South Africa needs to improve its governance and regulatory transparency to attract more foreign direct investment (FDI), says AT Kearney global business policy council chairperson Paul Laudicina.
In a briefing on Friday, he noted that South Africa’s share of regional foreign direct investment (FDI) inflows had diminished since 2007, as demonstrated in the latest AT Kearney FDI Confidence Index.
The amount of investor attention the country attracts has declined in recent years, with South Africa not even ranking among the top 25 investment destinations on the index.
Laudicina pointed out that investors had become more bullish on the global economy in recent years, but that this has not extended to sub-Saharan Africa.
“Two-thirds of investors are more optimistic about the global economic outlook this year than they were last year,” he said.
He stated that, at a regional level, global investors were particularly optimistic about economic prospects in the Asia Pacific, Europe and Eurasia, as well as the Americas.
“In contrast, investors have mixed views on the outlook for the Middle East and North Africa and are somewhat pessimistic on sub-Saharan Africa, which may explain why these regions are not represented on the Index this year,” Laudicina said.
He noted that the most important factors investors looked at when deciding to invest were regulatory transparency and lack of corruption, followed by tax rates and ease of payment, as well as the cost of labour.
He added that an increase in geopolitical tensions topped investors’ list of likely wildcards for the fourth year in a row.
“Investors also view the likelihood of a political crisis in an emerging market as higher than last year, which may be contributing to the fact that fewer emerging markets appear on this year’s Index. Investors are prioritising governance factors when choosing where to invest,” he said.