Recent events confirm that South Africa’s perceived receptiveness towards foreign direct investment (FDI) is declining. Consequently some foreigners are disillusioned, and look to better growth prospects elsewhere in Africa.
The case of EU investors – our single largest source of investment by far – confirms this: aggregate EU FDI stocks in South Africa declined by 23 percent between 2010 and 2012, at a time when their global FDI stocks increased. And that was before the legislative barrage unleashed before our 2014 national elections.
Since our economy is plagued by high unemployment, social discord, low growth, and rising political populism, the signal failure to retain, let alone ignite, foreign investor interest from our major source is disturbing.
But why is this the case? And will the Promotion and Protection of Investment Bill, shortly to be presented to Cabinet, change this dynamic?
Our politics have changed sharply in recent months. The ANC, harried by the populist EFF, is struggling to respond. Unfortunately, sensible, orthodox economic policies don’t buy votes.
We are not China; our market is not large enough to turn a blind eye to foreign investors’ concerns. We are at the cusp of a crucial turning point.
