South Africa has recorded a swing in foreign direct investment (FDI) outflows of $4.26 billion in the second quarter of 2025, according to the South African Reserve Bank (SARB). This marks one of the country’s sharpest quarterly outflows in recent history, driven primarily by transactions involving mining giant Anglo American as it spun off its platinum unit. The development underscores both the volatility of capital flows in resource-dependent economies and the structural shifts underway in South Africa’s mining sector.
The outflows contrast with the broader trajectory of the South African economy in the same period. According to SARB’s September 2025 Quarterly Bulletin, real GDP expanded at an annualised rate of 2.9% in Q2 2025, accelerating from 0.9% in the first quarter. Growth was powered by recoveries in the manufacturing and financial services sectors, signalling resilience even as investor sentiment was tempered by corporate restructuring.
READ ALSO: Building the South African Economy through Foreign Direct Investments, FDIs
Despite the stronger growth momentum, South Africa’s unemployment rate remains among the highest globally. SARB data shows the official unemployment rate stood at 33.2% in Q2 2025, only marginally down from the 33.6% recorded in Q1. The figures highlight a structural labour market problem that economic expansion alone has yet to resolve, raising questions about the inclusiveness of growth at a time when foreign capital is shifting outward.
Inflationary pressures have also edged upward, shaping the investment climate. Headline consumer price inflation rose to 5.6% in July 2025, up from 5.2% in June, remaining within SARB’s target band but uncomfortably close to the upper threshold. While global energy prices and domestic food costs contributed to the rise, the inflation trend adds another layer of caution for investors weighing exposure to South African assets.
On the external front, South Africa’s trade surplus narrowed to R48.2 billion in Q2, down from R82.4 billion in Q1. Export volumes were weighed down by softer global demand for key commodities, even as imports rose moderately. The contraction in the trade surplus, when paired with the sharp FDI outflows, illustrates the external pressures confronting South Africa’s balance of payments in 2025.
Fiscal Balancing Act
South Africa’s fiscal accounts also remain under scrutiny. The government’s net borrowing requirement stood at R192.5 billion in Q2, compared with R178.9 billion in Q1, reflecting persistent budgetary pressures. Public debt is projected to hover around 73.5% of GDP in 2025/26, a level that underscores the delicate task of stabilising finances while sustaining growth-friendly expenditure.
The Anglo American spin-off, while significant in scale, highlights broader questions about South Africa’s investment narrative. Structural reforms, persistent unemployment, inflationary pressures, and fiscal strains weigh heavily on investor perceptions. Yet the underlying economic growth achieved in the second quarter suggests that opportunities remain, particularly if policymakers can restore confidence and deepen structural reforms.
Looking ahead
South Africa’s record outflows in Q2 do not tell the full story of its economy. Beneath the headline numbers lies a nation achieving modest growth, wrestling with unemployment, and striving to manage fiscal and external balances. The challenge ahead lies in aligning macroeconomic resilience with investor confidence. If the right policy signals are sent, the tide of investment that has flowed outwards may yet find its way back to South African shores.
