problems within the country’s power sector, impairments to its critical rail and port infrastructure, and a worsening macroeconomic climate, according to Global Finance.
These issues are replicated to greater or lesser degrees across much of the 16-nation Southern Africa Development Community. Yet despite them, the region remains a magnet for foreign investment in key sectors like mining and infrastructure, and longtime business and investment community participants like Botswana-based Christopher Roy Garland believe its best days lie ahead.
So, how should outside investors think about business opportunities in this part of the world? Here’s what experts like Garland see as the most important considerations in the near term.
High Interest Rates Increase Investment Challenges
The cost of borrowing money has risen dramatically across the Global South since the early years of this decade. This is a problem not only for consumers in Southern Africa but also for local and outside investors who wish to deploy capital toward economic development across the region.
The good news in this is that interest rates are expected to decline in the coming months and years. While they will remain higher in places like Southern Africa than in Europe or North America, any movement will help reduce financial strain on planned and under-construction projects.
Good Governance Matters
South Africa’s governance challenges remind us of the importance of stable, predictable institutions in developing countries. Southern Africa has long had an uneven history in this regard, with places like South Africa and Botswana generally regarded as more politically stable than some other countries in the region. Outside investors can try to improve governance in the countries they invest in, but ultimately it’s up to political leaders (and the governed) to support those efforts.
Durable Infrastructure Is (Often) a Good Bet
One of the bright spots for outside investment in the SADC region recently has been large-scale infrastructure projects, like transnational rail-and-port networks and highway expansions. These investments tend to spur more economic output than they require, strengthening the communities they serve. As Southern Africa’s population grows and its economic ambitions increase, look for more opportunities to expand and improve its infrastructure.
Economic Diversification Efforts May Pay Off
Much of Sub-Saharan Africa remains dependent on natural resource extraction — largely funded and supported by multinational corporations — for economic growth. This is fine as far as it goes, but it’s not the foundation for a truly diverse economy.
Fortunately, many countries in the SADC recognise this, and they’re making efforts to move beyond resource extraction as a result. The most exciting developments are in the software and clean energy industries, both of which are seeing a surge in homegrown entrepreneurship that could reshape the region’s politics, economy, and social dynamics.
Demographic Trends Are On Southern Africa’s Side
The African continent is growing faster than any other. Even as natural population growth slows and eventually reverses in North America, Europe, and much of Asia, Africa is expected to continue on its trajectory for several decades to come.
With population growth comes economic growth. This is a straightforward “value proposition” for outside investors in the SADC region and a reminder that the lessons of the past are not always applicable to forward-looking decisions.
A Brighter Tomorrow for Southern Africa?
There’s no use in sugar-coating it: The investment climate in Southern Africa, as in much of the rest of the Global South, is challenging at the moment. Blame high interest rates, unstable governance, and creaky infrastructure.
Yet there’s also more opportunity to be found in this part of the world than nearly anywhere else. With favorable demographic trends and encouraging signs that the region’s economy is diversifying away from natural resources and agriculture, it’s a bright time for bold entrepreneurs and investors here — and outsiders eager to support local and regional development.
Progress won’t happen in a straight line; it never does. But business experts like Christopher Roy Garland, as well as a new generation of political leaders from across the SADC, believe that Southern Africa’s best days are still to come.
