South Africa has dropped five places to 12th in a global ranking of preferred investment destinations among developing economies, highlighting waning foreign investor confidence amid mounting structural and political pressures.

The latest Kearney index points to persistent challenges in the country's mining sector, which has long been considered a cornerstone of its economic appeal.

Output in the sector declined by 2.7 percent year-on-year in November, according to Statistics South Africa, with logistics bottlenecks and failing transport networks constraining exports of key commodities such as coal and iron ore.

Kearney said a combination of domestic and global pressures is dampening demand. "Domestic political uncertainty, infrastructure issues, increasing operational costs, and global trade tensions have all converged to impact demand for South African minerals exports," the firm noted.

While natural resources remain the country's strongest draw, cited by 36 percent of surveyed investors, other fundamentals are proving less compelling. Ease of doing business and governance each attracted just 22 percent, while workforce skills and economic performance scored 23 percent and 24 percent, respectively. Infrastructure quality, including roads, ports, and power supply, registered only 25 percent, underscoring persistent capacity gaps.

The findings come shortly after scrutiny of investment pledges announced at a conference hosted by President Cyril Ramaphosa. The event reported commitments totaling R415 billion, approximately $22.5 billion at current exchange rates, from 22 countries.

However, analysts have questioned the credibility of the figures when compared with official data.

Government figures indicate that total commitments since 2018 have reached R1.14 trillion, roughly $61.8 billion. Yet actual realised investment remains modest. Data from Statistics South Africa shows new investment rose by just 1.3 percent in the final quarter of 2025, contributing only 0.2 percentage points to overall economic growth.

Kearney also warned that rising geopolitical tensions, particularly in the Middle East, could further dampen global capital flows. "Capital continues to flow, but companies are becoming more selective about where they invest," said Erik R Peterson.