George Herald | Chinese, US investment push up SA investment flows

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Chinese, US investment push up SA investment flows
08:33 (GMT+2), Fri, 06 July 2012

NATIONAL NEWS - Local foreign direct investment (FDI) flows reached the US5.9 billion 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 US1.2 billion in FDI, and the second highest number in Africa after Nigeria.

South Africa's FDI flows in 2011 represented 13.6 percent 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 percent stake in Massmart for US2.4 billion.

China's Jinchuan Group bought base metals company Meterex for US1.3 billion and delisted the company.

Finally, the Chinese Investment Corporation had bought 25 percent of diversified group Shanduka.for R2 billion.

"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 US42.7 billion in 2011, from US43.1 billion 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 US36.9 billion in 2011, from US29.5 billion previously.

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

Inward FDI to southern Africa recovered from a 78 percent decline in 2010, more than doubling its total in 2011 to US6.4 billion.

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

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

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

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

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

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

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

Global foreign direct investment reached US1.54 trillion in 2011, exceeding the pre-financial crisis average of US1.47 trillion between 2005 and 2007.

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

During 2011, FDI flows to developing countries throughout the world reached a record US684 billion, an increase of 11 percent on 2010.

Developing countries accounted for 45 percent 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 US1.6 trillion.

"Longer-term projections show a moderate but steady rise, with global FDI reaching US1.9 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.

Source : Sapa