South Africa Loses Over R1 Trillion in Foreign Investment

South Africa has experienced a substantial decline in foreign investment, with disinvestment exceeding R1 trillion over the past ten years. Trevor Manuel, chair of Old Mutual and former finance minister, attributed this decline to eroding confidence in South Africa, driven by various government-driven crises and investors seeking regulatory certainty and effective execution.

Manuel stated, “Foreign investors disinvested more than a trillion rand from South African equities and bonds over the past decade, with that money being redirected to competing markets that appear to be on a more sound governance and regulatory footing.”

Iain Williamson, chief executive officer of Old Mutual, echoed these sentiments, emphasising the erosion of investor trust and confidence in Africa and South Africa. He highlighted the ongoing energy crisis, logistical challenges across ports and railways, and service delivery challenges as key constraints to economic growth.

The lingering effects of state capture and the continued impact of corruption have further exacerbated the situation, leading to institutional weakening and distrust in the system. Manuel emphasised, “The effects of state capture continue to be felt in all spheres of South African society, and while there has been an effort to restore the institutions and rebuild the economy, more work is necessary to eradicate corruption completely and regain institutional strength.”

In terms of financial performance, Old Mutual reported a negative net client cash flow of R11.97 billion, up 55% from the previous year, despite a 3% improvement in gross flows to R32.81 billion. The company attributed this increase to a shift from a major offshore investor, leading to R7.8 billion outflows, coupled with increased withdrawals from money market funds and challenges in the South African pension fund market.

To ease investor’s nerves and regain investment trust, Manuel and Williamson emphasised the need for policy certainty and stability. They highlighted the importance of adopting a pragmatic approach, striking a balance between fiscal requirements and providing clear regulations and long-term regulatory certainty.

As South Africa grapples with these challenges, concerted efforts across the private sector, public sector, and civil society are crucial to restoring investor confidence and fostering sustainable economic growth.