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Fig. 2. Perceptions of risk constrain a country’s ability to attract investment AVERAGE FDI as PERCENTAGE of GDP 3% 2.4% 2 1 0.5% 0 AVERAGE POLITICAL RISK RANKING LOW RISK COUNTRIES HIGH RISK COUNTRIES 29 98 South Africa lags far behind countries such as Ireland, Singapore and China in our ability to attract FDI. The issue is not just with FDI; our overall investment rate is also lower than for these countries. Fig. 3. South Africa lags other countries in attracting investment (6) FDI as PERCENTAGE of GDP (1997 - 2002) 15% 13% 10 9% 5 4% 4% 3% 0 1% IRELAND SINGAPORE CHINA POLAND MALAYSIA SOUTH AFRICA page 15
The way we approach transformation should increase, and certainly not reduce, investor confidence. The wrong approach to transformation can increase perceptions of risk in three key ways: • Lack of certainty and clarity in the operating environment • Limited sense of partnership with business • Lack of confidence in the future sustained value of investments (e.g. equity deals transacted at less than “fair value”; need to “underwrite” BEE equity funding arrangements, etc.) Although risks can be exaggerated, the potential impact of these risk perceptions is anything but theoretical. Following The way we approach transformation should increase, and certainly not reduce, investor confidence the leak last year of the “draft” Mining Charter, we experienced net foreign capital outflows of R11 Billion during the following six months. This contrasts to average foreign capital inflows of R19 Billion over the previous seven years. (7) Thankfully, due in part to investors becoming somewhat reassured by the agreed Mining Charter, we have now returned to net capital inflows. We have not, however, recovered the inflows lost in the intervening period. page 16
Page 1 and 2: BRENTHURST DISCUSSION PAPER 8/2007
Page 3 and 4: INTRODUCTION By NICKY OPPENHEIMER E
Page 5 and 6: South Africa’s economic advanceme
Page 7 and 8: to transformation, could become an
Page 10 and 11: OUR UNIQUE CHALLENGE Effective tran
Page 12 and 13: And this is the nub of the challeng
Page 16 and 17: Investors were reacting to what the
Page 18 and 19: measures aim to ensure that our app
Page 20 and 21: standards for transformation, appli
Page 22 and 23: China, for example, has used a mix
Page 24 and 25: Africans no longer see value in mak
Page 26 and 27: Fig. 5. Sizing the BEE funding requ
Page 28 and 29: • Establishing incentives to crea
Page 30 and 31: What is certain is that inaction is
Page 32: Acknowledgement We would like to th

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