Back in in­vestors’ good books

South Africa favoured as an an in­vest­ment prospect due to its strong in­fra­struc­ture and man­u­fac­tur­ing po­ten­tial

The New Age (Gauteng) - - BUSINESS - SELLO RABOTHATA sel­lor@the­

SOUTH Africa has clawed its way back into the ranks of coun­tries at­trac­tive to for­eign di­rect in­vest­ment (FDI), while neigh­bour­ing Botswana has been named the most at­trac­tive for FDI.

This emerges from two dif­fer­ent re­ports re­leased this week. Quan­tum Global’s re­search arm, in its Africa In­vest­ment In­dex 2016, has Botswana at num­ber one and SA fourth af­ter Morocco and Egypt.

The other re­port is the 2017 AT Kear­ney For­eign Di­rect In­vest­ment Con­fi­dence In­dex which says de­spite its re­cent credit rat­ing down­grades and po­lit­i­cal risks, South Africa has climbed back into the top-listed coun­tries for FDI.

“SA makes a come­back, likely as a re­sult of im­prov­ing short-term eco­nomic prospects and the long-term in­vest­ment po­ten­tial in the coun­try’s man­u­fac­tur­ing sec­tor,” AT Kear­ney’s re­port said.

“De­spite some con­tin­ued eco­nomic volatil­ity due to low global com­mod­ity prices, the Mid­dle East and Africa make a come­back on the in­dex af­ter a two-year ab­sence,” it said.

The United Arab Emi­rates ranks 21st, with SA at 25th.

“This could sig­nal a de­sire by global in­vestors to di­ver­sify the lo­ca­tion of the FDI af­ter sev­eral years of a flight to safety trend.”

The re­port said that while over­all FDI flows to Africa de­creased 5% in 2016 to an es­ti­mated $51bn (R670bn), SA bucked the over­all re­gional trend, with UN’s Con­fer­ence on Trade and De­vel­op­ment es­ti­mat­ing its FDI in­flows in­creased 38% in 2016.

“It should come as no sur­prise, then, that South Africa claims the fi­nal spot in the top 25.”

The coun­try’s re­turn to the in­dex would seem to sug­gest that re­cent FDI trends may con­tinue: FDI in­flows rose 38% to an es­ti­mated $2.4bn last year af­ter fall­ing to its low­est level in 10 years the pre­vi­ous year.

“On one hand, South Africa faces chal­lenges re­lated to gover­nance, ex­change rate volatil­ity, and de­creased trust in po­lit­i­cal lead­ers.

“The un­em­ploy­ment rate stands at 26.5%, and elec­tric­ity and trans­porta­tion in­fra­struc­ture in­vest­ments have stalled.

“On the other hand, the coun­try has op­por­tu­ni­ties to cap­i­talise on its im­prov­ing econ­omy and re­gional role.

“Its GDP growth is ex­pected to reach 0.8% in 2017 and dou­ble to 1.6% in 2018.”

It said that in­vestors may an­tic­i­pate that, with re­newed im­prove­ments in South Africa’s in­fra­struc­ture and ed­u­ca­tion, the coun­try is poised to lead one of the world’s next ma­jor man­u­fac­tur­ing hubs.

“South Africa’s large semi-skilled and un­skilled work­force is likely a draw for these in­vestors as well.”

On the other hand, ac­cord­ing to the Africa In­vest­ment In­dex 2016, Botswana scores highly on its re­search based on a range of fac­tors that in­clude im­proved credit rat­ing, cur­rent ac­count ra­tio, im­port cover and ease of do­ing busi­ness.

Prof Mthuli Ncube, head of Quan­tum Global Re­search Lab said: “De­spite con­sid­er­able ex­ter­nal chal­lenges and the fall in oil prices, many of the African na­tions are demon­strat­ing an in­creased will­ing­ness to achieve sus­tain­able growth by di­ver­si­fy­ing their economies and in­tro­duc­ing favourable poli­cies to at­tract in­ward in­vest­ments. Botswana is an ex­am­ple.

“Its strate­gic lo­ca­tion, skilled work­force and a po­lit­i­cally sta­ble en­vi­ron­ment have at­tracted the at­ten­tion of in­ter­na­tional in­vestors lead­ing to a sig­nif­i­cant in­flux of FDI.”

Ac­cord­ing to the re­port, the top five African in­vest­ment des­ti­na­tions at­tracted an over­all FDI of $13.6bn.

Morocco was ranked sec­ond on the in­dex based on its in­creas­ing solid eco­nomic growth, strate­gic ge­o­graphic po­si­tion­ing, in­creased for­eign di­rect in­vest­ment, im­port cover ra­tio and an over­all favourable busi­ness en­vi­ron­ment.

Egypt was ranked third due to an in­creased for­eign di­rect in­vest­ment and real in­ter­est rates and a grow­ing ur­ban pop­u­la­tion.

South Africa, fourth, scored well on the growth of GDP fac­tor, ease of do­ing busi­ness in the coun­try and sig­nif­i­cant pop­u­la­tion.

Zam­bia was the fifth coun­try on the list due to its sig­nif­i­cant do­mes­tic in­vest­ment and ac­cess to money sup­ply.

Mthuli said: “With a pop­u­la­tion of more than a bil­lion and a rapidly grow­ing mid­dle class, Africa clearly of­fers sig­nif­i­cant op­por­tu­ni­ties to in­vest in the con­ti­nent’s non-com­modi­ties sec­tors such as fi­nan­cial ser­vices, con­struc­tion and man­u­fac­tur­ing, among oth­ers.

“How­ever, struc­tural re­forms and greater pri­vate sec­tor in­volve­ment are cru­cial to un­lock­ing Africa’s true po­ten­tial.”


GOOD CUR­RENCY: South Africa re­mains an at­trac­tive mar­ket for for­eign in­vest­ments de­spite re­cent down­grades and po­lit­i­cal risks.

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