Wiseman Khuzwayo

Global investor confidence in South Africa has improved this year, according to the 2014 foreign direct investment confidence index released yesterday by global management consulting firm AT Kearney.

South Africa climbed two spots to become the world’s 13th most attractive destination for foreign direct investment (FDI). Last year its ranking dropped three spots.

It is the only country in Africa on the list of 25 and came ahead of Switzerland, Spain, Japan and Italy. In total, 11 European countries still rank in the top 25.

The US remained the most attractive destination, followed by China and Canada.

The index, now in its 12th edition, is based on data from a survey administered to senior executives of the world’s leading corporations.

The 300 participating companies represent 26 countries and span all industry sectors.

The survey was conducted in January and February.

AT Kearney said British oil major BP announced in April last year that it would invest $550 million (R5.8 billion) in its refinery, terminal and service station retail network assets over five years in South Africa.

BP will partner with Pick n Pay to open 120 Pick n Pay Express stores across the country, mimicking similar ventures between Woolworths and Engen, and between Fruit & Veg City and Caltex.

According to the index, Google made its first renewable energy deal in Africa with a $12m solar investment in the Northern Cape in May last year.

AT Kearney said: “While not particularly large deals, these moves are a positive sign for a country with volatile FDI figures, the result of the preponderance of larger merger and acquisition deals.”

It said Africa bucked 2013’s lethargic trend in FDI with a 12 percent increase to $47.6bn. Growth was driven partly by investment in extractive industries, but there was also increased interest in manufacturing and services.

Imara Africa Securities said yesterday that a new wave of investors was entering sub-Saharan Africa, excluding South Africa. There was little indication the trend would change soon.

It said interest was evident from the US’s West Coast to the UK and continental Europe. Even asset managers in Cape Town and Johannesburg were contributing to the trend.

Imara Africa Securities is a member of the pan-African Imara financial services group, which has custodial arrangements and trading platforms in numerous African markets.

Andrew Schultz, the Cape Town-based head of strategy at Imara Africa Securities, said increased interest in “Frontier Africa” was attributable to four key drivers:

n Stronger flows from a small group of specialised Africa funds that had invested in sub-Sahara equities for several years, primarily asset managers in the US, UK and South Africa.

n Niche-focused start-ups, which were funds recently established by asset managers in South Africa and offshore that specifically targeted Africa outside of South Africa.

n West European investment professionals with a growing appetite for African equities, although their funds might be registered in non-European jurisdictions, including British Virgin Islands and the Caymans. These were non-traditional investors in Africa. Their interest suggested a strategic shift in sentiment.

n Global emerging markets that focused on emerging economies, including South Africa, but were beginning to include or increase allocations into Frontier Africa.