Minister Expresses Concern over Investment in SA
Department of Trade, Industry, and Competition (DTIC) Minister Patel expressed concern over the fall in the level of foreign direct investment (FDI) being attracted to SA and agreed with the industry that the ease of doing business in SA should be improved. But he pointed out that the Companies Amendment Bill was progressing steadily through Parliament and should be adopted soon. The Minister also threw his weight behind rules to ensure that local products were an element in government tendering (for example in the Public Procurement Bill which is also going through Parliament). In his view, this policy of “localisation” did not conflict with export promotion objectives. These were some of the results of the NEDLAC Trade and Industry Council (TIC) held in early October. EFSA was for the first time invited to attend the TIC.
Another issue raised at the TIC was the serious economic impact of load shedding (power outages). The trade unions pointed out to the Minister that their members were suffering considerably from short working hours imposed due to the outages. This is a point strongly supported by the industry.
Meanwhile, a UNCTAD Report, “International tax reforms and sustainable investment” (UNCTAD’s World Investment Report 2022), shows that FDI has recovered from COVID. It points to flows of foreign direct investment (FDI) recovering to pre-pandemic levels in 2021 and achieving $1.58 trillion – a 64% increase compared with 2020. FDI to African countries hit a record $83bn in 2021. This was more than double the amount reported in 2020 when the COVID pandemic reduced investment flows to the continent. Despite the strong growth, investment flows to Africa accounted for only 5.2% of global FDI, up from 4.1% in 2020. In brief, FDI investment in Africa shows the following results:
- FDI to Southern Africa increased almost tenfold to $42bn, due to intrafirm financial transactions in SA.
- West Africa saw FDI increase by 48% to $14bn
- Investment flows to East Africa increased by 35% to $8.2bn
- Central African FDI remained flat at $9.4bn
- FDI to North Africa declined by 5% to $9.3bn in 2021
But the prospects for this year are grimmer. The report said that to cope with an environment of uncertainty and risk aversion, developing countries must get significant help from the international community. And the International Monetary Fund (IMF) has recently issued a warning that after the better-than-expected post-pandemic rebound last year, economic growth in Sub-Saharan Africa is expected to stall in 2022, dropping from 4.6% in 2021 to 3.8%, mainly due to Russia/Ukraine conflict and the disruption to food supplies which has already started to set back the region’s prospects.
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