Picture: THINKSTOCK
Picture: THINKSTOCK

FOREIGN direct investment (FDI) into SA plunged 74% to $1.5bn last year, a dramatic and far steeper decline than experienced by the rest of the continent, according to the Global Investment Trends Monitor published by the United Nations’ Conference on Trade and Development (Unctad).

FDI flows into Africa fell 31.4% year on year in 2015 to $38bn, with Central and Southern Africa registering the largest declines.

"Developing economies saw their FDI reaching a new high of $741bn, 5% higher than in 2014. Developing Asia, with its FDI flows surpassing half-a-trillion US dollars, remained the largest FDI recipient region in the world, accounting for one-third of global FDI flows. Flows faltered in Africa and Latin America and the Caribbean (excluding offshore financial centers) reflecting the plummeting prices of their principal commodities exports," the report said.

Developing economies in general also suffered a decline in announced greenfield investments, which the report said pointed to a growing weakness in the capital expenditures of multinational enterprises.

On a global basis, Unctad projects a decline in global FDI this year.

"Barring another wave of merger and acquisition deals and corporate reconfigurations, FDI flows are expected to decline in 2016, reflecting the fragility of the global economy, volatility of global financial markets, weak aggregate demand and a significant deceleration in some large emerging market economies. Elevated geopolitical risks and regional tensions could further amplify these economic challenges," the monitor said.

Globally FDI climbed 36% last year to an estimated $1.7-trillion, the highest level since the global economic and financial crisis of 2008-2009. There was not much investment in greenfield investments in productive assets, however, with FDI flows being mainly concentrated in cross border merger and acquisitions.

Cross-border merger and acquisitions rose 61% while the overall value of announced greenfield investment projects registered little change from the previous year.

Developed economies, particularly the US (the number one destination) and Europe, were the main beneficiaries, capturing 55% of the FDI flows. A part of the FDI flows was also related to corporate reconfigurations involving large values in the financial account of the balance of payments but little movement in actual resources.

Flows to transition economies continued to fall (-54%) being harmed by tumbling international commodities prices and regional conflicts.

Investment in the Russian Federation and Kazakhstan, fell sharply.