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Johannesburg - A healthy Nigerian economy could be beneficial for South Africa, the SA Chamber of Commerce and Industry said on Monday in a statement.
However, CEO Neren Rau said this is only if domestic companies are able to strengthen their business links with Nigeria, which is now Africa's economic giant.
"This development is also an important signal that South Africa is not the only investment destination in Africa. South Africa will now face stronger competition from Nigeria for foreign investment."
This meant South Africa would have to review its policies and approach to investor confidence.
The biggest economy
On Sunday Nigeria claimed the crown as the biggest economy in Africa overtaking South Africa.
The new data was released by Nigeria's national bureau of statistics office after a rebasing of its gross domestic product, which showed that the economy grew $453bn in 2012 and expects a jump to $509bn for 2013.
The finance ministry on Monday welcomed the news, saying that Nigeria's new status is proof that Africa is on the rise.
It added that South Africa will continue to forge trade and investment ties with Nigeria and other African countries.
Time for incentives
Rau said business needed to be offered incentives by government to positively affect investor confidence.
"Business must experience a welcoming investment environment. Several current legislative proposals will incur significant increases to the cost of doing business, weaken property rights and create uncertainty," he said.
"Examples include the investment bill (PPIB), private security amendment bill (PSIRA) and mining legislation."
Investor confidence
To improve investor confidence, government must consult with the business community specifically on the impact legislative proposals might have on investor confidence and the cost of doing business.
"This must then be reflected in mandatory Regulatory Impact Assessment (RIA) processes for each policy proposal," he said.
"To enhance certainty in the business environment, the motivation for each policy proposal should be linked to the National Development Plan."
