Bottom falls out of FDI: Finance Minister must table plan to restore confidence

The latest UN Global Investment Trends Monitor shows that the bottom has fallen out Foreign Direct Investment (FDI) into South Africa. The report shows that FDI inflows declined by 43% in the past year: the largest decline amongst all developing economies. 

In light of this data released yesterday we call on the Minister of Finance to use the Medium Term Budget Policy Statement (MTBPS) tomorrow to table an emergency plan to restore investor confidence in South Africa.

In comparison to our peformance, emerging economies like as Chile and Thailand have seen increases in FDI of 80% and 62% over the same period. Furthermore, inflows to the rest of Africa grew by more than 5%, even as they were declining into South Africa. 

The authors of the report note that "South Africa suffered a significant fall in FDI inflows in the first half of 2012 due to slower economic growth." We concur, and note that since the global financial crisis of 2008 the ANC government has failed to spur growth in South Africa even as developing economies around the world have regularly been able to achieve growth at twice the rate of ours.

And in recent months South Africa's economic woes have intensifed as government has failed to overcome its internal ideological confusion on the economy, leaving us vulnerable to labour unrest and ratings downgrades.

Tomorrow's MTBPS represents a chance for the Finance Minister to show investors that he is firmly in charge of economic policy, and that the government is able to implement a clear plan to ensure that South Africa is a place where they can do business.

Minister Gordhan must demonstrate that the government will not bow to pressure from its tripartite partners to implement unsustainable, populist policies. He must set out how the government will control debt levels and what steps will be taken to cut wasteful expenditure. 

Figures such as those contained in the UN Global Investment Trends Monitor will become commonplace if every government leader does not start demonstrating a strong commitment to sound economic policy aimed at stimulating growth and creating jobs. 

Statement issued by Tim Harris MP, DA Shadow Minister of Finance, October 24 2012

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