Changing offshore investment limits: A solution looking for a problem

South Africa’s investment shortfall reflects weak governance and a lack of viable projects, so reducing offshore limits would weaken institutional savings without creating productive domestic investment.

• Institutional savings reached an estimated R16.1tn at the end of June 2026, with 31.8%, or about R5,131bn, invested in foreign assets.
• The JSE is highly concentrated: basic materials and financials represented 61.6% of local free-float capitalisation in September 2026, compared with 18.4% in the FTSE Global Total Cap Index, while South Africa represented about 0.4% of that global index.
• The authors’ first counterfactual assumes a 45% offshore allowance from 2011 and estimates a 2025 savings pool of R17.5tn, compared with the actual R15.8tn, even though domestic assets would have been R0.7tn lower.
• A second scenario produces an R18.5tn pool in 2025, while a full-use scenario produces R19.4tn, or 23% above the actual outcome, with domestic assets only R0.1tn below the actual level.
• Fixed investment averaged about 16% of GDP in South Africa over the past 15 calendar years, compared with approximately 42% in China and more than 20% in most emerging markets, while successful private investment has concentrated in areas such as renewable energy, telecommunications, mining, agriculture and tourism.

Takeaway: The authors argue that policy should improve public-sector governance and restore competitive advantages, since forced local investment would raise concentration risk and could direct capital into marginal projects while making South African savers poorer.