A dramatic improvement has taken place in the investment climate in Southern Africa in the past two years, according to a recent report by the BusinessMap Foundation on investment in the South African Development Community (SADC).
The report, Investment 2002: Challenges and Opportunities, notes that money is flowing into the region at an unprecedented rate, though levels of foreign direct investment (FDI) announced in the past two years are still relatively low in world terms.
BusinessMap has identified new and intended foreign investment in the SADC region, excluding South Africa, in 2001 and last year worth R343-billion.
”FDI is arguably less important for South Africa than for the SADC, because the country has a developed capital market,” said Reg Rumney, executive director of the foundation. ”Through this billions of rands of domestic and foreign portfolio investment can be raised in bonds and shares, in addition to FDI, though this tends to be hot money that flows out as easily as it flows in.”
FDI into South Africa over the past nine years totalled about $22-billion (or about R131-billion at current exchange rates) — an average of $2,4-billion (about R14,6-billion) a year. Last year BusinessMap tracked about $2,7-billion (or R24-billion) of announced FDI into Southern Africa.
Almost half of the money was destined for Angola, with Mozambique second in line. About $36-billion in actual and intended investment has been announced over the past two years. By comparison, the United Nations Commission for Trade and Development (Unctad) recorded an inflow of less than $20-billion from 1991 to 2001. The Unctad figure for 2001, at
$2,3-billion, is about a third of BusinessMap’s 2001 figure of $6,6-billion of actual investment.
Some of the disparity is due to definition, some to timing. BusinessMap records FDI amounts when they are announced, and categorises them into ”actual” transactions and ”intentions”. Central banks and Unctad record only when the money changes hands.
Despite gloomy misperceptions of Africa as the ”hopeless continent”, the SADC region is attracting investors. The lure of rich natural resources on most of the subcontinent is too good to resist.
Even in Zimbabwe, where the rule of law and property rights have been flouted, new investors have placed money, particularly in platinum mining, as others have disinvested.
Improved governance in countries like Mozambique is attracting investors. The end of the civil war in Angola means that BusinessMap has even tracked investments outside the oil industry, which tends to be part of an enclave economy.
For instance, South Africa’s Shoprite Group is set to start operating in Angola’s wholesale and retail sector this year and began construction in Luanda last year on a R113-million combined Shoprite and Megasave distribution centre.
SAB-Miller in 2001 paid $19-million for a 45% share in Coca-Cola Bottling Luanda to the Coca-Cola Company, which will keep a 10% stake. And the telecommmunications company Unitel, in which Portugal Telecom holds a 25% stake, has invested about
$10-million to install a cellphone network in Benguela province.
Mozambique, which in 2001 took second place in the SADC with FDI of about $2-billion, last year received the highest FDI of $477-million.
South Africa is a big investor in the region, contributing about $2-billion of actual investment. South Africa’s top investment destination for 2001 and last year was Mozambique. Indeed, South Africa has become the former Portuguese colony’s largest foreign investor.
For example, South Africa has taken over all the breweries in that country. Last year Mozambique’s largest brewer, Cervejas de Moçambique, in which SAB-Miller has a 78% stake, took over the controlling interest and management control of Laurentina from Brasseries International Holdings, a subsidiary of the Castel Group.
The tourism sector is another area where South Africans are big players. South Africa’s Jordan Properties is leading an environmental and tourism investment of $20-million in Mozambique’s Vilanculos Coastal Wildlife Sanctuary. Jordan built the 20-bed Dugong Lodge at Vilanculos last year. A second 20-bed lodge is being built by a Danish investor.
In financial services, South Africa’s Absa group took over Mozambique’s Banço Austral, formerly Popular Development Bank, in 2001. Actual FDI inflows into SADC, as recorded in BusinessMap’s FDI database, in dollar terms were substantially higher in 2001 than last year. About $7-billion, or R56-billion, was reported to have come into the SADC in 2001 against little more than $1-billion, or R11-billion, last year.
When intended investments are added in, the picture looks more comparable. The total figure for 2001 is almost $20-billion of actual and intended investment. For last year the figure is about $16-billion.