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Foreign investment in SA dives in 2010

Jul 26 2011 18:22 Sapa

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Johannesburg - South Africa's share of foreign direct investment (FDI) fell 70% in 2010 from the previous year, according to a United Nations Conference on Trade and Development report released on Tuesday.

South Africa "saw its inflows fall by over 70% to $1.6bn, a level amounting to only one-sixth of the peak recorded in the country in 2008", according to the World Investment Report 2011.

However, Prof Stephen Gelb of the University of Johannesburg cautioned that FDI did not give "the full story", as foreign flows were not just about money.

"It's about the entry into the economy of a bundle of resources," he told reporters.

These included money, skills, business models, management capabilities, and new products and process.

"This is much more important for long-term growth than US dollars."

It was however difficult to measure these benefits across countries, he said.

South Africa ranked tenth in Africa in 2010 in terms of inflows received, and received just under 3% of the African total of FDI. It had dropped from fourth place in 2009, when it received 9% of total inflows to the continent.

Angola was the top-ranked African country, followed by Egypt, Nigeria and Libya.

South Africa's share of FDI in 2010 put it 69th in the world rankings.

To put this in perspective, Chile received $15bn and ranked 19th. Indonesia received $13bn and ranked 20th, Gelb said.

The FDI performance index - which looks at the share of FDI inflows making up gross domestic product (GDP) - puts South Africa 128th in the world, far behind the 85th place it achieved in 2009.

Burkina Faso was ahead of South Africa at 127th, and Italy was in 126th place.

Gelb expected South Africa's performance to improve this year.

"2010 performance for South Africa was possibly an aberration... we're likely to do much better."

According to data from the SA Reserve Bank, South Africa received $707m in FDI in the first quarter of 2011. This was almost half the $1.6bn in FDI received in the whole of 2010.

It was not only South Africa that did badly. Africa's FDI performance in 2010 was "not great", Gelb said.

"Africa did not share in the rise in FDI inflows experienced by other developing economies."

The continent's FDI inflows for 2010 fell 9% from 2009, to $55bn.

In 2010, Africa received 10% of the developing economy inflows and 4% of world inflows.

This compared to 2009 when Africa received 12% of developing economy inflows and five percent of world inflows.

Overall, developing economies did well, attracting 52% of FDI inflows which was the first time they had taken the lion's share from developed countries.

In another global first, emerging economies made up 10 of the top 20 recipients of FDI inflows, with China and Hong Kong leading the way, followed by Brazil.

Outward flows of FDI from developing economies also increased to about one-third of the global total. This was a big increase from 16% in 2009.

"In addition to strong performance in attracting foreign direct investment, developing countries became much more important in terms of sources of FDI flows into other economies," said Gelb.

Most of this was south-south investment, with 70% of the FDI flowing between developing economies.

Global foreign direct investment had not returned to pre-financial crisis levels, although it had shown some recovery.

It rose 5% to $1.24 trillion in 2010, but was still 37% below its 2007 peak.

According to the report, barring any economic shocks, FDI should recover to pre-crisis levels in the next two years.
sarb  |  united nations  |  fdi  |  gdp  |  sa economy
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