Ramaphosa’s investment drive paying off
Direct inflows more than double in 2018
PRESIDENT Cyril Ramaphosa’s investment drive has gathered momentum, with the latest Quarterly Bulletin from the South African Reserve Bank (Sarb) indicating that inflows more than doubled in 2018.
The Sarb said on Wednesday that inward direct investment had increased to R70.7 billion in 2018 from only R26.8bn in 2017.
Inflows surged despite direct investment liabilities reverting to an outflow of R8.2bn in the fourth quarter from an inflow of R28.7bn in the third quarter of 2018 because of the repayment of short-term loans by the South African subsidiaries to foreign parent companies.
Last year, Ramaphosa launched the campaign to raise $100bn (R1.42 trillion) in investments in the next five years in an effort to kickstart the country’s ailing economy.
Ramaphosa received pledges from local and international business leaders at the inaugural Presidential Investment Summit in October.
The pledges included R71.5bn from mining and metals group Anglo American towards sustaining its local operations. Auto manufacturer MercedesBenz pledged to invest R10bn. Naspers said it would put R6bn into the local economy, and drug maker Aspen Pharmacare said it would invest an additional R3.4bn in its Port Elizabeth plant.
Ramaphosa also led a presidential jobs summit at which the government, labour and business pledged to create 275 000 jobs through various agreements in a bid to address the country’s 27 percent unemployment rate.
On Wednesday, the Sarb said that real economic activity increased at a slower pace in the fourth quarter of 2018, with real gross domestic product (GDP) growth moderating to 0.8 percent in 2018 from a revised 1.4 percent in 2017 following two consecutive quarters of contraction in the first half of 2018 and an increase of 1.5 percent in the last two quarters of the year.
The slowdown in 2018 mainly reflected a contraction in real economic activity in the primary sector.
“By contrast, the real output of the secondary sector increased slightly following a small contraction in 2017, while growth in the real gross value added by the tertiary sector accelerated marginally,” the Sarb said.
Real gross fixed capital formation contracted 1.4 percent in 2018 following a moderate increase of 1 percent in 2017.
“Capital investment South Africa was constrained by, among other factors, low business confidence, regulatory uncertainty in the mining sector, in particular, electricity-supply disruptions, subdued economic growth and concerns about fiscal sustainability, said the report.
It said the ratio of nominal fixed capital formation to GDP declined to 18.2 percent in 2018 – its lowest level since 2005 and well below the 23.5 percent of 10 years ago.
The Sarb said unemployment decreased by 70 000 in the fourth quarter of 2018 to about 6.14 million, but increased by 259 000 from a year earlier. Discouraged work-seekers also increased by 303 000, or 11.9 percent, to about 2.84 million in the year to the fourth quarter of 2018, and by 108 000 from the third to the fourth quarter.
The unemployment rate which does not take discouraged work-seekers into account decreased from 27.5 percent in the third quarter to 27.1 percent in the fourth quarter, up from 26.7 percent a year earlier.