22 March 2019

South Africa: Investment Drive Making Waves in Economy

President Cyril Ramaphosa's aggressive efforts to boost the country's stagnant economic growth are yielding results, according to figures released by the South African Reserve Bank (SARB).

In the Quarterly Bulletin released on Wednesday, the SARB said inward direct investment increased from only R26.8 billion in 2017 to R70.7 billion in 2018.

South Africa's direct investment liabilities, however, reverted from an inflow of R28.7 billion in the third quarter of 2018 to an outflow of R8.2 billion in the fourth quarter.

This, the report said, was due to the repayment of short-term loans by South African subsidiaries to foreign parent companies.

President Ramaphosa in October last year hosted the inaugural South Africa Investment Conference. During the conference, businesses pledged nearly R290 billion worth of investment announcements over the next five years.

The investments were a culmination of a six-month investment drive by the four envoys tasked with globetrotting in search of over R1.2 trillion worth of investments over the next five years.

Former Finance Minister Trevor Manuel, Former Deputy Finance Minister Mcebisi Jonas, businesswoman Phumzile Langeni as well as retired banker, Jacko Maree, form part of the team of envoys searching for investors with deep pockets. Presidential economic advisor Trudi Makhaya is also part of the team.

The SARB bulletin also highlights that portfolio investment liabilities reverted from an inflow of R17.9 billion in the third quarter of 2018 to an outflow of R33.9 billion in the fourth quarter, as non-residents disposed of both equity and debt securities.

"Non-residents' net sales of domestic equities of R15.7 billion in the fourth quarter followed net sales of R7.4 billion in the third quarter, while their net purchases of debt securities of R25.3 billion in the third quarter reverted to net sales of R18.2 billion in the fourth quarter.

"Non-residents' net purchases of domestic equity and debt securities of R90 billion in 2018 were significantly less than the R279 billion in 2017," said the report.

Other investment liabilities changed from an outflow of R8.7 billion in the third quarter of 2018 to a marked inflow of R113 billion in the fourth quarter. The sharp reversal, the bulletin said, could be attributed to non-residents extending loans to the domestic banking sector as well as an increase in rand-denominated deposits and, to a lesser extent, foreign currency-denominated deposits with the domestic banking sector.

"Other investment liability inflows nearly doubled from R61.4 billion in 2017 to R119 billion in 2018," the SARB said.

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