Fall attributed to lacklustre economic performance, lower commodity prices and higher electricity costs

Foreign direct investment into South Africa has dropped by 69% to $1.8bn, its lowest level in 10 years, according to the United Nations Conference on Trade and Development’s 2016 World Investment Report.

The report attributed the fall in South Africa’s FDI to lacklustre economic performance, lower commodity prices and higher electricity costs. The decline was also attributed to continued reliance on mineral-based exports.

“Low commodity prices depressed FDI inflows in natural-resource-based economies,” said the report.

Global FDI into Africa fell to $54bn in 2015, a decrease of 7% over the previous year, the report showed.

Flows to Africa, Latin America and the Caribbean faltered despite FDI flows towards developing economies reaching a new high of $765bn.

In southern Africa, FDI flows rose by 2% to $17.9bn, mainly driven by large inflows in Angola which received $8.7bn in 2015.

Flows into Africa are however expected to increase moderately in 2016, due to liberalisation measures and planned privatisations of state-owned enterprises.

“To reduce the vulnerability of Africa to commodity price developments, countries are reviewing policies to support FDI into the manufacturing sector,” said the report.

Other liberalisation measures include the removal of further restrictions on foreign investments in most African countries.

Kenya is said to have moved to abolish restrictions on foreign shareholding in listed companies, as competition for capital heats up among Africa’s top capital markets.

The Reserve Bank of Zimbabwe also increased the threshold of foreign investors’ overall ownership on the Zimbabwe Stock Exchange to 49% from 40%, while the single investor limit was raised to 15% from 10%.Tanzania also lifted a 60% restriction on foreign ownership of listed companies, permitting full foreign control.

Source: Politics Web