Hot on the heels of Minister of Finance Malusi Gigaba’s investment trip to the United States this week, comes the news that South Africa has made it onto the annual AT Kearney 2017 Foreign Direct Investment (FDI) Confidence report for the first time since 2014.
The ‘comeback kid’ took the last place on the list of the top 25 countries, and is the only African country to make the list.
The US, Germany and China took the first, second and third slots respectively.
“FDI inflows rose by 38% to an estimated US$2.4 billion last year after falling to their lowest level in 10 years in 2015,” said AT Kearney partner and chairman of the Global Business Policy Council, Paul Laudicina.
He acknowledged that investors were a little skittish around South Africa’s challenges relating to governance, exchange rate volatility and decreased trust in political leaders.
“The unemployment rate stands at 26.5% and electricity and transport infrastructure investments have stalled,” Laudicina pointed out, adding that on the other hand the country had “opportunities to capitalise on its improving economy and regional role”.
He said SA was the second largest economy in Africa after Nigeria and an “important gateway market” for foreign investors to the more than one billion people in sub-Saharan Africa.
“This region will be the primary source of global population growth in the coming decades, and investors may anticipate that with renewed improvements in South Africa’s infrastructure and education, the country is poised to lead one of the world’s next major manufacturing hubs,” Laudicina commented.
He pointed out that industry sector investors in particular indicated a strong preference for investing in South Africa, noting that the country’s large semi-skilled workforce was likely a draw.
Minister of Communications, Ayanda Dlodlo, welcomed AT Kearney’s report, pointing out that long-term investments in manufacturing would be a key driver of investment.
“We are also optimistic that the current UK-US Investor road show, led by the minister of finance, will bolster our investment efforts,” he said.
Dawie Roodt, chief economist at Efficient Group, shares global investment optimism, pointing out that SA has a massively undervalued currency, “amazingly attractive yields on our bond market” and “fantastic companies to invest in”.
“South Africa is a screaming buy,” he says, adding that following the downgrades by ratings agencies, the country probably needs at least two years to regain its investment status.
Charles Roth of the US-based Thornburg Investment Management, suggested in a blog that the political shake-up in SA could provide the opportunity for some “bargain-hunting” for global investors.
“Bottom up investors who like buying quality companies with bright earnings prospects at reduced prices should give the stocks of South African companies a careful once-over. This is especially true for companies with global exposure,” he wrote.
