FDI Slump: South Africa needs to be open for investment in greenfield and infrastructure projects
South Africa's foreign direct investment (FDI) slump is a sign that the ANC government's unenthusiastic response to foreign investment is beginning to affect market perceptions.
It is no longer acceptable for our economy to be open only for mergers, acquisitions and other corporate transactions while foreign-funded greenfield and infrastructure projects go to the rest of Africa.
South Africa has urgent and enormous infrastructure needs. The state is planning to spend R809bn of taxpayers' money on infrastructure investment over the next 3 years. That's R16 000 per citizen. Instead of funding this from our own pockets, why don't we leverage foreign capital in public private partnerships (PPPs) to help get this infrastructure built?
It's time for a shake-up of the government's complacency and their view that foreign capital is some kind of threat. We will not always be largest economy in Africa so we need to attract capital to our shores to grow the productive base of our economy and ensure that we remain competitive when our size advantage lapses.
Yesterday's UN's World Investment Report for 2011 indicates that foreign direct investment (FDI) into South Africa has slumped by 70% since 2009 (see here - PDF). The numbers show a drop from R5 billion worth of inflows in 2009 to R1.6 billion worth in 2010. In this respect, countries such as the DRC, Congo, Ghana, Algeria and Sudan have surpassed South Africa in terms of FDI.
It is very likely that the government's muddling and contradictory approach to FDI has contributed to this decline. In addition, their failure to convince investors that nationalisation and expropriation of private assets are off the table is another factor.
Whilst we are debating FDI policy, nationalisation of private and expropriation of land, foreign capital is pouring into infrastructure, mines and manufacturing capacity in other African countries. Those investments will start to come to our shores if President Zuma and the economic ministers, speaking with one voice, promote South Africa as an investment destination where private assets are safe and private capital is leveraged to meet infrastructure and manufacturing deficits.
Statement issued by Tim Harris MP, DA Shadow Minister of Trade and Industry, July 27 2011
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