Major direct investments by China will contribute to South African Economic Development: report

By Wang Lei

Major direct investments by China are welcomed and will contribute to the economic development of South Africa, according to a report jointly released by Longyuan South Africa Renewables and South African think tank Price Metrics (Pty) Ltd.

The report, Foreign Direct Investment in South Africa by Chinese and Other Investors, outlines and analyses the level, structure and trends in Chinese direct and other investments in South Africa from 2001 to 2019, as well as reviews implications of the current level and structure of foreign investment in South Africa, including major opportunities and risks for Chinese investors.

According to the report, most foreign investment in South Africa is portfolio investment in its debt and equity markets reflecting the country’s sophisticated, large, liquid, and well-regulated financial markets.

The report listed several advantages for Chinese investors to invest in South Africa, such as its status as Africa’s second largest economy (after Nigeria), the most diversified economy on the continent, its abundant natural resources, and particularly its mineral wealth and large presence of multinational companies, many of whom view South Africa as their headquarters in Africa.

The risks come along with some challenges.

Institutional changes, constraints on electricity supply for energy intensive businesses, relatively high costs of labor and inflexible labor market regulations, restrictive Black Economic Empowerment regulations affecting procurement of locally made products and services, a general low economic growth environment in the next few years, as well as the rand exchange rate are some risks for Chinese investors.

The report concluded that Chinese investment in South Africa is under-represented and provides many opportunities for investors.

The report is part of Research on Risks and Issues of Chinese State-owned Companies under the South African Investment Environment, conducted by Longyuan SA Renewables, a subsidiary of China Energy and China Longyuan, and PriceMetrics, who are also working on Research on Broadening Corporate Brand Influence and Better Fulfilling Corporate Social Responsibility.

Both researches are expected to be completed before April 2021. The reports will guide Chinese investors in SA to better invest in SA, as well as better fulfill their social responsibility in SA. 

People’s Daily