South Africa among ‘top destinations for foreign investment’

The 2014 Foreign Direct Investment Confidence Index (FDICI) said South Africa is the only country in Africa on its list of 25, coming ahead of Switzerland, Spain, Japan and Italy. The US maintains its first place position from last year’s FDICI, followed by China and Canada.

FDICI highlighted investments in South Africa by UK-based BP and Google’s solar power project investment in the country’s Northern Cape as “signals of a positive trend” for the country.

According to FDICI, which charts forward-looking investment sentiment, nearly four out of five respondents “are more optimistic about the global economy than they were a year ago”.

The FDI flow figures are based on the latest statistics available from the UN Conference on Trade and Development (UNCTAD). Other secondary sources include investment promotion agencies, central banks, ministries of finance and trade, and major periodicals.

AT Kearney partner and study co-author Erik Peterson said: “We feel confident that despite a slow and uneven economic recovery, executives who make FDI decisions are regaining a sense of measured confidence. The 2014 FDICI is not only an indicator of FDI flows, but an excellent telescope into specific economic stories around the globe.”

FDICI reflects the findings of the ‘Africa Economic Outlook 2014’ (AEO), published last month by the African Development Bank Group, the Development Centre of the Organisation for Economic Co-operation and Development and the UN Development Programme. AEO said foreign investment in the continent, direct and portfolio, had “fully recovered” from the effects of the 2009 global economic crisis and is projected to reach a record $80 billion this year.

FDI and portfolio investment “could soon constitute Africa’s main source of financial flows if the current pace of growth is sustained”, AEO said. South Africa is likely to remain among the top recipients of FDI to the continent in 2014 with $4.8bn, AEO said.

AEO highlighted the development of South Africa’s manufacturing infrastructure which has led to the country becoming a supplier of components to the global automotive industry

The ‘World Investment Report 2013’, published by UNCTAD (264-page / 2.18MB PDF), said Chinese FDI stock in Africa at the end of 2011 stood at $16bn. South Africa was the leading recipient of Chinese FDI, according to UNCTAD. South Africa itself was the fifth largest holder of FDI stock ($18bn) on the continent in 2011 and the second largest developing country investor globally after Malaysia. “The majority of this outward stock can be attributed to reinvested earnings in the private non-banking sector,” UNCTAD said.

According to the African Development Bank, trade between China and Africa grew by 20% in 2012 to reach $26.4bn.

Ernst & Young’s (EY) market attractiveness survey on Africa (80-page / 2.4MB PDF), published earlier this year, said South Africa had led 15 African nation destinations in attracting new FDI projects (82%) since 2003.

EY’s survey said the US and UK were the “most notable investors” in South Africa from 2003-2011, with Germany, India and Australia making up the next top spots. According to EY, FDI inflows to South Africa are forecast to average about $10bn annually up to 2017, “with approximately 125,000 new jobs created as a result”.