South African foreign investment confidence will suffer as a result of the xenophobic attacks in Durban, according to an economist.

Xenophobic attacks on African immigrants has escalated over the past week in the KwaZulu-Natal city, with the country’s security cluster announcing measures to bring the situation under control.

Foreign investors took the stability of a country very seriously, macro-economist Dr Harold Ngalawa told Fin24 on Tuesday.

“An economy characterised by violence and lawlessness is not good for investment,” said the University of KwaZulu-Natal academic. “Xenophobia is typically both violent and lawless.”

“As an economy, we benefit from foreign investment,” he said. “Foreign investors sit down and do an analysis of a country they want to invest in and stability is one of the factors they consider. If you put yourself in the shoes of an investor, you would sit back and wait to see where this is going to.”

Township economy will also suffer

The micro economy of townships in Durban will see prices climbing due to the eradication of “elements” of competition, said Ngalawa.

Most of the foreigners being attacked own spaza shops and have been forced to flee with whatever they can take with them.

“People who had similar businesses can now trade with less competition,” he said. "That presents problems to consumers as they will become less well-off.

“Increases in prices happen for different reasons,” he said. “Traders could justify it on the increasing electricity tariffs for example, and with weakened competition, the likelihood of prices going up in the townships is high."

Xenophobia won’t affect SA relations in Africa

Ngalawa said the xenophobic violence, which focuses directly on African immigrants, won’t affect South Africa’s relationship on the continent.

“South Africa is a giant economically and African countries respect this government,” he said. “It is seen as a country that can be relied upon.

“These attacks will have little impact on this relationship,” he said.

South Africa can learn from its neighbours

Ngalawa said he has travelled to many African countries, including Uganda, where South African anti-apartheid fighters were protected before democracy.

“They really looked after South Africans,” he said. “In Uganda, they created special places for South Africans, including their own cemeteries.”

When Zimbabwe started experiencing its economic catastrophe, its people started immigrating to countries all over Africa, looking for economic opportunities.

“They have not been treated the same way South Africans treat them,” he said.

“If South Africans travel to other countries in Africa, even after the 2008 xenophobic attacks, they are treated well,” he said. “Those countries do not think of inflicting revenge as a result of xenophobia here.”

“South Africa could learn a lesson from its neighbours,” he said.

News24.com