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SOUTH Africa should celebrate the fact that its outbound foreign direct investment (FDI) had shown strong growth as much of this was directed to the African continent, Trade and Industry Minister Rob Davies said.

 

Investment in Africa was important for South African companies, he added, as the domestic market was too small on its own to sustain high rates of economic growth over the long term.

"The African continent is now widely acknowledged as the next growth frontier and SA is in the fortunate position of having identified the growth opportunities in Africa many years ago already," Mr Davies said in a written reply to a parliamentary question by Inkatha Freedom Party MP Jan Esterhuizen.

Mr Esterhuizen asked Mr Davies to explain the apparent "overarching desire" by South African businesses to grow offshore rather than to invest locally. He noted that outbound FDI had grown by only 17% this year compared to the 24% fall in foreign direct investment into the country.

Mr Davies said the World Investment Report released by the United Nations Conference on Trade and Development in June 2015 demonstrated that aggregate global FDI inflows had declined by 16% in 2014 as a result of the continued uneven and weak recovery of the global economy.

SA was not unaffected by these developments, with inflows slowing from $8.3bn in 2013 to $ 5.7bn. This was nevertheless higher than other African countries and SA remained the top destination in Africa for FDI projects.

FDI outflows from SA could partly be accounted for by the investments made in Africa by companies such as Vodacom, MTN, SABMiller, Standard Bank, Pick n Pay, Shoprite-Checkers, Woolworths, Nando’s and mining companies.

Mr Davies said they showed the extent to which South African entrepreneurs and companies had become serious participants in the global economy. In most cases, these outward investments draw on their South African value-chains, expertise and financial resources.

"These outward investments are positive and should be celebrated. Market opportunities are arising as Africa’s population urbanises and consumer demand grows off a low base in many African countries. We encourage our firms to seize these opportunities, noting that their ability to do so is precisely because they are able to leverage off the financial resources and market successes in SA," the minister said.

The investments by South African companies also contributed to regional integration, infrastructure development and industrialisation of other African countries.

 

Source: Business DayLive

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