Major direct investments by China are welcomed and will contribute to the economic development of South Africa, according to a report from Longyuan South Africa Renewables and its thinktank Price Metrics (Pty) Ltd.
Longyuan SA Renewables is a subsidiary of China Energy and China Longyuan.
Price Metrics is an influential South African consultancy organisation that provides independent and evidence-based economic analysis and advice to organisations in the private and public sectors.
The partners published the report, which is one of the chapters of topic one, “Foreign Direct Investment in South Africa by Chinese and Other Investors”, on December 22 based on research on risks and issues of Chinese state-owned companies under the South African investment environment and broadening corporate brand influence and better fulfilling corporate social responsibility.
This report outlines and analyzes 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 also listed several advantages for Chinese investors to invest in South Africa, “Africa’s second largest economy (after Nigeria), most diversified economy on the continent, abundant natural resources and particularly mineral wealth and a large presence of multinational companies many of whom view South Africa as their headquarters in Africa.” the report said.
The risks come together with some challenges.
Institutional changes, constraints on electricity supply for energy intensive businesses, relatively high costs of labour and inflexible labour 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. Major direct investments by China are welcomed and will contribute to the economic development of South Africa.
Click the link below to view the full report: http://www.saceta.co.za/uploads/Longyuan/FDIINSABYCHINESEANDOTHERINVESTORSFINAL22DEC2020.pdf