Losing out on foreign direct investment

A global foreign direct investment study of 34 countries concluded that South Africa was losing out on US $2 billion of investment it could attract, the WOZA news site reported on Wednesday. The results of the study were published on Tuesday by Pricewaterhouse Coopers, the world’s
leading professional services organisation.

The study estimated the extent to which such investment is deterred by a lack of clear, accurate, formal, easily discernible and widely accepted practices in the world’s capital markets and national economies. The index looks at transparency in the area of corruption and in government economic policies. The average outcome of these and other factors yields an O-Factor. The higher the index, the greater the economic activity that did not occur “or which diverted to other avenues that inspire greater investor confidence”.

South Africa’s O-Factor is 60, which coincides with the average of the 34 countries analysed.

The benchmark countries are Chile (36), UK (38), US (36) and Singapore (29), the least opaque of all 34 countries. Russia (84) is the most opaque. Three African countries - South Africa, Kenya and Egypt - are included in the study, with Kenya accorded an O-Factor of 69 and Egypt one of 58. Of the five areas from which the O-Factor is derived, South Africa fared worst in “accounting standards and information released by corporations, banks and governments”.