SA, Mozambique drive regional growth in fund flows

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Tawanda Karombo Harare

South Africa and Mozambique, with massive infrastructure and gas projects, are the front runners in attracting global investment into the southern African sub-region, according to a UN trade and investment body.

The World Investment Report released by the UN Conference on Trade and Development (Unctad) on Tuesday says investment inflows into southern Africa doubled to $13 billion (R135bn) last year, thanks to attractive investment climates in South Africa and Mozambique.

However, South Africa still faces immense competition from Nigeria – now the continent’s biggest economy – as another report released this week showed that the west African country was the most favoured destination among frontier markets for investments by the major European and American multinational companies.

The Frontier Markets Sentiment index ranks Nigeria as the most attractive frontier market for investment. The index, according to brokerage and advisory firm Imara Africa Investment, tracks the level of interest shown by major European and American multinational companies in African and other frontier economies.

In the southern African region, South Africa still leads the rest in attracting investment from across the world, according to Unctad’s World Investment Report. The country lured investment inflows of just above $8bn last year, with major infrastructure projects largely accounting for this. In 2012, South Africa had total investment inflows of about $4.5bn.

“In southern Africa, investment inflows almost doubled to $13bn, mainly due to record high flows into South Africa and Mozambique. In both countries, infrastructure was the main attraction. In Mozambique, investments in the gas sector also played a role,” Unctad said in a release accompanying the report.

Zimbabwe had investment inflows of about $400m, the report said, roughly the same as the previous year.

Experts and analysts said yesterday that investor uncertainty stemming from an erratic regulatory framework in Zimbabwe was mainly to blame for the flattening out of foreign direct investment. They said more clarity was needed to revive investor interest in the country.

Nigel Chanakira, the chairman of the Zimbabwe Investment Authority, said on Tuesday that uncertainty was to blame for the country’s flattening investment inflows.

The state investment body is targeting investment inflows of $1bn for the current year, a figure economists said was unrealistic.

“The country is struggling and there’s still a long way before we start seeing meaningful new investments,” said a fund management and investment advisory company focused on Zimbabwe and the rest of southern Africa.

“Investors want to see clarity first before committing to new projects despite the fact that we have investment areas and projects that could be of interest to investors.”

The Unctad report showed Nigeria, Egypt and Morocco rounded out the list of the top five African countries that received the most investment from abroad last year.

“Despite increasing their share of foreign direct investment into landlocked developing countries from 18 percent to 23 percent, the picture for African landlocked developing countries was mixed.”

Half of Africa’s economies experienced investment falls while the other half, mainly mineral exporting countries, registered significant rises.

“Half the economies experienced falls and half – predominantly mineral exporting economies – registered an increase, with a strong performance in Zambia, where flows topped $1.8bn,” the report said.

Overall, African foreign direct investment flows rose by 4 percent to $57bn last year with this rise attributed to “international and regional market seeking investments as well as infrastructure investments”.

North African investment inflows, however, declined by 7 percent to $15.5bn, with Morocco and Sudan attracting about $3bn each.

West Africa’s inflows declined by 14 percent to $14.2bn owing to “decreasing flows to Nigeria” although oil projects in Ghana, Gabon and Ivory Coast had “started to attract considerable investment from foreign transnational corporations” during the period under review.

Rising interest among international investors in Kenya and Ethiopia lifted investment flows into east Africa by 15 percent to $6.2bn.

“Kenya is developing as a favoured business hub, not only for oil and gas exploration in the sub-region but also in industrial production and transport services. Ethiopia’s industrial strategy is to attract Asian capital in order to develop its manufacturing base,” Unctad said in a release accompanying the World Investment Report.

The UN agency said in the report that overall world investment developments had bucked declining trends and swung to growth in 2013. It said investment flows across the world had grown by 9 percent year on year to $1.45 trillion.

Unctad has set a target of $1.6 trillion in global investment flows for this year. By 2016, global cross-border investments are seen further rising to $1.8 trillion although it has cautioned that fragility and uncertainty in some regions could dampen this expected growth trajectory.

“Fragility in some emerging markets and risks related to policy uncertainty and regional instability may negatively affect the expected upturn,” Unctad said.


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