The Kearney Foreign Direct Investment (FDI) Confidence Index has revealed that South Africa was lifting to be primarily propelled by the dynamic and growing technology and start-up sectors, with FDI inflows of R53.8 billion.
In the index, South Africa showed strong growth, climbing six spots from 17th to 11th on the emerging markets index.
The annual survey of global business executives ranking markets that were likely to attract the most investment in the next three years attributed SA’s lifting to be primarily propelled by the dynamic and growing technology and start-up sectors, FDI inflows in the second quarter of 2023.
This was driven by the completed Heineken acquisition of Distell, and the continuing interest/investment from European nations and other key markets.
Kearney partner and Africa managing director Theo Sibiya said SA’s start-up funding grew from $50 million in 2015 to close to $350m in 2021.
“Even though Cape Town is referred to as the “startup capital” of SA, Johannesburg is a close second in terms of attracting investment,” Sibiya said.
The authors of the index added that despite the positive growth trajectory in FDI witnessed in SA, several challenges persisted, thereby hindering greater investor confidence in the nation’s market.
Last year, investors cited concerns around unreliable electricity supply, high crime rate, and concerns over security.
Political uncertainty with upcoming elections and shifts in the regulatory framework, the perceived challenges in navigating bureaucratic processes and regulatory compliance, particularly among smaller enterprises and the availability of skilled talent were also flagged.
Sibiya said addressing these challenges would be crucial in fostering a more conducive investment climate and sustaining SA’s upward trajectory in FDI inflows.
The findings of the 2024 FDI Confidence Index showed that there was an overall positive confidence among executives about the global economy, despite the many global challenges.
The US retained the top position for investment attractiveness for the 12th consecutive year.
Looking at the FDI Confidence Index world rankings for 2024, Canada retained the 2nd position, while China jumped to third place from ranking seventh last year.
The United Kingdom increased one rank to fourth, Germany dropped one notch to fifth, and France maintained its sixth-place position.
Notably, Japan dropped from third to seventh, while the United Arab Emirates made a striking leap from 18th to eighth, perhaps on the back of ongoing business and legal reforms.
Sibiya said this year’s results reflected continued investor optimism about the global economy, in spite of increasing geopolitical tensions.
He said these higher expectations regarding the global economic outlook were likely explained in large part by the better-than-expected performance of the US, and the 2024 results reflecting a stronger showing for emerging markets overall, with eight markets making the top 25 global rankings up from six last year.
While this year’s survey continued to demonstrate investor preference for developed markets, accounting for 17 out of 25 of the markets on the work rankings, two more emerging markets than last year made the top 25 rankings.
Seven of the 25 markets on the Index-Poland, Chile, Romania, Peru, Hungary, Uruguay, and Oman-joined the list for the first time.
China, the United Arab Emirates, Saudi Arabia, India, Brazil, Mexico, Poland, and Argentina made up the top eight positions, and they were the only emerging markets included in the world index rankings.
Sibiya also said as SA looked forward to the rest of this year, the country’s climb in Kearney’s FDI Confidence Index showcases growing investor confidence, especially in the dynamic technology sector.
“To capitalise on this momentum, SA industries must prioritise creating a conducive business environment and fostering innovation. This will not only attract more foreign investment but also drive sustainable, economic growth in the country,” Sibiya said.
BUSINESS REPORT