'No time for complacency as SA moves up FDI rankings'

Foreign direct investment (FDI) looks set for a resurgence – and Africa and SA are expected recipients. But SA is currently shooting itself in the foot, with a horrendous longterm strike rating. And, at the moment, we have the now-historic platinum strike, a short-time (as yet) sugar strike, and now a metal workers’ strike. Whether the latter two do become equally longbearded ancients isn’t likely – if you look at past events. But, in the now, it’s anybody’s guess. But it certainly has hammered a nail into SA’s reputation as a reliable exporter. And overseas columnists are betting on it wielding a nine-pound hammer on SA’s FDI attractiveness this time around as well. But it’s good news from the global recovery point of view, if you read through the 2014 AT Kearney Foreign Direct Investment (FDI) Confidence Index. The current data now shows clear signs of renewed confidence. According to Kearney, nearly four of every five respondents are more optimistic about the global economy than they were a year ago (50%). And the good news here is that Kearney suggested that this optimism had “the potential to become a self-fulfilling prophecy”, as a return to normal levels of investment would significantly contribute to future growth. The index also reveals that “a core group of developing economies continues to enjoy widespread confidence among business leaders”. It listed China holding steady in second place. Brazil (5th) and India (7th) both had strong showings. Other important emerging markets, such as the United Arab Emirates (11th), Mexico (12th), SA (13th), Malaysia (15th), and Indonesia (25th), are also among the top 25. Kearney also noted that Africa had “bucked 2013’s lethargic trend” with a 12% increase to US$47.6 billion in FDI. Its growth, it added, was driven partly by investment in extractive industries, but manufacturing and services are also seeing increased interest. To find out the local feelings on this latest FDI news, we bounced the executive draft of the report off two of SA’s top trade economists – Luke Doig, senior economist at the Credit Guarantee Insurance Corporation (CGIC) and Shireen Darmalingam, macroeconomic analyst for Standard Bank Research. Improved confidence around global FDI intentions are obviously a welcome development, according to Doig, ref lecting as they do improved global economic prospects over the coming years. “SA’s notable improvement to 13th may, however, be at risk – given that our growth prospects are under threat together with policy uncertainty,” he told FTW. “Notwithstanding this, the country remains the hub of activity in southern Africa.” Casting his telescope on sub-Saharan African (SSA), Doig focused on the fact that there were other studies corroborating the improvement in attractiveness. And this despite the risks of doing business on the continent. “Many governments realise the urgent need for diversification away from extractive industries. And the growing middle class offers an outlet for manufacturing and service industry activities. “SSA also has an enormous infrastructural deficit. And this too is attracting considerable interest, which should only deepen and accelerate over the next decade.” Darmalingam also applauded SA’s progress in the FDI index. “However,” she said, “SA shouldn’t indulge in complacency. We need to implement programmes to attract investment to our shores on a sustainable basis, especially during these times of economic uncertainty.” Inward FDI to SA more than doubled in 2013 to R79bn from R37.5bn in 2012. “However,” Darmalingam added, “downside risks to the outlook exist. This includes both domestic uncertainties and the speed and shape of global economic activity in 2014. “A weak global economic recovery may result in deterioration of commodity exports and in a slowing down or reduction of investment projects.” INSERT & CAPTION Many governments realise the urgent need for diversification away from extractive industries. – Luke Doig