http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.50Change: 0.09
R/$ = 10.49Change: 0.07
Au 1294.45 $/ozChange: -8.41
Pt 1415.50 $/ozChange: -21.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Nelson Mandela 1918 - 2013   Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science & Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Jul 26, 2011

FDI inflows to SA slumped 70% in 2010, recovery expected in 2011

Back
University of Johannesburg economist and The EDGE Institute director Prof Stephen Gelb on South Africa's poor foreign direct investment performance in 2010, Camera Work: Nicholas Boyd. Editing: Darlene Creamer.
© Reuse this



Foreign direct investment (FDI) flows to South Africa slumped by more than 70% to just $1.6-billion in 2010 from $5.4-billion in 2009, the United Nations Conference on Trade and Development (Unctad) 'World Investment Report 2011' shows.

The result was materially worse than the overall 8.5% decline, to $55-billion, in FDI flows to Africa during the year and pushed the continent’s largest economy into tenth position as a recipient of FDI, from a ranking of fourth in 2009.

Africa’s decline also bucked an otherwise strong performance from other developing regions, reflected by the fact that the continent’s share of developing-country FDI inflows fell from 12% in 2009 to 10% last year.

In fact, 2010 was the first year in which developing countries actually accounted for more than half of all FDI inflows, which rose by 5% overall to $1.24-trillion. Flows to developing and transitional economies accounted for 52% of that total, led by Asia and Latin America - inflows to developing economies rose by 12% last year.

Also for the first time, half of the top 20 FDI recipients were from developing countries, with the US attracting the most inflows last year at $228-billion, followed by China ($106-billion), Hong Kong-China ($69-billion).

Outward FDI flows from developing countries also surged by 21% to $388-billion, increasing outward flows from developing economies from 16% of the total in 2009 to 29% last year.

South Africa’s other ‘Brics’ partners, Brazil, Russia and India also featured among the leading 20 recipients, as did Saudi Arabia, Mexico, Chile and Indonesia.

University of Johannesburg economist and The EDGE Institute director Professor Stephen Gelb, who presented the report's findings in Johannesburg on Tuesday, said South Africa’s "terrible" figures left the country ranking 69th globally.

The South African figure was also only one-sixth of the peak of $9-billion achieved in 2008 and represented only 2.8% of the total FDI to Africa in 2010.

Gelb noted, too, that on Unctad’s FDI performance index, which calculates the share of FDI inflows in a country’s gross domestic product, South Africa ranked a lowly 128, behind Burkina Faso at 127. In 2009, South Africa ranked at number 85.

Angola remained the top recipient at $9.9-billion, or 20% of total inflows. However, the oil-rich country also experienced a contraction in inflows from the $11.6-billion reported in 2009 and the $16.5-billion of 2008. Angola was trailed by Egypt, Nigeria and Libya.

Gelb said that South Africa’s FDI flows had already picked up in the first quarter of 2011 and would be buoyed further by the $2.4-billion acquisition of 51% of Massmart by Wal-Mart.

Gelb also stressed that, while the 2010 FDI inflows performance was disappointing, South Africa’s FDI figures had been volatile historically and were heavily influenced by single large deals. The volatility was likely to remain owing to the fact that much of the FDI in South Africa related to big-ticket merger and acquisition activity, rather than greenfield investments, which tended to involve smaller values.

Further, the “stock” of FDI in South Africa remained material at R132-billion, which was more or less 25% of Africa’s total FDI stock.

Unctad also anticipated that FDI flows would continue to recover more generally in 2011, possibly even to pre-economic crisis levels. Global FDI peaked at nearly $1.8-trillion in 2008, having averaged $1.47-tillion between 2005 and 2007.

Having slumped to $1,18-trillion in 2009, Unctad expects a continued recovery from the $1.24-trillion base of 2010. In fact, despite the current “soft patch” in the recovery, the agency was modeling FDI flows of between $1.4-trillion and $1.6-trillion for this year, rising to $1.7-trillion and $1.9-trillion in 2012 and 2013 respectively.

However, Unctad argued that policy makers should seek to tap the growth and employment opportunities arising from so-called nonequity modes (NEM) of international production, which included contract manufacturing and farming, services outsourcing, franchising, licensing and management contracts.

In fact, Unctad estimated that NEM generated at least $2-trillion in sales globally during 2010 and that these practices were increasingly shaping international value chains.

THE WAL-MART FACTOR

Gelb argued that, besides the South Africa automotive industry, the country had done little to integrate its enterprises, or fashion its enterprise development models to the NEM opportunity.

