Morocco overtakes South Africa in Africa investment rankings

Morocco’s rise past South Africa in the rankings of Africa’s most attractive investment destinations has sharpened questions about the execution of Pretoria’s industrial policy, particularly in the automotive sector, a pillar of the economy that accounts for roughly 5% of gross domestic product.

The judgment comes from the latest RMB Where to Invest in Africa report, published on Tuesday, which places Morocco fourth and South Africa fifth. Seychelles holds the top position, followed by Mauritius and Egypt. The study identifies Morocco’s industrial transformation, with vehicle production doubling since 2015, as a key driver of its improved standing.

The accountability question now sits squarely with the department of trade, industry and competition. Minister Parks Tau said this month that South Africa will phase out semi-knocked-down vehicle assembly, warning that if the continent’s most industrialised economy does not build vehicles that markets such as Europe will buy, it will lose those markets. The EU is the largest export destination for the country’s automotive industry, absorbing about two-thirds of all vehicles built locally, but the bloc is experiencing an accelerated consumer shift to new hybrid technologies.

South Africa’s automotive master plan has set a target of raising locally manufactured component content from current levels of around 38% to 42% to 60%. Paul Cooke, from Investec’s corporate and investment banking franchise, described the new-energy vehicle transition as an industrial imperative. In a note, he said that as demand shifts towards cleaner vehicle technologies, South Africa needs to secure a share of their production, and that with Europe and the UK enforcing stricter carbon measures and zero-emission requirements, failure to gear local production towards new-energy vehicles risks eroding established export markets while increasing reliance on imports. A pragmatic path, he argued, will likely require flexible manufacturing across internal combustion engine, hybrid, plug-in hybrid and electric vehicle technologies while the market evolves.

The policy demands are echoed in a recent report by global accounting and advisory firm PKF, which found that while South Africa retains important competitive strengths, including established investment by original equipment manufacturers and an extensive component-supplier network, retaining those attributes will require co-ordinated action among government, manufacturers, infrastructure providers and the wider automotive ecosystem. The firm listed priority areas: accelerating localisation, improving the reliability and cost competitiveness of electricity and freight logistics, securing future vehicle production mandates, developing new-energy vehicle manufacturing capabilities, and strengthening the domestic supplier base.

Ziyaad Moosa, a partner at PKF Johannesburg, framed the stakes in explicitly institutional terms. South Africa faces growing competition from automotive manufacturing hubs such as Morocco, Thailand and Mexico, which are aggressively vying for international production mandates. The decisions made over the next few years, he said, will determine whether the country attracts the next generation of automotive investment or gradually loses production volumes, export opportunities and industrial capacity to competing markets. The industry, he added, needs more than ambitious targets; it needs a competitive operating environment, faster policy execution, and the confidence of global manufacturers to commit their next generation of investment to South Africa.

Isaah Mhlanga, chief economist at RMB, told Business Day that Morocco’s move above South Africa is best understood as a growth momentum story. Industrialisation, export diversification, infrastructure investment and macroeconomic stability have strengthened Morocco’s position. He was careful to note that South Africa has not been contracting; it has been growing positively, but at a slower pace than a fast-growing Morocco, hence the overtaking. Morocco has been growing at close to 5% for the last couple of years, while South Africa has been stuck at 1% for the last decade, with 1% expected this year and next.

The investment bank said South Africa remains a significant investment market, supported by deep financial markets, improving reform delivery and substantial shock-absorbing capacity, but slower growth continues to place pressure on its ranking. Mhlanga pointed to visible sector-level evidence: Morocco has been industrialising, and its proximity to Europe has allowed it to attract automotive producers making low-cost goods for export into the European market. He cited Nissan’s departure from South Africa for Morocco, saying the company moved precisely because Morocco has been doing the right reforms to encourage automotive investment, while large established manufacturers in the domestic market have been suffering and reducing prices when competing with cheaper Chinese brands. He also noted that energy problems in recent years, driven by load-shedding, contributed to raising the cost of doing business locally.

By contrast, tourism is another sector where Morocco is outperforming. The RMB report notes Morocco recorded 19.8-million arrivals in 2025 and receipts of about $13bn, and the country is set for further boosts as it co-hosts the 2030 Fifa World Cup with Spain and Portugal, targeting 26-million annual tourists by the end of the decade. South Africa’s tourism recovery, while positive, with a record 10.5-million international arrivals in 2025, up 17.7% on 2024, lacks a demand catalyst of comparable scale. The country has set a target of 15-million international visitors by 2030. A decade ago the two countries were on par, each welcoming about 10-million visitors a year, while Tunisia was a distant third with 5.7-million.

Meanwhile, on the reform front, the Operation Vulindlela progress report, covering April to August, notes significant progress in areas such as visa reform. Half of the reforms in that area have been met, and the rest are on track to meet their objectives. Achievements include the introduction of the trusted tour operator scheme, the trusted employer scheme, electronic travel authorisation and the meetings, exhibitions, events and tourism scheme. Whether that pace of execution can extend to the automotive sector’s demands, and before Morocco consolidates its advantage, is now the open question facing the department of trade, industry and competition.