SA's position as the launch pad for global companies into Africa is being threatened by other countries that are rolling out red carpets for investors, experts and business leaders are warning.
Nigeria, Kenya and Egypt pose the greatest risk to SA's continental competitiveness - despite their lacking advantages such as a sophisticated financial sector and a liquid stock exchange to match the JSE, which is Africa's largest bourse. SA also has one of the world's best legal systems.
But these competitive advantages are not enough to protect SA's reputation as an investor-friendly market and gateway to sub-Saharan Africa, experts say.
SA was falling behind its neighbours in terms of its relative competitiveness, with the biggest shortfalls stemming from increasing structural constraints, Business Unity SA said in a paper posted on its website.
A growing middle class among the 800-million people in sub-Saharan Africa was attracting multinational companies in sectors ranging from retail to consumer and financial services.
"If current growth rates continue, SA will certainly lose its dominant position in Africa. For example, by 2050 Egypt will be twice the size of the South African economy and Nigeria nearly three times as big as SA," Michael Jordaan, CEO of First National Bank, said yesterday.
"We need to up our growth game, not only to reduce unemployment but also to keep our gateway status."
Professional services firm Deloitte said the recent expansion by some of Africa's largest companies into sub-Saharan Africa was a wake-up call to local investors who still believed SA's long-held position as a gateway to the region would not be threatened.
Analysing foreign direct investment trends in Africa, the Africa head for Deloitte Consulting, Jacqueline Chimhanzi, said that competition for investment was accelerating, with SA increasingly facing the risk of losing out to countries such as Nigeria.
Nigeria attracted $11bn in investment in 2010 compared to SA's $1,6bn.
"Indeed, this trend is set to continue into the foreseeable future," Dr Chimhanzi said yesterday. "With interest in African markets on the rise - even from as far afield as Italy, despite the language barrier - SA needs to up its game."
Her analysis of Nigeria's growing importance confirmed another report yesterday, by analysts at Renaissance Capital, who predicted that Nigeria could overtake SA as the biggest economy in sub-Saharan Africa by 2016.
A Goldman Sachs Asset Management outlook for this year and next said African countries were becoming increasingly important for global economic growth.
Goldman Sachs analysts Jim O'Neill and Anna Stupnytska said they believed the Egyptian economy had the potential to overtake SA by 2023 in terms of gross domestic product, and Nigeria would be the largest African economy by 2039.
Imara Asset Management MD John Legat said yesterday: "Nigeria is a bigger consumer market than SA, with 150-million people, and it won't be long (before it is) a bigger economy than SA."
The frontier markets portfolio manager at Investec Asset Management, Malcolm Gray, said SA remained the preferred country for some companies in which to establish their head offices or invest in manufacturing for export into Africa.
But he said it was debatable whether SA was the launch pad into Africa, as some investors in sectors such as oil and gas would rather raise money in countries such as Canada and the UK than on the JSE.
"The saying that SA is the gateway to Africa is probably a nice marketing phrase but I don't know whether it is accurate because when we talk of Africa, it depends in which sector you are referring to," Mr Gray said.
The chief investment officer at BoE Private Clients, Daryll Owen, said the government should take the lead in making it easier for businesses to invest in SA, and for local companies to continue expanding into Africa.
Mr Legat said some of SA's neighbours were becoming preferred destinations for investors. He said Zimbabwe was increasingly able to serve Malawi's and Zambia's markets. Kenya had attracted African head offices for global groups such as Coca-Cola and General Electric.
Dr Chimhanzi said there was the risk of South African companies becoming complacent about seizing opportunities in the rest of Africa, based on the belief they would be approached as a channel into the continent.