Return to index bodes well for country

SA has made it back into the AT Kearney foreign direct investment (FDI) confidence index after a two-year absence, indicating it could receive higher inflows of FDI over the next three years. But SA is now at the bottom of the table, ranking 25 out of the 25 countries in the index, in contrast to 2014, when it was near the middle at number 13, ahead of economies such as Switzerland and Malaysia.

The index is based on a survey of global business executives in 30 countries which provides a forwardlooking view of which markets investors tend to target for FDI in the years ahead.

However, the survey was conducted in January 2017 and it is not clear whether the executives would have been less enthusiastic about SA after President Jacob Zuma’s recent cabinet reshuffle and ratings downgrades.

Reserve Bank figures show that SA received R33.5bn in direct investment in 2016, up from R22bn in 2015, but on a net basis, FDI still recorded outflows, with South African firms’ outward FDI to other countries of R49.7bn in 2016 exceeding the foreign inflows of FDI.

AT Kearney said SA’s FDI inflows had risen last year after falling to a 10-year low in 2015 and SA’s comeback to the index would seem to suggest that the recent trends might continue. SA had opportunities to capitalise on its improving economy and its regional role, the consultancy said.

However, it described SA as having a “mixed outlook” with respect to attracting FDI in the years ahead, citing challenges related to governance, exchange rate volatility and decreased trust in political leaders, as well as unemployment and infrastructure challenges.

Against this, SA was the second-largest economy in Africa after Nigeria and “an important gateway market for foreign investors to the more than 1-billion people in subSaharan Africa”.

The region would be the primary source of global population growth in decades ahead and “investors may anticipate that with renewed improvements in SA’s infrastructure and education, the country is poised to lead one of the world’s next major manufacturing hubs”.

The US maintained its number one rank on the index, while the UK jumped one spot to rank fourth in a result that AT Kearney partner Paul Laudicina said was a surprise — after last year’s index had indicated that investors were very apprehensive about a Donald Trump victory in the US election and Brexit in the UK.

As with other foreign policy issues, the Trump administration’s approach to Iran has been full of mixed messages. Yet amid the confusion there has been an ominous tendency to demonise Iran and misrepresent the threat it presents. This could lead to an unnecessary and risky confrontation.

The administration’s various and conflicting responses to the 2015 Iran nuclear deal are a case in point. The deal, one of the Barack Obama administration’s major triumphs, requires Iran to curb its nuclear activities in return for a lifting of economic sanctions. During the campaign, President Donald Trump called it “one of the worst deals I’ve ever seen” and promised to tear it up or renegotiate it if he won the election. Last week, however, a letter from Secretary of State Rex Tillerson to the House speaker, Paul Ryan, signalled Trump’s intention to stick to the deal.

The letter certified that Iran was complying with the agreement, negotiated by five world powers in addition to the US and Iran. The International Atomic Energy Agency, which monitors the agreement with onsite inspectors and advanced technology, reached the same conclusion in its most recent report.

However, in the letter, Tillerson also stressed that “Iran remains a leading state sponsor of terror” and said the administration was reviewing whether suspending sanctions continues to advance US interests.

Such sequential confusions are nothing new for Trump’s headspinning positions on important national security issues. One possible reason Trump has muted his criticism is that the deal has clearly curtailed Iran’s nuclear programme. It sharply limits the amount of uranium Iran is permitted to enrich and imposes checks that will allow the international community to know if there is cheating. Further, if the US reneges on the deal, it will rightly bear the blame for its collapse and other world powers will be furious. New York, April 24.