SA takes Africa investment lead

7 May 2013

South Africa, rated the most attractive country in Africa for investors, itself invested in more projects in the rest of the continent than any other country in 2012, acccording to Ernst & Young’s third Africa Attractiveness Survey.

The report, released on Monday, combines an analysis of international investment into Africa over the past five years with a 2013 survey of over 500 global business leaders about their views on the potential of the African market.

A large majority of respondents viewed South Africa as the most attractive African country in which to do business, with 41% of all respondents putting South Africa in first place and 61% including the country in their top three.

“The primary reasons for South Africa’s popularity appear to be its relatively well developed infrastructure, a stable political environment and a relatively large domestic market,” Ernst & Young said in a statement.

Hot on South Africa’s heels were Morocco (20% of respondents placing it in the top three, 8% putting it first), Nigeria (20% top three, 6% first place), Egypt (15% top three, 5% first place) and Kenya (15% top three, 4% first place).

SA ‘at forefront of Africa growth’

According to the report, Africa’s global share of foreign direct investment (FDI) grew from 3.2% in 2007 to 5.6% in 2012, driven in particular by growth in investments coming in from emerging markets: while investment from developed markets only grew at 8% over the five-year period, the rate of FDI projects from emerging markets into Africa grew at a compound rate of over 21%.

Between 2007 and 2012, the top emerging market investors in Africa were India (237 FDI projects), South Africa (235), the United Arab Emirates (210), China (152), Kenya (113), Nigeria (78), Saudi Arabia (56) and South Korea (57), all of whom were among the top 20 investors over that period.

The report singled out South Africa – the single largest investor in Africa by number of FDI projects in 2012 – as being at the forefront of growth in intra-African trade and broader emerging market investment.

Business Day newspaper pointed out that China and the European Union remained the biggest investors in the continent in value terms, but that South Africa, through the expansion of its multinational corporations across the continent, was playing a strategic role, particularly in the diversification of investment sectors.

The Ernst & Young report found that the continent’s trend towards growing diversification was continuing, with an increasing emphasis on services, manufacturing and infrastructure-related activities – a positive sign given the volatile nature of commodity prices and the growth risks associated with over-dependency on a few key sectors.

Ernst & Young’s Africa business centre director, Michael Lalor, told Business Day that “the longer-term story is the contribution that South Africa is making to the development of services sectors across the continent, which is helping to reduce dependence on natural resources”.

Sub-Saharan Africa on the rise

Ajen Sita, Ernst & Young’s Africa managing partner, said there was “a growing confidence and optimism among Africans themselves about the continent’s progress and future”.

Kenya and Nigeria had also invested heavily in the continent in recent years, and others, such as Angola, were expected to become increasingly prominent investors across the continent over the next few years.

The survey also revealed a shift in emphasis in terms of African FDI destinations, with investment into North Africa largely stagnating since 2007 while FDI projects into sub-Saharan Africa grew at a compound rate of 22%.

Among the star performers attracting growing numbers of projects were Ghana, Nigeria, South Africa, Kenya, Tanzania, Zambia, Mozambique and Mauritius.

The report noted that, despite the impact of the ongoing global economic situation, the size of the African economy had more than tripled since 2000. It added that the continent’s growth outlook appeared positive, with African gross domestic product (GDP) as a whole expected to grow by 4% in 2013 and 4.6% in 2014, and a number of African economies predicted to remain among the fastest growing in the world for the foreseeable future.

Mark Otty, Ernst & Young’s managing partner for Europe, the Middle East, India and Africa, said the platform for this growth had been provided by “a process of democratization that has taken root across much of the continent, ongoing improvements to the business environment, exponential growth in trade and investment, and substantial improvements in the quality of human life”.

Sita said Ernst & Young was confident that the continent was on a sustainable upward trajectory.

“A critical mass of African economies will continue on this journey,” Sita said, adding that there was “a strong probability that a number of these economies will follow the same development paths that some of the Asian and other rapid-growth markets have over the past 30 years.

“By the 2040s, we have no doubt that the likes of Nigeria, Ghana, Angola, Egypt, Kenya, Ethiopia and South Africa will be considered among the growth powerhouses of the global economy.”

SAinfo reporter