South Africa takes a knock in foreign direct investment

Foreign direct investment flows to South Africa tumbled 43.6% in the first half of 2012 compared to the same period last year, while FDI to the continent as a whole rose by 5%, a United Nations report said on Tuesday.

The decline in FDI to Africa's biggest economy came amid an 8% drop in global FDI inflows due to heightened global economic uncertainty, according to the UN's Global Investment Trends Monitor.

As South Africa battles the worst labour unrest since the end of apartheid, the numbers suggest it will face increased competition for investment from its faster-growing neighbours.

The report said FDI inflows to South Africa fell to $1.7-billion in the first six months of 2012 from $3-billion in the first half of 2011, reflecting sluggish domestic economic growth as well as a slowdown in developed economies.

"It reflects the situation in the main investors in South Africa [which] are developed countries," said Astrit Sulstarova, an economist at the UN's Conference on Trade and Development, which produced the report.

Slow economic growth in South Africa could also be influencing investment decisions, Sulstarova added.

The IMF forecasts South African GDP growth of 2.6% this year, and recently cut its 2013 growth forecast to 3% from a July projection of 3.3%, due to its close links to struggling Europe.

The IMF has also trimmed its 2012 forecast for Africa to 5% from 5.4% but raised its projection for 2013 to 5.7% from 5.3%.

FDI flows to Africa grew 5.1% to $23.1-billion in the first half of 2012 after three consecutive years of decline, the conference's report said, citing a return of investor confidence to North Africa, especially Egypt.

Globally, FDI inflows reached $668-billion in the first half of 2012, down 8% from the same period in 2011, due to a decline in inflows to the United States and the other Brics countries – Brazil, Russia, India and China.

But China was still the world's largest recipient of FDI, with inflows of $59.1-billion in the first half.

For the first time, developing countries accounted for half of global FDI inflows, the trade conference said, with Latin America and the Caribbean attracting greater investment along with Africa.

Flows to Europe as a whole increased by 5.7% but the European Union experienced a decline of 3.8%. – Reuters

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