South Africa has emerged as Africa's most important outward
investor with outward flows of $720-million in 2003, a new United
Nations (UN) study has found.
The World Investment Report 2004 which was released internationally yesterday by the UN Conference on Trade and Development (Unctad), and was presented to the South African media at a function held at the Industrial Development Corporation's offices in Sandton, Gauteng.
It found that South Africa ranked ninth among developing economies in 2003 in terms of outward stock, with 90% of that foreign direct investment (FDI) stock in developed countries.
However, the study also indicated that South African businesses are playing an increasing role in large African projects. In 2002, for instance, South Africa's FDI stock in Africa accounted for seven per cent of the country's total outward FDI.
The report found that several factors are driving this phenomenon. The liberalisation of South Africa's regulatory regime for outward FDI has facilitated the expansion abroad of firms from that country and the liberalisation of the country's trade and exchange controls has raised competition in local markets and encouraged firms to look abroad. At the same time, privatisation and liberalisation in other African countries have allowed South African companies to acquire firms in the region. Thirdly, South African firms often have technological advantages over local competitors in Africa and greater familiarity with African conditions than transnational corporations (TNCs) from other regions.
By the end of the 1990s, South Africa had over 900 TNCs with seven of them being among the top 50 non-financial TNCs from developing economies in 2002.
Unctad said that some TNCs - MTN, Eskom, Sasol and Vodacom SA - have started to expand regionally in the past few years such as in the Democratic Republic of the Congo, Mozambique, Namibia, the United Republic of Tanzania and Zimbabwe.
Others have become major world players in their own industries: AngolGold became the world's largest gold producer when it acquired the Ashanti gold mine of Ghana in 2003, and SABMiller, with its primary listing in the UK, has become one of the world's largest breweries, controlling more than 160 factories in over 40 countries.
The report also found that global foreign direct investment (FDI) inflows to South Africa increased marginally from $757-million in 2002 to $762-million in 2003, while FDI inflows into Africa increased from $12-billion to $15-billion.
This was despite the world experiencing a difficult FDI environment last year with 2003 FDI inflows declining by 18% to $560-billion which follows a massive fall of 41% in 2001, from $1,4-trillion to $818-billion, and another 17% in 2002, to $679-billion.
Unctad said that Africa's performance was noteworthy for three reasons, particularly because the growth rate of 28% was higher than that of the other groups of countries and that oil accounted for bulk of the increase, especially in Equatorial Guinea.
The report also found that several small African economies shared in the growth of FDI. As a result, the distribution of inflows was more broad-based than in any year since 1999, with 22 countries receiving more than $0,1-billion compared to 16 in 2001.
The value of cross-border mergers and acquisitions - the key driver of global FDI since the late 1980s - was also down 20% last year.
Unctad said the drop in FDI inflows was confined to the developed countries and Central and Eastern Europe.
Inflows to developing countries rose by 9%.
Excluding Luxembourg, China was the world's largest host country in 2003.
Unctad found that the structure of FDI has shifted towards services, facilitated by the liberalisation of FDI policies.
The UN agency also noted that FDI flows to different regions and countries were uneven, with 111 countries experiencing a rise in FDI inflows and 82 a decline.
Flows to developing countries as a group rose by 9%, from $158-billion in 2002 to $172-billion.
The report said that there was an increase in flows to 36 countries and a decline to 17.
FDI flows to developed countries fell by 25% to $367-billion while FDI outflows from developed countries rose in 2003, albeit marginally.
The US was again the main investor country, with a 32% increase in outflows.
Outflows from the EU were down by 4% while Japan's outflows continued to fall.
Unctad reported that world FDI flows have seen a dramatic shift towards the services sector, with the services sector accounting for about 60% of the global inward FDI stock, compared to less than 50% a decade earlier.
However, the UN agency said that despite the continued decline in FDI inflows, the increase in outflows and an improved economic climate suggests that a recovery is under way in 2004.
The report indicated that FDI inflows are set to rebound but could not say by how much.
A few large cross-border mergers and acquisitions (M&As) may make all the difference, but are however, impossible to predict. Cross-border M&As increased in value by 3% in the first six months of 2004, compared to the same period a year earlier.
During the first four months of this year, the value of share trading in the world also rose by 60% compared to the same period in 2003.
Corporate profitability also rose significantly in the main home countries in 2003 and is reportedly continuing to increase in 2004.
Unctad said that the findings of its surveys support the prediction that a rebound in FDI flows is in the making, with three quarters of the companies surveyed and four out of five location experts expressing optimism regarding FDI prospects over the next three years.
A recovery in FDI would boost international production, presently carried out by at least 61 000 TNCs with over 900 000 foreign affiliates, representing an FDI stock of about $7-trillion.
However, Unctad pointed out that a recovery does not mean that all countries will realise their FDI potential.
It said that its Inward FDI Performance Index, a measure of a country's attractiveness to FDI, shows that such economies as the Czech Republic, Hong Kong, China and Ireland continue to attract significant investment even during the current FDI recession.
In contrast, Unctad said that countries such as Japan, South Africa and Thailand have yet to realise their full potential to attract FDI, according to their ranking on the Inward FDI Potential Index as compared with that on the Inward FDI Performance Index.
