Foreign Direct Investment into South Africa Soars

Johannesburg, South Africa

South Africa led the subregion as foreign direct investment (FDI) inflows into Africa jumped by 25% in 2011, according to the 2012 World Investment Report by the UN Conference on Trade and Development (Unctad).

The report, released in Geneva, Switzerland on Thursday, shows that FDI inflows to Africa soared from US$29.5-billion in 2010 to $36.9-billion in 2011, a level comparable to the peak of $37.3-billion achieved in 2008, prior to the onset of the global financial crisis.

FDI to South Africa rebounded from $1.23-billion in 2010 to $5.81-billion, making South Africa the second-biggest FDI destination on the continent in 2011 after Nigeria, which received $8.92-billion in FDI.

Oil, gas producers still dominant

Ghana ($3.22-billion), Congo ($2.93-billion), and Algeria ($2.57-billion) completed the top five African FDI destinations by Unctad’s reckoning, underscoring the dominance of oil- or gas-producing countries – South Africa being the sole exception.

Another significant African oil producer, Angola, also received major investment inflows, according to Unctad, “but divestment and repatriated profits by transnational corporations rendered net inflows negative”.

Continuing rises in commodity prices and a relatively positive economic outlook for Africa were among the factors contributing to the turnaround, the annual survey found.

For Africa as a whole, total FDI inflows declined. However, this was due to a drop in FDI to North Africa, with inflows to traditional strong performers Egypt and Libya coming to a halt as result of protracted political and social instability in those countries.

Improved investor perceptions

Overall, the continent’s FDI prospects for 2012 were promising, Unctad said, “as strong economic growth, ongoing economic reforms and high commodity prices have improved investor perceptions of the continent.”

Unctad’s figures show that South Africa’s FDI inflows for 2011 accounted for 13.6% of Africa’s total, while amounting to 31.8% of the country’s gross domestic product (GDP) in 2011 – up from 9.9% in 1995.

Jorge Maia, research head at South Africa’s Industrial Development Corporation, who presented Unctad’s report locally, said the country’s investment policy regime was “quite liberal compared to other countries”.

“South Africa is not only rich in natural resources, it also has very good infrastructure relative to its peers and very good technical skills,” Maia was reported as saying.

Leon Myburgh, Africa strategist at Citigroup, told reporters that Africa was outperforming most developed markets and some emerging markets as well.

“Given its relatively low state of development, there are huge opportunities for investment across the continent, either for new business or infrastructure,” Myburgh said. “These are being exploited and will continue to be exploited in coming years.”