Geneva, Switzerland — 27 June 2013 – Bad news for sectors like mining and industry in South Africa, is that foreign direct investment (FDI) flows into the country decreased by 24% between 2011 and 2012, according to the latest report of the United Nations Conference on Trade and Development (Unctad).
The report, which was released here yesterday, shows that South Africa recorded a decline from US$6billion (R60.6billion) in 2011 to US$4.6billion (R46.46billion) in 2012, reports Fin24.
Unctad said this was largely due to net divestment in the third quarter of 2012 as a foreign mining company offloaded its stake in a local subsidiary.
However, South Africa did remain Africa’s third-largest recipient of FDI inflows in 2012, after Nigeria and Mozambique.
Although the decrease in FDI represented a 24% year-on-year reduction, it was above the pre-recession average of US$3.9billion (R39.39billion) a year. Furthermore, South Africa experienced far more FDI inflows in greenfield investments, particularly in the renewable energy sector.
FDI flows into South Africa represented 9.1% of Africa’s total inflows in 2012, the report added.
South Africa’s total FDI inward stock stood at US$139billion (R1.4trillion) in 2012, representing 35.6% of gross domestic product (GDP), compared with 9.9% in 1995.
South Africa’s stock of FDI in Africa stood at US$18billion (R181billion), it added.
In 2012, FDI flows into Africa increased by 5% to US$50billion (R505billion).
Jorge Maia, head of research at the Industrial Development Corporation, said South Africa should not be concerned yet.
“Even though you did have a decline last year, obviously the global conditions remain very difficult. Most of the regions of the world experienced a decline in FDI flows. South Africa was not alone there,” he said.
Maia said there were reasons South Africa lagged behind Nigeria and Mozambique.
“In Nigeria there are a lot of inflows going into extractive industries, natural industries and the oil industry,” he said. “Mozambique was also attracting investment into its natural resources.
“The bulk of the big investment is focusing on specific natural resources such as gas fields and coal fields,” he pointed out.
Maia said South Africa’s performance was good in a year that most citizens viewed as difficult one. “We are competing in a very fiercely competitive global environment. Countries are scrambling for FDI and in Africa you’ve got so many countries wanting FDI,” he added.
“We will have to play the game very cleverly,” he concluded. “We have to make sure that we have an attractive investment environment in this country otherwise, we will lag behind.”
Source: Fin24. For more information, click here.