Local and foreign direct investment picked up during the second half of 2020, pointing to early signs of rising positive sentiments towards the South African economy, and especially in relation to its manufacturing sector, which saw a significant focus on new investments.
This emerged as a central theme from the latest Foreign Direct Investment (FDI) Tracker published by economic research institution the Trade and Industrial Policy Strategies (TIPS).
The FDI Tracker authors, Kelello Mashiane and Muhammed Patel, point out that the latter half of 2020 saw an increase in investments, partly driven by a stabilisation of production in the face of the pandemic, as well as a result of the pledges made during President Cyril Ramaphosa’s November 2020 Investment Conference.
They state that the investment pledges (some new and some already on the cards) point to a rise in positive sentiments towards the economy, but that it was still early days as the pledges were still not in the ballpark of those made during the 2019 Investment Conference.
The tracker found that, during this period, the bulk of the R75.2-billion (committed for 32 projects) emerged out of pledges made at the conference.
Compared with the first half of 2020, a large portion of the investments (R29-billion) was directed at manufacturing-linked projects in basic metals (about R18-billion), food and beverages (R6-billion) and the automotive value chains (R5-billion).
The second-largest amount of R20-billion is linked to mining, while there was also a sizeable investment in telecommunications.
Of note, Patel and Mashiane point out, the projects captured during this period showed a greater diversity of investor companies, industries and subsectors compared with the first half of the year, where projects were concentrated within a handful of mining and energy companies such as Menar, Anglo American Platinum and BioTherm.
Another interesting shift highlighted is the continued support from French companies, which collectively pledged R14-billion at the 2020 Investment Conference following a R20-billion commitment at the 2019 Investment Conference by a group of French companies (Total, Alstom, Limagrain and Air Liquide).
The tracker also highlighted that a substantial share of the total investment value recorded comprised three projects valued at more than R10-billion each, which constitute 61% (R46-billion) of the total pledged value.
The largest of these commitments is R17-billion for the United Heavy Industries investment programme followed by Anglo American’s R15-billion investment in the firms’ operations and the R14-billion combined pledge by a collective of French companies.
The tracker recorded seven projects that are valued between R1-billion and R6-billion. These account for 22% of the total pledged value, or R29-billion in total.
Pioneer Foods’ R5.5-billion expansion project has the highest value in this bracket.
When exploring the impact of these investments on job creation, the tracker found that, based on employment creation data, 15 799 job opportunities were linked to seven projects with 6 349 being permanent jobs and 9 450 being temporary jobs.
There were a number of sustainability investments, including renewable energy projects.
One of these is CHEM Energy South Africa's investment in a fuel cell technology manufacturing facility at the KwaZulu-Natal Dube TradePort Special Economic Zone to feed into the ambitious green hydrogen value chain.
Rainbow Rare Earths has also invested in developing long-term sources of neodymium and praseodymium and associated rare earth elements.
Also, a significant investment in telecommunications is Teraco Data Environments’ R4.4-billion JB4 data centre. The facility is being built in Ekurhuleni, Gauteng, and will become the largest single-site data centre in Africa.