South Africa was still the most attractive foreign direct investment (FDI) destination in Africa, despite the recent negative perceptions that the country was losing momentum, said advisory firm Ernst & Young (E&Y) Africa Business Center lead partner Michael Lalor on Thursday.

He said the nationalisation debate, recent events in the mining sector and the downgrading of the country’s sovereign credit ratings, besides others, were fuelling negative perceptions but slammed a recent Economist article suggesting South Africa was on a downhill slide.

E&Y’s latest research found that, while Africa as a whole was growing rapidly, South Africa was growing right along with it, Lalor declared.

“… the view that South Africa is losing out to the rest of Africa in the competition for FDI is factually incorrect. Despite the very real socioeconomic challenges facing South Africa, the trends demonstrate that FDI both into South Africa, and from South Africa into the rest of the African continent is growing substantially,” the E&Y ‘Africa by numbers: Assessing market attractiveness in Africa’ research report said.

From 2007 to 2011, as the world suffered from the fallout of the global economic crisis, South Africa recorded a compound annual growth rate (CAGR) of 28.7% in the number of new FDI projects and 24.7% in the amount of foreign capital investment, said E&Y Africa CEO Ajen Sita.

This compared with Angola’s negative project growth and Nigeria’s 1% growth.

The number of foreign investment projects in Africa as a whole rose at a CAGR of 20%, from 421 projects in 2007, to 857 in 2011, while sub-Saharan Africa projects recorded a CAGR of 30%.

While the capital investment in Egypt, Nigeria and Algeria was higher than South Africa, he pointed out that up to 80% of this investment went into the cash-intensive oil and gas sectors and did not yield the positive results of the diverse investments into South Africa.

South Africa’s diverse range of foreign-sourced projects yielded close to 100 000 jobs, cumulatively, from the period 2007 to 2011, Lalor claimed.

Coal, oil and natural gas accounted for 24% of all foreign investment, while metals accounted for 20%. The automotive original-equipment manufacturing, communications and alternative and renewable-energy industries attracted 9% each of the FDI during the period from 2003 to 2011.

Further, analysing the composite emerging market risk, which examined the quality of governance, the levels of democracy, the strength of the institutional environment, corruption, the ease of doing business and the strength of the financial and capital market systems, South African ranked as the third-lowest risk in Africa, behind Mauritius and Botswana, and rated sixth globally, well ahead of its Brics counterparts.

Brazil, India, China and Russia positioned at 21, 22, 25 and 39 respectively.

The composite opportunity index, which factored in a country’s population size, the population size in the largest city, the size of the economy, gross domestic product growth trends and gross capital formation trends, ranked South Africa second, after Nigeria.

However, the firm believed that it was possible the country would experience slower growth over the next two years, along with the rest of Africa and the world, as global economic volatility intensified.

Meanwhile, despite the country’s positive performance, South Africa had the potential to be a “blue-chip” emerging market investment destination and more could be done to realise this potential, said Sita.

The country could push its growth higher through the provision of policy certainty, prioritising regional integration, bridging the regional infrastructure deficit, enhancing partnerships with business and improving social cohesion, he concluded.