Amid the prevailing economic gloom and doom, it came as welcome relief to learn that South Africa’s foreign direct investment (FDI) inflows rose 269% in 2011 – climbing to $4.5-billion from a revised 2010 figure of $1.2-billion.

The South African recovery was underpinned by the contested $2.4-billion purchase of a majority interest in JSE-listed Massmart by retail giant Wal-Mart, of the US.

The deal was itself not large enough to feature on the United Nations Conference on Trade and Development’s (Unctad’s) list of 70 cross- border merger and acquisition deals with a value greater than $3-billion. But it still served to support a country-level turnaround from the shock 70% slump of 2010. That said, South Africa’s 2011 performance remained well below the country’s inflow peak of $9-billion achieved in 2008.

The recovery was also not sufficient to reverse the decline in overall inflows to Africa, which fell for the third consecutive year. In fact, Unctad’s Global Investment Trends Monitor shows that FDI inflows to Africa, which started declining in 2009, contracted by 0.7% to $54.4- billion from $54.7-billion in 2010.

The continental results were influenced by a fall-off in FDI flows to Libya, Tunisia and Egypt, which underwent material political transformations during the period – inflows to Egypt fell by more than 92% from $6.4-billion in 2010 to only $500-million last year.

The report also shows that Central Africa and East Africa experienced decreases in inward investment flows. But West Africa and Southern Africa showed “robust” growth, with Nigeria reporting a 12% rise in FDI inflows from $6.1-billion to $6.8-billion.

By contrast, global FDI inflows rose 17% year-on-year to $1.5-trillion, despite the prevailing economic and financial turmoil, with developing and transition economies accounting for half of that amount, with record inflows of $755-billion.

Unctad estimated that FDI flows were likely to rise moderately in 2012 to around $1.6-trillion.

But the outlook for South Africa is far from clear.

On the one hand, there should be something of a greenfield inflow uptick once the first batch of renewable-energy projects starts to move into the implementation stage during the second half of 2012.

However, the generic outlook for FDI flows, either corporate activity related or project related, is constrained by several external and internal uncertainties.

A number of commentators have argued that South Africa’s performance should have been far better, particularly in light of the strong commodity markets. But studies show that mining’s contribution to South Africa’s gross domestic product has declined over the last decade, while the sector’s contribution has climbed strongly in other resources-rich countries, such as Chile, Russia, Indonesia, Colombia, Australia and Brazil.

Unhappily, mining policy and regulatory overhangs remain and investor appetite is likely to be dampened further as surging costs, particularly administrative costs, undermine the earnings outlook.

Similarly, the likelihood for manufacturing- related investment is weak, given poor prospects in many of the economies with which South Africa traditionally trades.

Therefore, barring another Massmart-type deal in 2012, it is difficult to say for certain that the recovery will be sustained.