A report from Eiris cites worries over the treatment of black workers and continuing fears about the poor performance of the South African economy as reasons.
Nelson Mandela, president of the African National Congress, recently callled for an end to sanctions, ending decades of opposition to investment there. The ANC has also asked foreign countries not to set special codes of conduct for investment in South Africa.
Eiris vets companies to check whether they meet a range of ethical criteria. Its recent report suggests fund managers have not yet been won over by the ANC's change of heart. It says: 'Most of our clients are still concerned, most notably about the level of wages companies pay.
'Most say that they will look at the record of companies which stayed in South Africa all along.' Tim Gregory manages about pounds 4.5m on behalf of investors in the Credit Suisse Fellowship Trust ethical fund. He said: 'Our current stance is to avoid investment in South African- linked companies. Given the treatment of black workers and the continuing uncertainty, we are continuing with that policy at the present time. We have to balance ethical considerations and the likely investment returns for our fundholders.'
An Eiris spokeswoman said: 'Despite the official ending of sanctions, funds are still reluctant to invest there, even where the treatment of workers is the same (as in other counties).
She added that potential options for UK funds wanting to invest in South Africa include the Community Growth Fund, which was launched last year by the country's black trade unions.
The fund has won praise from another UK fund manager, the Merlin Ecology Fund, which hopes to invest in it.
Ethical investors prepared to consider South Africa as an additional option within their portfolios may still find problems.
According to Eiris, only eight of the 113 company groups on its database for South African involvement are not on its lists for other reasons. For instance, 67 per cent also have military involvement.Reuse content