EY’s latest Africa Attractiveness report reveals that South Africa attracted the highest number of FDI flows projects in Africa in 2018.
The high number of FDI inflow projects come as a surprise since SA has had weak investor confidence. The business confidence in the second quarter remained at 28 flat unchanged from the previous quarter, a survey by Rand Merchant Bank showed.
“Critically lacking is confidence, both at the consumer and business level, and the private sector holding off on new capital spend until more certainty on the country’s future direction emerges,” a part of the report read.
Report authors called on the government to urgently articulate policy direction, solve the ongoing land reform issue, address the challenges facing the failing state-owned-companies in order to create a more business-friendly environment.
A major cause of concern which could have contributed to the low investor confidence is the poor state of state-owned enterprises (SOEs) many of which have been dependant on government bailouts to remain afloat, hurting the fiscus.
While these SOEs underperformance is greatly affecting the SA economy, the government is yet to come up with a workable turnaround plan to rescue these entities.
“An urgent focus on implementing economic reforms as outlined in the President’s economic stimulus and recovery plan announced in September 2018 and progressing State-Owned Companies plans to strengthen governance and stabilise cash flows, will go a long way towards stimulating increased FDI flows,” EY Africa Government & Public Sector Leader Sandile Hlophe said during WEF currently ongoing in Cape Town while launching the EY Africa Attractiveness report 2019.
While South Africa led in the number of FDI inflow projects, it only attracted USD 5 Mn in FDI placing it behind Egypt (USD 12 Mn), Algeria (USD 9 Mn), Nigeria (USD 8 Mn), Ethiopia (USD 7 Mn) and even Zimbabwe (USD 6 Mn).
The report cautioned that if the Cyril Ramaphosa-led country fails to solve its political instability and provide better leadership, its leading FDI position may further decline.
Worthy to note also, the report named South Africa as the most extensive investor into the rest of the continent. Last year, South African investors place a record 10 projects in Nigeria, totaling USD 375 Mn. South African investments also increased in Kenya attracting USD 190 Mn in capital spread across six projects.
While addressing the attendees of the WEF summit, Hlophe reiterated that attracting FDI should be one of the most important initiatives for African governments.
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