Why Africa’s largest economy saw its first negative FDI inflows since 1990

South Africa recorded negative Foreign Direct Investment inflows last year for the first time since 1990, as multinational companies repatriated profits, adjusted intracompany financing and completed major Mergers & Acquisitions transactions.

BusinessDay analysis of the World Investment Report 2026, released on Tuesday by the United Nations Conference on Trade and Development, showed that Africa’s largest economy recorded FDI inflows of $2.32 billion in 2025, compared with positive value of $2.37 billion in 2024. The last time the country recorded a negative FDI position was in 1990, when inflows stood at -$78 million.

“The country recorded negative inflows of $2.3 billion, primarily as a result of intracompany financial flows, profit repatriation and M&A transactions,” the report said.

A negative FDI figure does not necessarily mean foreign companies are exiting South Africa or that new investment has stopped. FDI data captures the net movement of capital between foreign parent companies and their local affiliates, including equity injections, reinvested earnings, intercompany loans, dividend payments, acquisitions and divestments.

The country’s negative data was driven by three main factors.

First, profit repatriation rose as foreign-owned companies transferred earnings to parent firms abroad rather than retaining them for expansion in South Africa. When companies distribute profits instead of reinvesting them locally, reinvested earnings — a major component of FDI — decline.

Second, intracompany financial flows turned negative. These flows include loans, debt repayments, cash pooling and other funding arrangements between multinational groups and their South African subsidiaries. Repayments by local affiliates to overseas parent companies can reduce net FDI, even where factories, offices and productive assets remain in the country.

Third, large M&A and corporate restructuring transactions affected the direction of capital flows. UNCTAD cited the spinoff and listing of Valterra Platinum by Anglo American and the acquisition of MultiChoice by Canal+ as notable transactions during the year.

Such deals can produce temporary swings in FDI data depending on how assets are financed, whether shareholders are paid abroad, and whether proceeds are transferred out of the country. They may therefore distort annual inflow figures without necessarily signalling a broad deterioration in the underlying investment environment.

Investment pipeline remains intact

Despite the negative inflow figure, South Africa remained an important destination for announced investments in manufacturing, energy and services.

UNCTAD said South Africa, alongside Algeria, Namibia, Ethiopia and Nigeria, attracted large projects in hydrocarbons, refining, battery storage and industrial production in 2025.

The country’s industrial base, relatively deep capital markets, established financial system and position as a gateway to southern Africa continue to support its appeal for multinational companies, particularly in renewable energy, critical minerals, logistics, automotive manufacturing and digital services.

South Africa is also increasingly positioned in global investment themes linked to energy transition and supply-chain diversification. Its mineral resources, including platinum group metals, manganese and other inputs used in clean-energy technologies, remain strategically important to investors seeking secure supply chains.

The report noted that the number of technology and digital multinational enterprises among the world’s 100 largest multinationals increased to 16 in 2025, including the addition of The Walt Disney Company and Naspers.

Botswana also records negative inflows

The country was not alone in recording negative FDI flows. Botswana posted net outflows of $654 million in 2025, its first negative reading since 2021.

The divergence across the continent reflects the fact that annual FDI figures can be heavily influenced by a small number of large corporate transactions, debt movements and profit distributions, rather than solely by new greenfield investment.

FDI remains the largest source of external finance for developing economies, accounting for about half of total external financing in 2025, ahead of remittances, official development assistance and portfolio flows.

Its importance extends beyond the capital itself, through its potential contribution to productive capacity, technology transfer, export growth and participation in global value chains.

Africa’s investment picture remains uneven

Africa’s total FDI inflows declined to $70 billion in 2025 from an exceptional $94 billion in 2024. The 2025 figure nevertheless remained historically strong, standing about one-third above the average recorded between 2010 and 2024.

UNCTAD said the 2024 total was lifted by a small number of unusually large transactions, particularly Egypt’s Ras El-Hekma construction and real estate megaproject.

Excluding exceptional peaks associated with large one-off transactions in South Africa in 2021 and Egypt in 2024, Africa’s 2025 performance was its strongest underlying FDI result in recent decades.

Egypt remained Africa’s largest FDI destination despite a 66.7 percent decline in inflows to $15.5 billion. Guinea recorded the fastest growth, with inflows rising 457.1 percent to $7.76 billion, supported by bauxite and iron ore investments.

Mozambique attracted $5.69 billion, largely linked to hydrocarbons and liquefied natural gas projects, while Nigeria ranked fourth after FDI inflows rose to $4.01 billion, driven mainly by oil and gas-related international project finance deals.

UNCTAD said FDI inflows rose across several West African economies, supported largely by investment in natural resources and energy.

“FDI inflows rose in several West African economies, supported mainly by investment in natural resources and energy,” the report said.

Guinea’s inflows increased more than fivefold to about $8 billion, driven by bauxite and iron ore projects that are strengthening the country’s role in global mineral supply chains.

Greenfield investment signals future opportunities

The report said African greenfield project values fell by almost one-third in 2025, although the number of projects increased. This suggests that investors continued to commit to a broader range of smaller projects despite geopolitical tensions, trade-policy uncertainty and a more selective global investment environment.

Greenfield projects are often viewed as a clearer measure of future productive investment because they involve the creation of new facilities, capacity and jobs, unlike mergers, acquisitions and intracompany financial transfers.

Competition for investment is increasingly centred on energy, infrastructure, technology and critical resources. African countries are attracting interest from Gulf and Asian investors, particularly in sectors linked to energy infrastructure, critical minerals, industrial production and logistics.

Africa’s least developed countries received about $33 billion in FDI in 2025, although inflows remained concentrated in a small number of economies and sectors.

The continent’s mineral reserves — including copper, cobalt, lithium, manganese, graphite and rare earths — are drawing greater investor attention as companies seek materials needed for batteries, renewable-energy systems and advanced manufacturing.

However, the gains remain uneven. Investment continues to be concentrated in countries with large natural-resource projects, established industrial bases or major infrastructure opportunities, leaving many African economies with limited participation in the sectors attracting the most global capital.

Outlook remains uncertain

The outlook for FDI in 2026 remains uncertain, with slower global growth, trade-policy shifts, geopolitical tensions and conflict likely to weigh on investment decisions.

UNCTAD said strong profits among the world’s largest multinational enterprises could support investment in high-value industries. However, productive investment is likely to remain subdued and uneven, with capital increasingly concentrated in a narrow group of sectors and locations.