Foreign investment in South Africa slumps 43 percent

Foreign direct investment in South Africa last year slumped by a massive 43 percent in dollar terms last year, a new study has found.

Foreign direct investment in South Africa last year slumped by a massive 43 percent in dollar terms last year, a new study has found.

With low levels of domestic savings and local companies increasingly looking abroad for business opportunities, foreign investment is seen as essential to address the country's unemploymnent rate, hovering around 33 percent, and widespread poverty.

The limited interest foreign companies have shown in South Africa had been insufficient to make a marked impact and was now on the decline, said BusinessMap, an economic analysis agency

In findings published on Monday, it said while South Africa had secured about $1bn in foreign direct investment in 1999, but this slid to $492m last year.

Major contributors to the fall were instability in neighboring Zimbabwe, the HIV-Aids crisis and low foreign direct investment in emerging markets around the world.

Economists say the situation should improve, provided the government push ahead with its privatisation program and exploits easier access to United States and European Union trade markets.

The government plans to reduce its shareholding in Telkom, the telecommunications monopoly from 70 to 50 percent this year, a sale expected to raise between 20 and 30bn rand.

"Last year was lousy, but this year should be better, especially if the further privatisation of Telkom goes ahead as planned," Mike Schussler, an economist at Tradek Ltd, said today.