According to Lullu Krugel, Senior Economist at KPMG, “South Africa’s leadership is focussing on reassuring investors. This is a very important step to reassure investors, especially after the recent credit rating downgrades, slower economic growth and strike action in the economy. Given the infrastructure requirements in the economy, FDI is a very important source of funding for the country and a factor that has important bearing on our currency as well.”
Where in previous years South Africa, Nigeria and Ghana have received the bulk of FDI within the continent – as they jointly accounted for about 50% of FDI inflow in 2011 – in the second half of 2012, FDI inflow in South Africa experienced a 43.6% decline when compared to the same period in 2011. “FDI can be quite volatile from one year to the next and the decline in FDI to South Africa does not necessarily represent a permanent trend, but bureaucracy and labour market constraints are two of the biggest concerns for international investors looking at South Africa,” Krugel continues.
“To really reassure investors, the President will need to make it clear that challenges around these two big concerns will be, or are being, addressed and provide some form of assurances. His statements in Davos are an important step in the right direction. Implementing the initiatives of the government, such as the National Development Plan, is the next important action.”
In his address in Davos, President Zuma confirmed the South African government’s commitment to its National Development Plan, adopted at ANC’s 53rd National Conference.
“South Africa has world class plans, where the National Development Plan and subsequent to this, stimulatory infrastructure plan, are clearly aimed at keeping the economy on the road to recovery. Efficient implementation and delivery on these plans will better serve to stay investor concerns and bolster FDI into the country”, conclude Krugel.