The World Investment Report 2004 which was released internationally yesterday by the UN Conference on Trade and Development (Unctad), and was presented to the South African media at a function held at the Industrial Development Corporation's offices in Sandton, Gauteng.
It found that South Africa ranked ninth among developing economies in 2003 in terms of outward stock, with 90% of that foreign direct investment (FDI) stock in developed countries.
However, the study also indicated that South African businesses are playing an increasing role in large African projects. In 2002, for instance, South Africa's FDI stock in Africa accounted for seven per cent of the country's total outward FDI.
The report found that several factors are driving this phenomenon. The liberalisation of South Africa's regulatory regime for outward FDI has facilitated the expansion abroad of firms from that country and the liberalisation of the country's trade and exchange controls has raised competition in local markets and encouraged firms to look abroad. At the same time, privatisation and liberalisation in other African countries have allowed South African companies to acquire firms in the region. Thirdly, South African firms often have technological advantages over local competitors in Africa and greater familiarity with African conditions than transnational corporations (TNCs) from other regions.
By the end of the 1990s, South Africa had over 900 TNCs with seven of them being among the top 50 non-financial TNCs from developing economies in 2002.
Unctad said that some TNCs - MTN, Eskom, Sasol and Vodacom SA - have started to expand regionally in the past few years such as in the Democratic Republic of the Congo, Mozambique, Namibia, the United Republic of Tanzania and Zimbabwe.
Others have become major world players in their own industries: AngolGold became the world's largest gold producer when it acquired the Ashanti gold mine of Ghana in 2003, and SABMiller, with its primary listing in the UK, has become one of the world's largest breweries, controlling more than 160 factories in over 40 countries.
The report also found that global foreign direct investment (FDI) inflows to South Africa increased marginally from $757-million in 2002 to $762-million in 2003, while FDI inflows into Africa increased from $12-billion to $15-billion.
This was despite the world experiencing a difficult FDI environment last year with 2003 FDI inflows declining by 18% to $560-billion which follows a massive fall of 41% in 2001, from $1,4-trillion to $818-billion, and another 17% in 2002, to $679-billion.
Unctad said that Africa's performance was noteworthy for three reasons, particularly because the growth rate of 28% was higher than that of the other groups of countries and that oil accounted for bulk of the increase, especially in Equatorial Guinea.
The report also found that several small African economies shared in the growth of FDI. As a result, the distribution of inflows was more broad-based than in any year since 1999, with 22 countries receiving more than $0,1-billion compared to 16 in 2001.
The value of cross-border mergers and acquisitions - the key driver of global FDI since the late 1980s - was also down 20% last year.
Unctad said the drop in FDI inflows was confined to the developed countries and Central and Eastern Europe.
Inflows to developing countries rose by 9%.
Excluding Luxembourg, China was the world's largest host country in 2003.
Unctad found that the structure of FDI has shifted towards services, facilitated by the liberalisation of FDI policies.
The UN agency also noted that FDI flows to different regions and countries were uneven, with 111 countries experiencing a rise in FDI inflows and 82 a decline.
Flows to developing countries as a group rose by 9%, from $158-billion in 2002 to $172-billion.
The report said that there was an increase in flows to 36 countries and a decline to 17.
FDI flows to developed countries fell by 25% to $367-billion while FDI outflows from developed countries rose in 2003, albeit marginally.
The US was again the main investor country, with a 32% increase in outflows.
Outflows from the EU were down by 4% while Japan's outflows continued to fall.
Unctad reported that world FDI flows have seen a dramatic shift towards the services sector, with the services sector accounting for about 60% of the global inward FDI stock, compared to less than 50% a decade earlier.
However, the UN agency said that despite the continued decline in FDI inflows, the increase in outflows and an improved economic climate suggests that a recovery is under way in 2004.
The report indicated that FDI inflows are set to rebound but could not say by how much.
A few large cross-border mergers and acquisitions (M&As) may make all the difference, but are however, impossible to predict. Cross-border M&As increased in value by 3% in the first six months of 2004, compared to the same period a year earlier.
During the first four months of this year, the value of share trading in the world also rose by 60% compared to the same period in 2003.
Corporate profitability also rose significantly in the main home countries in 2003 and is reportedly continuing to increase in 2004.
Unctad said that the findings of its surveys support the prediction that a rebound in FDI flows is in the making, with three quarters of the companies surveyed and four out of five location experts expressing optimism regarding FDI prospects over the next three years.
A recovery in FDI would boost international production, presently carried out by at least 61 000 TNCs with over 900 000 foreign affiliates, representing an FDI stock of about $7-trillion.
However, Unctad pointed out that a recovery does not mean that all countries will realise their FDI potential.
It said that its Inward FDI Performance Index, a measure of a country's attractiveness to FDI, shows that such economies as the Czech Republic, Hong Kong, China and Ireland continue to attract significant investment even during the current FDI recession.
In contrast, Unctad said that countries such as Japan, South Africa and Thailand have yet to realise their full potential to attract FDI, according to their ranking on the Inward FDI Potential Index as compared with that on the Inward FDI Performance Index.
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