Direct investment booms in South Africa
By Bernard Sathekge (South Africa News)
South African direct investment in Africa has increased four times the rate of overall foreign direct investment coming into the country, according to the latest survey by the South African Institute of Race Relations.
Lucy Holborn, research manager at the institute, said while South African investment in Africa accounted for only 8% of investment outside the country, the trend over the past 15 years showed that it was growing at a much faster rate.
According to the survey, since 1994 African foreign direct investment has increased from R3.8bn to R115.7bn in 2009, or 31 times.
Holborn commented that it was “absolutely a good move” for both South African companies and individuals to start concentrating on investing in the continent, considering high levels of growth in some parts of the region.
“That will also help a shortfall in trade export into the euro zone countries, which has been declining since the start of the recession in 2008 and made worse by the current European debt crisis.
“Trade flows to Europe have declined from R45bn in 2009 to R11bn in 2010, especially trade exports to the UK.
“The UK is the biggest trading partner in Europe, which is impacting enormously on South Africa exports due to the recession,” she said.
But some economists have estimated that South Africa has lost a total of R75bn in exports since the start of the European debt crisis.
However, said Holborn, total South African foreign direct investment stock in all countries has increased from R67.7bn in 1994 to R535.7bn in 2009.
“The data, sourced from the South African Reserve Bank, shows that the United Kingdom is the single biggest recipient of all South African foreign investment, accounting for 38% of all South African foreign assets.
“However, much of this is in the form of nondirect investment, including portfolio investment, and long- and short-term loans. Only 13% of South African investment in the UK is direct investment by South African residents,” Holborn said.
In addition, she said, the survey shows that 76% of all South African investment in Africa was direct investment and Mauritius was the biggest investment destination, followed by Mozambique, Angola and Zimbabwe.
“Most of potential markets for South Africa are based in Europe, but the trend is changing gradually as investment is growing faster in Africa.
“The more South African companies explore this African market, the more potential profit and that will also give a boost to South African domestic GDP growth.
“It is highly likely that South African investment could triple in the next decade,” Holborn said.
Stanlib chief economist Kevin Lings concurred that it was high time for South Africa to look to other places than the euro zone in order to help boost its growth because the crisis in Europe was likely to remain for sometime.
Lings said there were a lot of things happening in Africa and that the continent had been well spotted globally for plenty of opportunities.
“Export to Europe is under pressure while Africa is gaining momentum as an alternative export destination.
“South Africa cannot look for growth in parts of Europe, Asia and US any more, but it must now concentrate next door and encourage its neighbours to develop their own infrastructure for business to move smoothly,” he said.
Lings said there had been an increasing number of South African companies from retail, finance, mining and banks expanding and exploring opportunities in Africa lately.
He added that the likes of Shoprite, Absa and Standard Bank were good evidence that there was growth in Africa and expected more companies to follow suit.
“China has become interested in investing in Africa over the last two years and every time when China becomes interested, the world takes notice.
“Africa has been growing fast compared to other regions of the world and is attracting more investment.
“How quick it will be growing in years ahead is to be seen, but there is potential of growing further,” said Lings.
Source: The New Age