Assessing risk and opportunity in Africa

Lalor further comments: “Our relative optimism in this regard is based on several factors, but perhaps most notably, the government’s track record of sound macroeconomic management (which, we believe, is sometimes far too casually discounted) and the comparative policy certainty provided by the National Development Plan (NDP). In this context, we expect growth in FDI into South Africa to resume in 2014. This is partly because investor interest in Africa will continue to grow, and also because South Africa remains an attractive investment destination when compared to other African markets. This is the case because on any kind of objective risk versus opportunity analysis of African markets, South Africa will be among the best positioned markets for the foreseeable future.”

Positioning South Africa in the context of the African growth story

However, highlighting some of these more positive aspects of South Africa’s relative positioning as an investment destination is only part of the picture. In a global context in which investor focus has shifted decisively towards emerging markets, the African growth story is difficult to ignore. South Africa’s attractiveness in a global and emerging market context therefore becomes all the more compelling when positioned relative to the rest of the African continent.

South Africa does provide a stable platform from which to invest and do business in other parts of the continent. South Africa’s comparative advantages – for example, a strong services-based economy, a relatively large domestic economy, strong financial framework and robust democracy – make it an attractive entry point for foreign investors, particularly those that are still wary about investing in Africa. In the context of changing global dynamics and the shift in capital flows towards emerging markets, a South Africa that is purposely integrated and provides a stepping stone into other parts of Africa could genuinely rival the BRICs in the imagination of international investors.

In this context, South Africa is also playing an increasingly important role as a source of FDI for other, faster growing African economies. South Africa is ranked fifth overall in terms of investing in FDI projects in the rest of Africa since 2003 (i.e. overall, South African-headquartered companies have invested into the fifth most FDI projects on the continent in the past decade). These numbers are also increasing steeply, with compound growth of 57% in South African-originated FDI projects into the rest of Africa since 2007. In fact, when one strips out investment from other countries into South Africa itself, South Africa became the single largest investor in FDI projects in the rest of Africa in 2012.

In conclusion, Sita says: “It is imperative for government and business to work together to drive the consolidation and implementation of the NDP in South Africa. It is through close collaboration that we can agree on a common purpose and agenda, accelerate regional integration and drive investment in regional infrastructure. It is through this that South Africa can maintain its status on the continent and play a greater role in positioning Africa as a great investment destination in the global context.”