South Africa has entered a list of the top 20 prospective host economies for investment by transnational corporations (TNCs) for the period 2012 to 2014, the latest World Investment Report (WIR 2012) shows.
The country ranked fourteenth, along with the Netherlands and Poland, in a survey of TNCs prepared and validated for the report by the United Nations Conference on Trade and Development (Unctad).
The ranking, which was topped by China, was based on the percentage of respondents selecting an economy as a ‘top destination’.
Industrial Development Corporation head of research and information Jorge Maia, who presented the WIR 2012 findings in Johannesburg on Tuesday, described the ranking as “ reasonably good news”. “Below us, interestingly, is a country like Korea,” Maia noted.
The survey responses also pointed to the growing importance of developing regions as locations for international production over the medium term. Among the top five countries, four were developing economies, including China, India (3), Indonesia (4) and Brazil (5) – the US was ranked second.
However, South Africa performed less well in Unctad’s ‘Foreign Direct Investment (FDI) Attraction Index’, which measures success in attracting FDI over a rolling three-year period.
The list is led by Hong Kong and includes eight developing and transition economies in its top ten, including the Republic of Congo. In addition, Ghana (16), Mozambique (21) and Nigeria (23) improved their rankings.
By contrast, South Africa was among a list of countries that Unctad said received less FDI than could be expected based on economic determinants.
Nevertheless, South Africa recorded a sharp turnaround in FDI inflows during 2011, which rose to $5.8-billion, or 13.6% of Africa’s total, during the period.
The rebound from $1.2-billion in 2010 was underpinned, Maia said, by Wal-Mart’s acquisition of a stake in Massmart, as well as mining-related corporate activity.
FDI into South Africa represented 7.5% of overall fixed investment in the country in 2011, and enabled it to emerge as the second-largest recipient, after Nigeria’s $8.9-billion.
The performance of Africa’s largest economy also accentuated the recovery in the inflows to sub-Saharan Africa as a region, which recovered from $29-billion in 2010 to $37-billion in 2011 – a level comparable with the 2008 peak.
Inflows to Africa as a whole declined, meanwhile, for the third successive year, to $42.7-billion from $43.1-billion in 2010. However, the decline was caused largely by the fall-off in investment to Egypt and Libya.
Unctad noted that, in addition to traditional patterns of FDI in sub-Saharan Africa’s extractive industries, the emergence of a middle class was fostering the growth of FDI in services such as banking, retail and telecommunications, as witnessed by an increase in the share of services FDI in 2011.
The outlook for Africa was “promising”, owing to improved investor perceptions, which were driven by relatively strong growth, higher commodity prices and economic reforms.
Maia noted that, during the first five months of 2012, purchases of sub-Saharan African firms (outside of South Africa) were more than double what they had been in the comparative period during 2011.