SA grabs 13th spot as an Investment Destination in A.T. Kearney’s FDI Confidence Index

We all need good news stories. And this certainly is one of those. The mood of the media generally follows a somewhat gloomy view of things. But we are happy to find, that in amongst all of the opinions predicting the worst, there is a positive mood amongst international investors, with increased levels of confidence in South Africa as an FDI destination, as measured by A.T. Kearney's index. Sentiment is often the driving force behind market movements, is it too naive to hope that despite SA's current woes, we will indeed prosper as an investment hub and gateway for the international market into Africa in the long run? – LF

Globally, investors have a mostly positive outlook for the global economy with high levels of confidence. Global management consulting firm A.T. Kearney today released its 2014 Foreign Direct Investment Confidence Index (FDICI), an in-depth view of forward-looking investment sentiment.

In this year's ranking, South Africa climbed 2 spots to become the 13^th most attractive destination for FDI globally according to the senior executives surveyed from 300 of the world's leading corporations. The U.S. maintains its 1^st place position from last year followed by China and Canada.

The findings bode well not only for the U.S., but for the global economy: Nearly four out of five respondents are more optimistic about the global economy than they were a year ago. Since its inception, the study has consistently pointed toward top global choices for foreign direct investment, with the top 10 most attractive FDI destinations receiving a majority share of global FDI inflows roughly one year after the survey.

Paul A. Laudicina, founder of the FDI Confidence Index and A.T. Kearney chairman emeritus, notes, "Despite racking volatility and economic uncertainty on a global scale, the findings from the 2014 FDICI suggest that a corner is being turned. Corporations sitting on massive cash reserves are increasingly confident that they can parlay these into productive investments with attractive returns."

Each region has an interesting unfolding story seen through the lens of the FDI Confidence Index, with many of the winners riding on stability after the ongoing post-recession economic turbulence. Key international survey highlights include: despite unresolved deficits in the Eurozone, 11 European countries still rank in the top 25, some entering the ranking for the first time; Canada moved into the third spot; 39% of respondents voiced a more positive sentiment than last year for second-ranked China; and Russia (last year's #11) fell off the top 25 ranking, despite the fact that the survey was fielded prior to the current political situation in Ukraine.

Africa managed to increase FDI flows by 12 percent to $ 47.6 billion in FDI. Its growth was driven partly by investment in extractive industries, but manufacturing and services are also seeing increased interest. South Africa received $4.5 billion FDI in 2012 after a bounce of $ 5.8 billion in 2011.

"We expect to continue to see increased FDI flows to Africa overall. Energy related companies, retail companies and infrastructure and transport providers for example are all committed to invest in the continent. The Renewable Energy Independent Power Provider Programme in South Africa has played a major role in driving investment.  While each deal in itself may not be particularly large, these moves are all positive signs of the increased confidence of the global investor community," commented Wim Plaizier, Managing Partner, A.T. Kearney Africa.

"It is critical for governments and investors alike, to respond to this increased investor confidence by putting in place the right levers to capitalise on the many opportunities and drive further job creation and social and economic development."

The 2014 FDICI is not only an indicator of FDI flows, but an excellent telescope into specific economic stories around the globe. The A.T. Kearney report concludes that opportunities abound for investors who know where to look, aided by strategic foresight and scenario-based planning to understand where the potential lies and who is prepared to react to different eventualities.

"We feel confident that despite a slow and uneven economic recovery, executives who make FDI decisions are regaining a sense of measured confidence," said Erik Peterson, A.T. Kearney partner and a co-author of the study. "We're pleased that this year's study portrays a more optimistic picture globally."

For the full report, click on this link – Ready for Takeoff – FDICI 2014