South African business has for a long time now invested more outside of the country than others invested in South Africa. The net Foreign Direct Investment (FDI) position data goes back on a yearly basis to 1956, and quarterly to 2013 (the fourth quarter).
In 2016 it reached just over 10% of GDP the net value invested in foreign countries by SA enterprises. It was a record then, but now in the second quarter of 2017 it had reached 21% of GDP.
The total value of SA direct investment (known as fixed investment in the old days) into other countries reached R2,8 trillion – which equalled just about 61% of GDP.
Our firms are looking at ways to maximise their profits, which they do not do well within their home country. This scary situation was reported about a week ago by the SARB – but not reported on by the media.
Analysts in the know have kept quiet, as they fear that saying anything negative brings outrage. One analyst told me that the firm policy is to not talk to media about anything even slightly negative (before the Gupta e-mails) as it would bring the firm into disrepute.
So…much of the bad news on the economic front goes unreported.
The net positive asset position, however, should never be seen as negative. The outbound FDI brings dividend flows into SA which have helped to stabilise the Rand, and also keep making a good return for the 12,4 million people invested in pension funds in South Africa.
But such is the stream of fake news that real facts and figures are hidden even by our top-end media, who no longer have the time to investigate numbers, and just joined the church choir.
SA does not lack investments; it lacks intelligence in the public debate. Luckily the business leaders of SA have moved on!
Also when profits are low in the home country and risks are high investment will flow elsewhere!
The fixed capital formation is negative when returns do not justify investment, and money which is kept in the bank pays out more. Why take risks?
More recent data of the net fixed investment position shows that the net assets exceed foreign fixed Liabilities (Inward FDI) by more than 20% of GDP. This shows the impact of increased risks, such as inflation and a negative government view of business.
One can now expect to add 500 000 unemployed a year – if government does not change direction!
Mike Schussler is chief economist at Economists.co.za