- Johannesburg - The flow of
foreign direct investment (FDI) in SA, defined as longterm investment as
opposed to volatile portfolio flows into shares and debt instruments, looks
meagre .
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- How meagre? SA attracts on average less than 1% of total
FDI to developing countries.
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- The BusinessMap Foundation noted earlier this year that
investors were beginning to compare SA to Mexico due to their comparable
credit ratings, similar trading volumes for external debt and the importance
of inflation targeting in both countries.
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- Unfortunately, South African inflows of FDI do not begin
to match Mexico's. Admittedly, SA's FDI flows in recent years present a
far different picture from the negligible amounts of FDI pre1994, or the
disinvestments of the 1980s in response to political isolation of the apartheid
regime.
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- Yet in the "beauty contest" for investment
SA has not fared as well as its sound macroeconomic environment and good
infrastructure would suggest.
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- FDI into SA, as measured by BusinessMap over the past
nine years, has totalled about $22bn or roughly R131bn. This is on average
$2,4bn, or R14,6bn, a year. In dollar terms, the foundation recorded $520m
in FDI in the second quarter of this year, less than the revised figure
of $679m in the first quarter of this year.
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- If the first and second quarter's trend in foreign investment
continue throughout the year, the year average will be close to R4,872bn
or $600m, lower than the average from 1994-2002.
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- The South African Reserve Bank records actual flows.
By its measure FDI has been even lower. According to the Bank about 16bn
or R103m flowed into SA as FDI between 1994 and 2001.
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- Iraj Abedian, Standard Bank's chief economist, has rightly
said that an obsession with FDI is wrong, especially in countries like
SA that have developed local bond and equity markets that can be a source
of investment.
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- Yet SA needs FDI to offset persistent deficits on its
current account of the balance of payments and, most importantly, international
linkages, technology and skills transfer are all benefits held out by proponents
of FDI.
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- Rumney is executive director at The BusinessMap Foundation.
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- http://allafrica.com/stories/200310280304.html
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