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Foreign direct investment in SA rises

Johannesburg - Local foreign direct investment (FDI) flows reached the $5.9bn mark in 2011, boosted by American and Chinese investments, according to a UN report on Thursday.

The World Investment Report 2012 was prepared by the United Nations Trade and Development (UNTAD) and was presented to local journalists by the Industrial Development Corporation.

This was a sharp increase compared to 2010, when the country attracted just $1.2bn in FDI, and the second highest number in Africa after Nigeria.

South Africa's FDI flows in 2011 represented 13.6% of Africa's total for last year.

Investment last year had been boosted by three large investments, said Jorge Maia, the IDC head of research.

US retail group Walmart had bought a 51% stake in Massmart Holdings [JSE:MSM] for $2.4bn.

China's Jinchuan Group bought base metals company Metorex for $1.3bn and delisted the company.

Finally, the Chinese Investment Corporation had bought 25% of diversified group Shanduka.for R2bn.

"With the exception of South Africa, Africa's leading recipients of FDI in 2011 were oil and/or gas producers," said Maia, at the report launch.

The report was compiled by the United Nations Trade and Development (UNTAD). The IDC presented the report to local journalists earlier in the day.

Ghana, Congo (Brazzaville) and Algeria rounded out the top five investment destinations.

Maia noted that FDI continued to flow to oil-rich Angola, but divestment and profit repatriations rendered the investment flows negative for this country.

FDI flows into Africa fell for the third consecutive year to reach $42.7bn in 2011, from $43.1bn in 2010.

This was largely due to a contraction in investment flows to North Africa, as a result of instability in Egypt and Libya.

This region had traditionally accounted for a third of investments in Africa.

However, FDI flows to sub-Saharan Africa jumped to $36.9bn in 2011, from $29.5bn previously.

"The rebound in FDI to South Africa contributed substantially to this recovery," said Maia.

Inward FDI to southern Africa recovered from a 78% decline in 2010, more than doubling its total in 2011 to $6.4bn.

Developed countries invested relatively less in Africa compared to other regions.

Developing countries and transition economies increased their share of greenfield projects from 45% in 2010 to 53% in 2011.

East and South East Asian countries were the largest investors in Africa, with a 15% share of greenfield projects, up from 11% in 2010.

South Asia, which includes India, had a 13.5% share.

Investment from African sources, including South Africa, accounted for 12.6% of this total.

South Africa's total FDI stocks - representing the cumulative total investment in the country - now accounted for 31.8% of GDP in 2011.

This was triple the amount of FDI stocks in 1995, when the foreign investment accounted for just 9.9% of GDP.

Global foreign direct investment reached $1.54 trillion in 2011, exceeding the pre-financial crisis average of $1.47 trillion between 2005 and 2007.

But FDI flows were still 23% below the global pre-crisis peak, said Maia.

During 2011, FDI flows to developing countries throughout the world reached a record $684bn, an increase of 11% on 2010.

Developing countries accounted for 45% of global FDI flows in 2011.

This increase was driven by East and South-East Asia, as well as Latin America, he said.

UNTAD predicted slower growth in 2012 and a possible levelling off of investment flows to $1.6 trillion.

"Longer-term projections show a moderate but steady rise, with global FDI reaching $1.9 trillion in 2014, barring any macroeconomic shocks," said Maia.

Developing and transition economies were expected to maintain their high levels of FDI over the next three years.

The eurozone crisis and a fragile economic recovery would test the FDI recovery in developed countries, however.

Africa's FDI prospects were deemed promising, with strong economic growth, continuing economic reforms, and high commodity prices.

For the first five months of 2012, purchases of African firms by foreign buyers had more than doubled compared to the same period a year earlier.

South Africa was placed 14th on a list of top 20 investment destinations for transnational corporations - ahead of the Republic of Korea.

China, followed by the United States, topped the list.

Maia noted that there was a new focus on sustainable development as an investment goal.

A series of crises in finance, food security, and the environment were having a profound effect on investment policy.

"Mobilising investment and ensuring that it contributes to sustainable development objectives is a priority for all countries," he said.

 
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