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German appetite for FDI in SA on the rise

07.05.18 AHK Süd-Afrika - News-Hauptkategorie

German manufacturers are looking to increase their expenditure on foreign investments, including in South Africa, should government effectively address foreign investor concerns around policy uncertainty.

The Foreign Investments in Manufacturing Industry 2018 report – based on a survey of around 2 500 German industrial companies by the German Chambers of Commerce and Industry (DIHK) – showed that 10% of German manufacturers were looking to invest in Africa. “The recent regime change in South Africa has sparked renewed investor confidence and increased German companies’ appetite for foreign investment in the country,” said Alexander Solomon, head of economy and energy at the German embassy in Pretoria. He said trade between Germany and South Africa had amounted to €17 billion last year – up €2bn from the €15bn recorded in 2016 – but red tape and restrictive policies could dampen the growth potential. “It is clear President Cyril Ramaphosa understands what needs to be done to improve investor confidence and stimulate trade but investors are very cautious around the proposed land reform measures,” added Solomon.

Frank Aletter, deputy CEO and head of business development at the Southern African German Chamber of Commerce and Industry, agreed, pointing out that there was a “global understanding” that property was protected by the laws and the country’s constitution.

 “Land expropriation in the name of public interest is indeed possible, but this must be accompanied by some form of compensation. By adopting a policy of expropriation without compensation, South Africa moves away from this global standard and risks alienating foreign investors,” he said. According to Aletter, investor confidence may only be restored once a well-defined policy is in place. “And it has to be a good one at that.” He said that aside from policy uncertainty around land reform, foreign investors still faced challenges in meeting black economic empowerment (BEE) regulations which were becoming increasingly more restrictive.

Solomon added that for Ramaphosa to stimulate trade and grow investment confidence he needed to fight against any government corruption, rehabilitate the state budget and ensure proper governance of state-owned enterprises (SOEs).

“We are encouraged by many of the measures the president has already taken towards achieving this,” he said, pointing out that Germany and South Africa had always enjoyed a solid trade and investment relationship.

“There are over 400 German companies based in South Africa at the moment and we are confident of this relationship continuing commented Alexander. [more] see page 07

by Adele Mackenzie

Source:

ftw
Freight & Trading Weekly
Friday 4 May 2018 No. 2293