---

SA investment inflows on a high

24 March 2006 Foreign investor confidence in South Africa is riding high, judging by the country's net investment inflows for 2005. According to the Reserve Bank's latest quarterly bulletin, South Africa's net investment inflows - including foreign direct investment and portfolio inflows, or short-term foreign investment in SA equities and bonds - came in at a R98.4-billion surplus for 2005, the highest on record. And for the first time, Business Day reports, foreign direct investment (FDI) inflows exceeded portfolio inflows, jumping from R5.1-billion in 2004 to R40.7-billion in 2005 - thanks in large part to Barclays' R33-billion purchase of a controlling stake in Absa. Offsetting the current account deficit The record investment inflows have helped to allay concerns over the state of South Africa's balance of payments - in particular, over a widening gap between the import and export of goods and services to and from the country. The Reserve Bank reported on Thursday that the deficit on the current account of the balance of payments, which measures this gap, rose to a 22-year high of R71.6-billion (4.5% of gross domestic product) in the fourth quarter of 2005, from R68.4-billion (4.4% of GDP) in the third quarter. For the year as a whole, the current account deficit stood at R64.4-billion, compared to R47.5-billion in 2004. Economists told Business Day that fears of a resulting rise in inflation would be eased by the fact that the deficit was easily funded by the R98.4-billion surplus on the financial account of the balance of payments, which records net investment inflows. Also encouraging, according to Business Day, was the fact that South Africa was becoming less reliant on short-term, less dependable portfolio investment to finance the current account deficit. Stanlib Asset Management economist Kevin Lings told Business Day that larger current account deficits were "relatively normal for an emerging economy trying to improve growth and employment," adding that spending on fixed investment in South Africa tended to be highly import-intensive. SouthAfrica.info reporter

Want to use this story on your website? See Using SouthAfrica.info material.

• Print this page

• Send to a friend