Foreign Direct Investment In South Africa – Foreign direct investment in South Africa increased by 80% in 2013, making the economy once again Africa’s largest recipient at nearly $8.2 billion.

Foreign direct investment in South Africa increased by 80% in 2013, making the economy once again Africa’s largest recipient at nearly $8.2 billion. But if the advantages of the country are used more successfully, there are many more opportunities. Success is a manifestation of the special concern of the investor community.

Foreign Direct Investment In South Africa

Foreign Direct Investment In South Africa

South Africa has returned to the top spot as the largest recipient of foreign direct investment in Africa, but it is important that the country continues to improve its attractiveness as a major investment destination.

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In 2013, South Africa received $8.2 billion in foreign direct investment (FDI), followed by Mozambique with $5.9 billion. Nigeria followed with $5.6 billion. The figures are from the World Investment Report 2014, published by the United Nations Conference on Trade and Development (Unctad) on Tuesday 24 June. In 2012, South Africa was three countries behind Nigeria, Egypt and Mozambique.

Commenting on the report’s findings, Industrial Development Corporation head of research and information, George Miah, said various factors attract foreign direct investment to South Africa. Many of these factors were highlighted by participants in the 2013 Ernst & Young Africa Attractiveness Survey, which rated South Africa as the most attractive place to do business in Africa. This includes:

In addition, South Africa has a very diverse economy that is technologically advanced in many ways, Mia explained.

According to the South African Reserve Bank (SARB), direct investment inflows into South Africa reached R79.1 billion in 2013, according to figures from an Unctad report. Significant direct investment inflows were recorded in all quarters of the year, peaking at 47.4 billion rubles in the third quarter.

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According to the SARB, some of these loans relate to foreign loans from parent companies to subsidiaries in South Africa. According to Maia, the expansion of the foreign parent company’s stake in its subsidiary in the South African financial sector has been specifically addressed by the SARB, which Maia said is considered to be an increase in Barclays’ stake in Absa. Arger Telecom’s Cell C capital can also be included in the figures. More recently, Mariott Hotels may acquire Protea in the first quarter of 2014 for a direct investment of $8 billion.

However, the Barclays deal led to a similar cash flow, Absa’s acquisition of Barclays’ African assets, now known as Barclays Africa Group. This may contribute to South Africa’s FDI outflows in 2013. The latter amounted to $5.6 billion, as reported by Unctad, or R54.2 billion, according to the SARB, and put the country in a leading position in Africa. . Outside investors, said Maya.

A report from Unctad says global foreign direct investment grew by 9% in 2013 to $1.45 trillion. Africa as a whole grew by 4% to $57 billion. “It was quite a good result [for Africa], FDI flows to Asia increased by 3%, but of course the quantum when it comes to Asia is much bigger, $426 billion,” Mia explained.

Foreign Direct Investment In South Africa

Notably, 10 of the top 20 FDI recipients since last year are from developing or emerging economies. “Furthermore, developing economies accounted for the largest share of FDI inflows last year, at $778 billion, or 54 percent of the total.”

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“The relatively fast economic growth rates of emerging and developing countries, as well as their growing importance on the world stage, make them particularly attractive for FDI. Both market and sourcing investment opportunities are being pursued by the global investor community to develop. in the economy, as well as in their manufacturing, service and infrastructure sectors, and investments are made.

For example, in terms of market-seeking investments, the Unctad report argues that Africa’s middle class is becoming an increasingly attractive prospect for foreign investors. Unctad estimates that Africa’s middle class has grown by 30% in the past decade to 120 million people.

The increase in inflows to Africa in 2013 is mainly due to investments in Southern and Eastern Africa. Inflows to South Africa have almost doubled, reaching $13 billion. At the same time, FDI in East Africa increased by 15% and reached 6.2 billion dollars. In South Africa, South Africa and Mozambique were behind this development.

While FDI growth has been significant, Africa could do better in attracting direct investment if some barriers are removed. In various regional economic communities on the continent (such as SADC), tariff barriers have fallen significantly, but non-tariff barriers remain a major obstacle. “These [non-tariff barriers] are still the most important barrier when it comes to FDI, including cross-border investment and intra-regional trade, which is relatively low in Africa.”

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According to Mia, South Africa can take a lot from the report. The country faces a “highly competitive global investment environment”. South Africa competes for FDI with many economies around the world, many of which have significant comparative and/or competitive advantages. This means that “there is no room for complacency and the country must continue to try to improve its attractiveness as an investment base”.

“We demonstrate many advantages and positive aspects that contribute to the attractiveness of our country as an FDI destination. However, several factors have become apparent constraints and/or are of particular concern to global investors, such as the availability and cost of electricity and, more recently, weak sustained industrial activity in South Africa’s mining sector,” said he. Absa |: Corporate and Investment Banking > Insights and Events > Africa remains open for business despite pandemic

There is no doubt that the events that took place in South Africa at the beginning of July did not portray the continent in the best light, but Africa is one of the few remaining frontier markets that can generate significant investment returns for the patient investor.

Foreign Direct Investment In South Africa

While it is easy for armchair analysts to look at the recent social unrest in South Africa or the military coup in Guinea and say “Africa is not conducive to good business”, the debate is more nuanced than the headlines.

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A decade ago, ‘Africa’ was seen as a stereotypical frontier market. Over the past 10-15 years, domestic financial markets have evolved and country-specific data has emerged. It is clear that each of the 54 African countries presents its own unique challenges and opportunities.

Countries like Egypt and Morocco don’t necessarily come to mind when we talk about high-growth economies, but both have come to the fore since 2020, making several innovations to grow their economies and attract foreign investors. .

Across the continent, there is real concern that chronic shortages of critical infrastructure such as water, electricity and transport are hampering growth. Without these investments, African markets will not be able to realize their potential.

One of the concerns for those looking at Africa from the outside is that this lack of investment is creating a situation as we are now seeing in South Africa, where corporate and private tax cuts are expected to bear the brunt of large infrastructure and social projects. .

Pdf) The Impact Of Foreign Direct Investment On Economic Growth And Employment In South Africa: A Time Series Analysis

For example, if we look at the Foreign Direct Investment (FDI) data in South Africa, we actually see a positive trend as the chart below highlights.

President Ramaphosa’s drive to attract new investment has tripled net foreign direct investment (FDI) despite the impact of Covid-19. While Toyota South Africa has committed to producing alternative energy vehicles in the country, the automotive sector is one of the biggest beneficiaries as Mercedes and Ford invest in significant new infrastructure.

The alcohol industry has faced some massive interference and negative headlines over the past 18 months. However, we do see Heineken making an offer for local group Distel, which is now valued at R31bn. The deal represents Heineken’s biggest since its bid for China Resource Beer in 2018.

Foreign Direct Investment In South Africa

It’s not just big corporations that revolve around attractively designed properties and businesses. Tech analyst Maxim Bayen tracks venture capital activity on the African continent and notes that African tech startups raised $1.3 billion in funding in the first half of 2021, led by South Africa, Nigeria, Egypt and Kenya. This $1.3 billion is more than half of what was raised for African startups in 2019, and what is most impressive about 2021 is that 70% of these deals are funded by foreign investors.

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Many of these deals are in the fintech space and should improve access to finance and the ability to move funds across the continent more efficiently over time. Less friction in the ecosystem will benefit all stakeholders.

Chinese investments in Africa have their detractors, but as the London School of Economics points out, they use significant capital on the continent and in Chinese state-owned enterprises.

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