He acknowledged that value-added was often low and that the employment generated in the sector was often low paying and vulnerable. But he argued that, on balance, NEM held much development and employment potential and could be important in helping to build domestic productive capacity.

South Africa, he argued also needed to focus more intensively on the role of FDI and NEM within the country’s growth and development frameworks.

Policies should be pursued that facilitated the entry into the economy of a “bundle of resources”, including capital, but also skills, technology, business models and new management capacity, as well as new products and processes.

There were currently a number of gaps in the South African policy environment, which was also being perceived as riskier owing to calls for nationalisaiton and the recent objections of government to the Wal-Mart acquisition of a stake in Massmart.

Speaking in his personal capacity, Gelb argued that the Competition Tribunal was the incorrect forum to engage with Wal-Mart on the supply-chain implications of its entry into the region.

Instead, government should be seeking to leverage the opportunities presented by the deal for South African firms to enter the Wal-Mart networks internationally.

“Even more important is the potential it offers to South African manufacturing operations to supply Mal-Mart entities around the world,” Gelb argued, noting that the Unctad report emphasises the enterprise development, employment, export, technology-transfer, skills upgrading and growth potential associated with being associated with such networks.

Massmart established a R100-million supplier development programme following the acquisition and Gelb felt that government should actively monitor progress to ensure that the proposed benefits are realised.

“We should be looking at similar opportunities with other large global corporations, whether they be in retail, the garment industry or in manufacturing.”
 

Edited by: Creamer Media Reporter
© Reuse this Comment Guidelines
 
 
 
 
 
 
 
 
Other Economy News
Renewable-energy projects, such as this Northern Cape solar farm, seen as key to low‐carbon energy supply.
Updated 7 hours ago Upfront investment costs will and should remain a critical consideration as South Africa moves to upscale and accelerate its infrastructure programmes. But one of the lead authors of the latest Intergovernmental Panel on Climate Change (IPCC) argues that the...
ANC SG Gwede Mantashe (L), chairperson Baleka Mbete (C) and President Jacob Zuma (R)
Updated 7 hours ago The creation of a small and medium enterprises department is very likely, African National Congress national chairwoman Baleka Mbete said on Thursday. "We are talking about a focused department looking at small and medium businesses because the departments must be...
Article contains comments
South Africa's drive to create a competitive and food-secure State was boosted on Tuesday with the launch of the Centre of Excellence (CoE) in Food Security, at the University of the Western Cape, which would bring together a cohort of experts and researchers from 19...
Article contains comments
Article contains comments
More
 
 
Latest News
Renewable-energy projects, such as this Northern Cape solar farm, seen as key to low‐carbon energy supply.
Updated 7 hours ago Upfront investment costs will and should remain a critical consideration as South Africa moves to upscale and accelerate its infrastructure programmes. But one of the lead authors of the latest Intergovernmental Panel on Climate Change (IPCC) argues that the...
Updated 7 hours ago The barrier to efficient water service delivery in South Africa was not of a technological nature but rather related to legal and Constitutional challenges, Water Research Commission (WRC) CEO Dhesigen Naidoo said on Thursday. Opening a WRC debate under the theme...
ANC SG Gwede Mantashe (L), chairperson Baleka Mbete (C) and President Jacob Zuma (R)
Updated 7 hours ago The creation of a small and medium enterprises department is very likely, African National Congress national chairwoman Baleka Mbete said on Thursday. "We are talking about a focused department looking at small and medium businesses because the departments must be...
More
 
 
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
 
 
 
 
 
This Week's Magazine
The power and water sector will come together in May to discuss challenges and celebrate successes at the annual African Utility Week and Clean Power Africa in Cape Town. More than 5 000 power and water professionals, including utility heads from Nigeria, Uganda,...
There is enough water in South Africa to supply communities and the economy, even if some activities may be constrained, such as agriculture in the Limpopo, says National Planning Commission commissioner Mike Muller. 
Muller was also the director-general from 1997...
South African antenna designer and producer Poynting and provider of professional products, system integration and implementation and commissioning services for the broadcast and telecommunications markets in South Africa, African Union Communications (Aucom),...
Industrial automation giant Festo has been displaying some of the its ongoing research projects and latest automation developments and products at the Hannover industrial fair from April 7 to 11, as part of its Integrated Automation – The Next Steps theme. The...
South African retail companies are responding to the way in which e-commerce is changing their engagement model with customers by improving customer engagement channels and order fulfilment intelligence, says industrial and retail software company JDA Europe, Middle...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks