South Africa’s efforts to project itself as the ideal destination for foreign direct investment in emerging markets may be severely thwarted by recent developments.
There have been media reports of multinational companies which are either seriously considering offers from potential buyers of their stakes in their South African operations or already in the process of divesting. According to Business Day, a South African business title five times a week, Barclays Bank is examining the possibility of selling its interest in South Africa’s ABSA Bank, with state owned entity said to have shown interest. Chevron, which trades in South Africa as Caltex, is also looking at the right price for its 75% interest in the local business. The company has been in the country for four decades. It has also been reported that some mining companies are also mulling over selling their assets.
While a sluggish economy is said to have compelled companies to review their positions, the number of multinationals companies that are pay huge tax payers should be great cause for concern to the South Africa. Commentators have expressed fear that it could reflect hardening perception that South Africa is no longer the safe haven it was for foreign direct investment. They mainly fault poor governance, volatile and militant labour movement. Recent decisions that the government had taken like the controversial dismissal of the finance minister whose performance had been given a thumbs up by the investors did not help matters.
While it cannot be said that the flight of foreign capital is a product of self-destructive tendencies that are inexplicably tolerated, their impact on the economy could be earth-shattering, for want of a better term.