Foreign investors flee SA market, but Africa still has appeal – STANLIB
FOREIGN investors in South African equities and bonds may be heading for the exits, but the outside world is far from turning its back on Africa as a whole.
The contrast in sentiment has been highlighted by Dylan Evans, STANLIB’s UK-domiciled director of global investment marketing, South Africa’s leading asset management and unit trust company.
As manager and marketer of the Standard Africa Equity Fund, STANLIB maintains close scrutiny of all African markets. The portfolio has underlying equity stakes in numerous jurisdictions across the continent, including Nigeria, Egypt, Zambia, Morocco, Mauritius and Ghana.
Evans notes that recently anyone who ‘follows the money’ will have witnessed a growing flight from South Africa yet foreign direct investment (FDI) in the rest of Africa remains remarkably robust.
“During the first 22 days of October, foreigners sold a net R22.6 billion of South African equities, the largest monthly sell-off by foreigners ever recorded,” says Evans.
“In the year to late October, foreigners sold a net R43.7 billion of South African equities – a sharp contrast with previous years.”
In 2007, foreigners bought a net R64.16 billion of our equities and a net R220 billion from 2004 to 2007.
Evans adds: “The dramatic acceleration of foreign equity sales and some bond sales has clearly weakened the rand. From the beginning of the year until late October, the rand weakened by 31.7% on a trade-weighted basis and by 41.1% against the dollar. This makes the rand the worst performing emerging market currency this year.”
Over the same period, the South African equity market lost around 30% of its value in rand terms and 58% in dollar terms.
Yet foreigners remain largely supportive of many other countries in Africa, judging by recent FDI flows.
Evans points to US$328 in FDI into Africa in the year to the end of September 2008. The biggest regional winners were West and North Africa. Nigeria alone attracted FDI of US$88.85 billion, while investors showed great interest in Tunisia (US$55.72 billion) and Egypt (US$32.85 billion).
In the southern part of the continent, Angola attracted FDI of US$11.45 billion while Namibia garnered US$7.9 billion, making it the biggest FDI winner in per capita terms. FDI into Zambia totalled US$4.63 billion; even troubled Zimbabwe enjoyed an inflow of US$2.29 billion.
The sectors with greatest appeal for foreign investors were real estate (accounting for US$83.45 billion), oil and gas (US$81.62 billion), mining (US$78.71 billion), infrastructure (US$20.52 billion) and electricity (US$20.26 billion).
