Some alarming figures on capital flows – shared by economist.co.za‘s Mike Schussler – have revealed that much more money is leaving South Africa than what’s coming in, creating a vacuum for job creation and economic stability.
Putting his findings to MoneyWeb, Schussler analysed data from the UN Conference on Trade and Development (Unctad) for 2017. It reveals that Mzansi uses one of the highest percentages of GDP to make foreign investments, but fails to receive anywhere near as much back.
Capital concerns for SA
Only Luxembourg and The Netherlands use a bigger chunk of their GDP to make foreign investments than South Africa. The gulf – estimated to be about R1.7 trillion – is apparently responsible for a catastrophic inability to create more jobs in this country:
“Using the average emerging market as a measure (average is taken as 12% of GDP as calculated), SA should have had R2.2 trillion in extra fixed investments by the end of 2017.”
“Assuming that the capital and labour ratio stays the same, this would have meant about 3.1 million more jobs. The net foreign investment stock is hard data collected by Unctad as well as the South African Reserve Bank. Other international bodies show similar declines and comparable trends.”
Mike Schussler, Chief Economist for economists.co.za
Investment in South Africa
It’s a report full of twists, turns and shocks – but ultimately, we continue to arrive at the same conclusion: Money is leaving South Africa at a much faster rate than it is coming in.
This is measured as “Foreign Direct Investment” (FDI), and as it stands, Zimbabwe currently has a better net percentage than SA. The problem has been exacerbated by some of the biggest homegrown companies deciding to set up shop abroad.
The likes of Investec, Anglo American and Steinhoff are huge South African-built businesses that now mainly operate from abroad. If they had stayed within these borders, our FDI ratio would be a lot easier on the eye as it would bring more money into the country and generate a bounty of employment.
With the cumulative data stretching back to 2017, Cyril Ramaphosa’s recent foreign investment drive could end up providing some relief here. But nonetheless, it does nothing to curb the amount of money leaving South Africa – and that’s the crux of the matter.