RETURNS from offshore investments are starting to offset a sharp increase in dividend outflows since major South African firms started to list overseas, a leading economic think-tank said on Wednesday.
A report by consultancy BusinessMap said that while dividend payments made by South African companies to overseas investors had increased sharply since firms started listing offshore, dividend receipts and export earnings were increasing at a faster rate.
Mining giant BHP Billiton was the first South African company to shift its listing to London in 1997, followed by four firms seeking access to foreign capital to fund international growth plans at a time when domestic interest rates were high.
Mining group Anglo American, financial services group Old Mutual and South African Breweries moved to London in 1999, and IT firm Dimension Data moved there in 2000.
Financial services company Investec has announced plans to list in London later this year.
Although approved by South African authorities, the firms have been accused of lacking faith in the domestic economy and partly responsible for a plunge in the value of the rand last year because of an increase in dividend payments made abroad.
The rand plummeted 37% against the dollar in 2001 to a low of 13,85 in December. It has since recovered by around 20% and was trading at 11,225 on Wednesday.
”However, not all of these payments can be attributed to the London-listed companies,” said Karl Gostner, author of the report.
He said that a conservative estimate suggested at least one quarter of total dividend payments would have flowed out of the country regardless of the London listings and that as much as half of all such outflows might be attributable to payments by foreign-owned entities investing in the local economy.
”While there is little doubt that the London listings have led to an increased outflow of dividend payments, there is little to suggest that they have done anything more than intensify changes underway in the structure of the…economy.”
Gostner said investment into fixed capital had not declined since 1997 and that South Africa had also received more in dividend receipts on non-direct investment during 2000 and 2001 than at any other time during 1994-2001.
This reflected the dividend receipts on total foreign assets held by South Africans as well as dividend returns to South Africans investing in the now London-listed South African firms.
”While this is only a gradual trend at present…on the basis of South Africa’s strengthening foreign asset ownership it would seem likely that these payments would increase in the medium term,” Gostner said. – Reuters