SA’s foreign direct investment dips in 2019

South Africa saw a dip in foreign direct investment in 2019 compared to the previous year, with inflows falling to R6.8 billion from R72.1 billion, the central bank said on Tuesday.

A key part of President Cyril Ramaphosa’s plan to revive growth in Africa’s most developed economy hinges on luring foreign capital, but prolonged power outages caused confidence among investors to wane along with industrial activity.

The sharp jump in local coronavirus infections, which saw Ramaphosa announce a nationwide lockdown for 21 days starting on Thursday, is set to pile further pressure on an economy already in recession and suffering intense financial market volatility.

The South African Reserve Bank (Sarb) said in its quarterly bulletin nationwide blackouts by state power firm Eskom since the beginning of 2020 had triggered broad-based economic weakness, while the impact of the coronavirus outbreak was also beginning to tell as global risk aversion spiked.

Inflows of portfolio investments, which involves the trade currencies, bonds and stocks, shrank dramatically on a quarterly basis, to R9.3 billion in the final quarter of 2019 from R40.2 billion in the previous one.

Since the beginning of February, as coronavirus infections climbed, the rand plunged more than 10%, bond yields rose to all-time highs, while around R4.5 trillion exited the Johannesburg Stock Exchange.

The bank’s figures in the quarterly bulletin showed equity outflows of nearly R3 billion in 2019, with sales of R33 billion in the fourth quarter and R32 billion in the third.