Laggards will miss out in the scramble for Africa
Business Live - May 7th 2012, 08:21
South African companies are still very much in the race into the rest of Africa, but could lose out to international competitors if they do not position themselves for the opportunities on the continent.
The 2012 Africa Attractiveness survey published by Ernst & Young (E&Y) this week showed South Africa still is the biggest contributor to intra-African foreign direct investment (FDI).
Overall SA was the sixth largest source of new FDI projects in Africa between 2003 and 2011, contributing 4.1% of total new FDI projects in the continent. The US led the pack with 12.5% of all new FDI projects, followed by France and the UK. China and Hong Kong was 11th with a share of 3.1%.
Michael Lalor, head of the Africa business centre at E&Y, said while there is a perception that South African companies are falling behind international companies in terms of African investment, the facts tell a different story.
"South African investment into the rest of the continent grew at a compound annual rate of more than 60% from 2007 to 2011. Last year alone it was around 69%," Lalor said.
"The question is whether that is enough. We would certainly like to see more South African companies moving at a faster rate."
Don Rogan, MD of stockbroking at BoE Private Clients, warned if South African companies do not position themselves to take advantage of the growth opportunities in Africa, someone else will.
He said geography has ensured that South African companies are ahead of the rest as far as investment in Africa is concerned, but said these companies need to take the next step and make a fuller commitment to Africa.
Questions have been asked about South Africa's position as the "gateway" into Africa, but Lalor said he disputes the notion that SA might be losing its status as the platform for investment into the rest of the continent.
According to the E&Y survey, South Africa is still the top African destination for new FDI project investment. Between 2003 and 2011 SA attracted 16% of the total new FDI projects into Africa, followed by Egypt on 10.9% and Morocco at 10.4%.
Intra-African FDI as a proportion of the total FDI projects in Africa more than doubled between 2003 and 2011, from 8% to 16.9%, showing that African companies are leading from the front in growing investments, E&Y said. Apart from SA, this trend is being led by Kenya and Nigeria. Between 2007 and 2011 the growth rates in new FDI from these two countries were 77.8% and 73.2% respectively.
The survey showed Africa received 5.5% of all global FDI last year, compared to a share of 4.5% in 2010.
While the total number of new FDI projects into Africa grew by 27% last year, capital investment fell by 7.3%.
Lalor said this was indicative of the changing nature of investment into Africa. Investment are moving away from capital intensive sectors like mining and going into manufacturing, business services and sales and marketing and support, which in turn creates more jobs. Last year the number of jobs created by FDI increased by 16.5% compared to 2010.
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