Value of foreign direct investment soars :: Namibia Internet Gateway cc ::

Articles: Value of foreign direct investment soars

Posted by admin on Wednesday, April 05, 2006 - 08:19 AM

THE value of mergers and acquisitions in SA soared 63% last year, helping the country eclipse India for the first time in terms of foreign direct investment, according to Ernst & Young.
Rob Rose

This shows local companies are now on the radar when it comes to foreign takeovers. Ernst & Young suggested a number of other foreign firms might bid for South African companies, possibly banks or mining companies. Mergers and acquisitions climbed to R269bn last year, powered by Old Mutual’s R38bn takeover of Skandia, Barclays’ R30bn purchase of Absa and Vodafone’s R21bn acquisition of Venfin shares. Within that, empowerment deals reached their highest ever level of R56bn. But crucially, R57bn of the total amount was “inward investment” — equal to the foreign investment of the previous five years combined. This also ensured SA edged past India for the first time when it came to foreign direct investment last year. While SA still lags China and Brazil by far in foreign direct investment, last year’s steep rise due to Barclay’s and Vodafone’s investments shows SA is now able to compete with such emerging market investment darlings as India. Dave Thayser, Ernst & Young associate director, said last year “was the first time SA even appeared on the (foreign direct investment) map, because previously we were always at the tail end of the curve”. Although SA has always attracted many foreigners to invest in the JSE through volatile “portfolio investments” it has had more difficulty in luring long-term foreign direct investors, such as Barclays. The Ernst & Young survey suggests historically low levels of fixed foreign investment could be in for a sustained increase. “The two major inward investment deals (Vodafone and Barclays) potentially represent the beginning of a new era of investment that should send strong signals of confidence to other potential investors,” it said. However, Thayser said it was not likely that there would be a repeat of last year’s deals where two large multinationals bought into SA on a massive scale. But he said that given the environment for acquisitions had never been better “this cannot be entirely ruled out”. The Ernst & Young survey is one of two major gauges of mergers and acquisition in SA, alongside that of Dealmakers. Using different criteria, Dealmakers put the total value of deals last year at R351bn.

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