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Executives rank South Africa as a top FDI destination, despite weakening economy

Yesterday A.T. Kearney, a global management consulting firm, released its 2014 Foreign Direct Investment (FDI) Confidence Index which shows South Africa ranked in 13th position for the most attractive destination for FDI globally. Despite recent labour strikes seen in the country’s mining industry and a weakening economy, this is a two spot climb up the ladder since last year, just beating Switzerland. 

The index measures the investment sentiment of senior executives at 300 of the world’s largest companies concerning their likelihood of direct investment in a market over the next three years. According to A.T. Kearney, the top 10 most attractive FDI destinations received a majority share of global FDI inflows roughly one year after each survey.

This year’s rankings show that the US continues to hold its first place position from last year, and is followed by China and Canada.

South Africa is the only African country to make the top 25 most attractive FDI markets, having received US$4.5bn in FDI in 2012 after a high of $5.8bn in 2011. To explain South Africa’s two point rise up the rankings, the report cites British oil major BP’s announcement in April last year that it will invest $550m in its refinery, terminal and service station retail network assets over five years. BP is also partnering with South African retail giant Pick n Pay to open 120 Pick n Pay Express stores across the country. Similar ventures have been made between South Africa’s Woolworths and Engen, as well as between Fruit & Veg City and Caltex.

The report also mentions Google’s first renewable energy deal in Africa, a $12m solar investment in South Africa’s Northern Cape province signed in May 2013. “While not particularly large deals, these moves are a positive sign for a country with volatile FDI figures, the result of the preponderance of larger M&A (merger and acquisition) deals,” adds the report.

EY also recently released its 2014 Africa Attractiveness Survey in which four of the top 15 African states and provinces in terms of FDI projects belonged to South Africa, with Gauteng province taking the leading position.

Africa sees rise in FDI

A.T. Kearney states that Africa overall managed to increase FDI flows by 12% to $47.6bn in 2013. According to the report, this growth was partly driven by investment in extractive industries, but manufacturing and services are also seeing increased interest.

Wim Plaizier, managing partner at A.T. Kearney Africa, commented that the firm expects continued increase in FDI flows in the continent.

“Energy-related companies, retail companies and infrastructure and transport providers, for example, are all committed to invest in the continent. The Renewable Energy Independent Power Producer Programme in South Africa has played a major role in driving investment. While each deal in itself may not be particularly large, these moves are all positive signs of the increased confidence of the global investor community,” notes Plaizier.

“It is critical for governments and investors alike, to respond to this increased investor confidence by putting in place the right levers to capitalise on the many opportunities and drive further job creation and social and economic development.”

A.T. Kearney 2014 FDI Confidence Index
Country 2014 rank 2013 rankChange
United States110
China220
Canada34+1
United Kingdom48+4
Brazil53-2
Germany67+1
India75-2
Australia86-2
Singapore910+1
France1012+2
UAE1114+3
Mexico129-3
South Africa1315+2
Switzerland1418+4
Malaysia1525+10
Sweden16__N/A
Chile1722+5
Spain1816-2
Japan1913-6
Italy20--N/A
Belgium21--N/A
Netherlands22--N/A
Denmark23--N/A
Turkey24--N/A
Indonesia2524-1

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