South Africa recorded foreign direct investment (FDI) inflows of R16.0 billion ($1.07 billion) in the fourth quarter from outflows of R12.2 billion in the third, the central bank said on Tuesday.
The South African Reserve Bank said in its Quarterly Bulletin that the inflows in the latest quarter were caused by non-resident parent entities increasing equity investments and granting loans to domestic subsidiaries.
The country saw FDI inflows of R51.1 billion for all 2020, down from inflows of R74.0 billion in 2019.
Portfolio investments, reflecting a record of buying and selling of securities such as bonds and shares, recorded inflows of R24.1 billion in the October-December quarter compared with outflows of R39.5 billion the quarter before.
Annual portfolio outflows, however, were at R159.3 billion against inflows of R87.5 billion in 2019.
“While non-residents’ disposal of domestic equity securities increased from 2019 to 2020, the largest change in the financial account came from their disposal of domestic debt securities of R74.6 billion in 2020,” the central bank said.
“The significant reversal in non-resident flows of domestic debt securities can be attributed to the increased risk attached to South African government debt as a result of the deterioration in government finances,” the bank said.
South Africa is struggling to bring down its ratio of debt to gross domestic product. Gross debt as share of GDP increased to 81.8% in 2020 from 63.5% in 2019 without an increase in government revenues as the economy failed to grow.
All three major ratings agencies rank the country’s debt at sub-investment level, or junk, citing weak growth and the execution risk in National Treasury’s plan to bring down public sector wages.