27 Feb 2025

Deepening trade relations between South Africa and France

Expanding bi-lateral trade between the two nations has the potential to unlock significant opportunities across various sectors.

As France's first economic and commercial partner in Sub-Saharan Africa, almost 5,000 French companies export to South Africa while French investments in the country have surpassed R100 billion over the last four years. This is according to Business France Sub Saharan Africa, the national agency supporting the international development of the French economy.

South Africa also boasts a thriving French business community, with over 400 French businesses and subsidiaries supporting socioeconomic development and directly employing more than 65,000 South Africans.

These companies operate across the economy in diverse sectors such as transport, pharmaceuticals, financial services and consumer staples.

Many French companies are also engaged in skills development initiatives, such as the French Tech South Africa programme that supports local start-ups through incubators and drives growth in high-potential economic activities.

Unlocking new business opportunities was the focus of the 2024 Business Summit Southern Africa and Indian Ocean hosted by Business France and Team France Export, a major initiative aimed at boosting bi-lateral trade between the two nations.

Held in Johannesburg, the third edition of this event, hosted French business leaders, company representatives and entrepreneurs from South Africa, Mauritius, Reunion Island, Mayotte and other key Southern African countries with the aim of attracting more French companies to the region and facilitating business opportunities for local businesses to export into the French market and broader EU region.

Commenting on Investec’s participation in the event, Reagile Moatshe, Head of Client Coverage at Investec, said:

As economic and business ties between South Africa and France deepen, financial institutions will play a pivotal role in facilitating investment opportunities for South African companies looking to expand into France, and for French enterprises interested in entering the local market

French FDI targets renewables sector

Renewable energy projects in South Africa have received the vast majority (62%) of all French FDI between January 2012 and April 2024, according to a Wesgro report. This is followed by coal, oil & gas projects (13%), business services (6%), chemicals (5%) and non-automotive transport OEM (4%).

South African businesses also stand to benefit from substantial opportunities from France 2030 – a €54-billion investment plan to accelerate the transformation of the French economy.

The initiative plans to mobilise significant funding for strategic sectors and green energy, and South Africa's established mining and services sectors can play a vital role in supporting these objectives.

South African interests in France

Many investors from Sub-Saharan Africa, including South Africa, choose France as the location of regional hubs to drive the development of new and innovative products, not only in the country but also in continental Europe.

From January 2012 to April 2024, South African companies have invested over ZAR3.57 billion in 21 projects in France. In this regard, the information technology services sector has been identified as the leading sector attracting investment flows, accounting for half of all projects and jobs recorded in 2023, ahead of agri-food and consumer personal care products, such as perfumes and cosmetics.

"Ultimately, investing abroad is not a zero-sum game. When South African businesses invest in France, they can leverage their operations back home, creating additional jobs and fostering economic growth,” explains Moatshe.

Trade opportunities

France was South Africa’s 12th largest import partner and 29th largest export market in 2023, notes Wesgro in a 2024 country report on France.

The report found that South African imports from France were, on average, nearly three times the value of the country’s exports to France over the past decade. Top imports include petroleum oils and oils obtained from bituminous minerals and crude, original equipment components and cars.

The Wesgro report states that the main South African exports to France in 2023 included aircraft and spacecraft, motor vehicles for the transport of goods, and coal.

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SA’s improved economic prospects

Citing “improving energy availability and further reforms in the transport sector,” the World Bank has raised South Africa’s GDP growth forecast for 2025 to 1.8% y/y and forecasting 1.9% y/y for 2026.

This, along with other improving economic indicators, is making South Africa increasingly attractive to French companies looking to invest or expand.

“South Africa is poised for substantially healthier economic growth, due to improving infrastructure investment appetite to drive structural reforms. We are seeing confidence return to the business sector and expect this to enhance consumer spend,” says Moatshe.

Inflation and interest rates stabilising: With inflation dropping below the inflation target, Investec expects two more drops in the repo rate, of -25bp each, in 2025.

Improved outlook for SA credit rating: Standard & Poor’s put South Africa on a positive outlook (indicating the potential for an upgrade from BB-) in November last year citing “increased political stability” and “an impetus for reform that could boost private investment and GDP growth”.

Business confidence jumps: According to Bloomberg, South African business confidence soared to its highest level in nine years in November 2024, reaching 118.1 on the Business Confidence Index (BCI). This is off the back of an improving economic outlook and the progress being made by the new Government of National Unity. The index increased further to 120.0 in January this year.

Fixed investment increases: Investec’s Bishop estimates that South Africa is expected to see fixed investment growth jump this year, by close to 5.0% y/y after a contraction over 2024, as private sector investment turns positive, and the SOE’s and government lift in capital expenditure.

Partnering for success

As France and South Africa continue to deepen their economic ties, the opportunities for businesses on both sides are more compelling than ever. Whether South African companies are looking to diversify into the European market or French firms are seeking to expand into South Africa’s dynamic economy, strategic partnerships and expert guidance are essential, says Moatshe.

"As France and South Africa forge deeper trade connections, businesses have a unique opportunity to expand and thrive in new markets. Success in cross-border growth comes down to the right strategy, partnerships and local insights".

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