Johannesburg - South Africa yesterday revised its gross domestic product (GDP) down to 0.4 percent in the fourth quarter, while Standard Bank warned the country would shed 200 000 jobs and the economy contract to 0.4 percent if it was downgraded.
The news came as the country fell off the league of big recipients of foreign direct investment (FDI), signalling an urgent need to sustain efforts to re-ignite growth and stave off a ratings downgrade to junk in early June. The rest of the continent remained almost in the same boat as FDI proved to be elusive.
Of concern to ratings agencies was the slowdown in South Africa’s economic growth and the lack of a catalyst to turn the situation around.
Novare, an independent investment advisory business, said last week: “While Moody’s have affirmed South Africa’s credit rating, which is… two notches above sub-investment grade, the risk of a downgrade by the other two rating agencies remains high as there remains no clear growth catalyst in sight, apart from plans that have yet to be implemented.”
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A report by AT Kearney, a global consultancy, into annual FDI confidence released this month, revealed that South Africa was missing for the second year running from the top 25 countries.
Investor concern
The report said this was indicative of heightened investor concern about political, policy and regulatory instability.
The report found the same trend on the rest of the continent, charging that despite numerous reports portraying Africa as one of the preferred frontiers for investment opportunities, its attractiveness for FDI had been lowered.
Not a single African country appeared in the top 25 countries on AT Kearney’s 2016 list of attractiveness for FDI.
In February, the UN Conference on Trade and Development (Unctad) found that FDI to Africa dropped last year, reflecting the plummeting prices of the region’s principal commodity exports.
The Global Investment Trend Monitor report showed that while FDI inflows to other regions were on the rise, Africa fell by 31 percent last year to about $38 billion (R593bn).
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FDI into South Africa, the continent’s second largest economy and most industrialised, plunged 74 percent to $1.5bn, while Nigeria, which is Africa’s largest economy and leading oil producer, saw its flows decline by 27 percent to about $3.4bn after it was “hit hard” by the drop in oil prices.
According to AT Kearney, as recently as 2013 emerging markets comprised more than 50 percent of the countries on its FDI confidence index.
In contrast developed markets captured eight of the 10 top spots and accounted for 80 percent of all countries included.
The US topped the index for the fourth year in a row, while China claimed the second place for the fourth consecutive year. AT Kearney said this demonstrated investors’ enduring interest in the Chinese market. The Asian powerhouse is followed by Canada and Germany.
AT Kearney said: “This likely reflects the fact that developed markets are once again the primary contributors to real GDP growth worldwide. And while 39 percent of global executives are seeking new investments in emerging markets, most Brics (Brazil, Russia, India, China and South Africa) have lost their lustre – so investments in emerging markets are being spread across a wider range of countries than in the past.”
For the second year in a row, only three Brics countries – India, China and Brazil – appeared on the index.
BUSINESS REPORT