'SA firing on all cylinders'
19 December 2005
The success and stability of the South African economy is being recognised around the world. 2005 saw many of the largest foreign direct investments in the country's history.
"There is no doubt that South Africa is firing on all cylinders," says Neil Gregson of Credit Suisse Asset Management.
Business confidence is at a 23-year high, and inflation has remained within the government's targeted 3-6% range for 27 consecutive months.
This stability, coupled with South Africa's growth potential, has seen some of the world's largest companies investing tin the country.
For some it is a return to South Africa: Barclays Bank and General Motors both disinvested from the country in the 1980s due to the former government's apartheid policies. Their return signals a resurgence of international investor confidence in the country.
'Upward trend'
General Motors returned to South Africa in 2004, and in
April 2005 announced an R18-billion deal to manufacture their flagship Hummer range in the country.
South Africa will be the only manufacturing site outside of the US to assemble the Hummer H3 - a smaller, cheaper, more fuel-efficient version of the famous sports utility vehicle. SA production of the H3 will begin in the last quarter of 2006, with up to 10 000 units a year being targeted.
The company also announced an additional R600-million plan to upgrade its production facility near Port Elizabeth in the Eastern Cape.
"This is a continuation of a trend of expansion of existing investments in SA, and will hopefully mark the start of a real upward trend in foreign direct investment," Reg Rumney, head of consultants BusinessMap, told Business Day.
'Huge vote of confidence'
The Absa-Barclays deal, finalised in July, at around R30-billion is the largest ever single investment in the country. The deal saw British-based Barclays
buying a 56% stake in Absa, one of South Africa's "big four" banks.
"It's a huge vote of confidence," said Dominic Bruynseels, CEO of Barclays Africa and Middle East. "We think South Africa is a positive and growing economy, and we want to be a part of that."
According to Absa economist Christo Luüs, the Barclays-Absa deal could finance half of SA's current account deficit for the year, and have a noticable impact on the country's gross domestic product.
Yebo, yes!
In November, another British company signalled its intention to increase its involvement in the South African market. Communications giant Vodafone announced an offer to purchase Venfin shares at 30% more than the current market value.
Vodafone already owns 35% of South African cellular company Vodacom, and with Venfin's 15% would increase its stake to 50%. The other 50% of Vodacom is owned by state-owned enterprise Telkom.
"Vodacom has been a highly
successful investment for Vodafone," said Vodafone CEO Arun Sarin. "The company is the established number one mobile operator in South Africa."
While not yet finalised, the deal is worth an estimated R16-billion.
It is also expected to spur Vodacom's growth in other African markets. Until now, the company has been hamstrung by a shareholder restriction on trading north of the Equator. The restriction was intended to prevent Vodacom from competing against its parent company.
Coega: all systems go
Meanwhile, South Africa's Coega development, a new deepwater port and industrial development zone (IDZ) in the Eastern Cape, secured its first tenants in 2005.
"Coega has taken off in a big way," CEO Papi Silinga told Engineering News.
In May, Belgian-owned Sander International Textiles became the first tenants to come on board. Since then German industrial group MAN Ferrostaal and Straits Chemicals have also confirmed that they
will build premises in the IDZ, in deals worth R1.6-billion and R1.1-billion respectively.
"If you look at the total value of investments we have signed up since May, then you can say that we have been averaging an announcement of an investment of R500-million or more in the Coega IDZ each month," Silinga said.
SouthAfrica.info reporter
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