Patel expects sharp decline in foreign direct investment in 2021
TRADE, Industry and Competition Minister Ebrahim Patel has warned that South Africa’s foreign direct investment will experience a sharp decline next year as the Covid-19 pandemic has driven the appetite for new investments to an all-time low.
Patel told a preparatory briefing of the Third South African Investment Conference scheduled for next Wednesday and Thursday that the UN Conference on Trade and Development World Investment report for 2020 forecast a drop of about 40 percent in foreign direct investment flows this year, and that the decline would continue even in 2021, only recovering in 2022.
He said that the economic outlook was highly uncertain as South Africa was bracing for the next credit ratings downgrade, following a deeper recession, with its growth set to contract by 8.2 percent this year.
“Foreign direct investment is expected to decrease by a further 5 to 10 percent in 2021 and to initiate a recovery in 2022,” Patel said. The outlook is highly uncertain.
“They say the outlook is tentative and uncertain, the prospects of foreign direct investment recovering robustly and quickly depends on the duration of the Covid-19 crisis and the effectiveness of policy instruments to deal with the various challenges and to mitigate the effects of the pandemic.”
The previous two conferences in 2018 and 2019 mobilised R664 billion in investment commitments. This year’s conference aims to re-ignite economic growth and boost confidence in the country’s recovery plan. Patel said the conference would assess the progress made in translating the pledges to investment flows.
“None of the pledges that have been made have disappeared. No company has written to us to say they withdraw their pledge, or they will no longer continue,” he said.
“What has happened is a number of these pledges have indicated they will slow down the implementation, certainly in part because of Covid-19.”
President Cyril Ramaphosa’s economic adviser, Trudi Makhanya, said Ramaphosa would use the platform to discuss infrastructure as the key element that underpins economic growth, among other issues.
“There will also be a panel on land reform and unlocking agricultural value chains. We have seen some steps in the land reform process in terms of releasing land, the sector itself thinking about a potential development agency that’s run by the sector,” Makhanya said.