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Foreign direct investment in good nick

Over the 12 months ended September 2023, gross foreign direct investment (FDI) inflows on the South African balance of payments achieved a record high average quarterly level (excluding the Naspers share swap transaction of 2021).


Since the end of 2015, the following four distinct phases of gross inward FDI can be distinguished (based on four-quarter moving averages):


  • Fourth quarter 2015 to first quarter 2018 (associated with the realisation of state capture and declining business confidence) - average quarterly inflow of R9 billion

  • Second quarter 2018 to first quarter 2020 (associated with the end of the Zuma era and the hope of improved governance flowing from the Zondo Commission of Enquiry into State Capture) – average quarterly inflow of R16.9 billion – an increase of 88%

  • Second quarter of 2020 to fourth quarter of 2021 (associated with the Covid pandemic and extensive lockdown regulations) – average quarterly inflow of R12 billion – a decline of 29%

  • First quarter of 2022 to third quarter of 2023 (associated with the end of lockdowns and economic recovery in most sectors) – average quarterly inflow of R28.7 billion – an increase of 140%



The strong upward trend in gross FDI inflows is especially encouraging against the background of South Africa being placed on the so-called “grey list” by the Financial Action Task Force (FATF), which is the global money laundering and terrorist financing watchdog. The grey listing occurred in February 2023.


Fortunately, a recent report by the FATF has indicated good progress with South Africa’s efforts to be removed from the grey list. According to National Treasury, the FATF has formally re-rated 18 of South Africa’s 20 deficiencies. Of these, 14 recommendations had been fully or largely complied with, and one was rated as not being applicable to South Africa.


Following these re-ratings, South Africa is now deemed to be fully or largely compliant in 35 of the FATF’s 40 standard recommendations, including five of its six core recommendations.


Judging by the positive trend in gross FDI inflows over the past year, it seems clear that global investors were always confident of South Africa’s ability to swiftly improve the regulatory standards required for preventing organised crime, corruption, and terrorism. National Treasury has indicated that it hopes to conclude the necessary reforms by 2025, which will remove South Africa from the list.


Once this has been achieved and considering the resilience of the South African financial sector, including compliance with international regulatory standards for banks, further impetus in FDI inflows can realistically be expected.


In the interim, the attractiveness of direct investments in the on-going transition to renewable energy in the whole of the Southern African region should continue to boost the balance of payments.

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