Foreign investors could continue dumping billions of rand worth of South Africa’s assets on the market as uncertainty over the formation of the Government of National Unity (GNU) prevails, in spite of having remained bullish in the first quarter of 2024 before the elections.
Data from the SA Reserve Bank (SARB) yesterday showed that the country recorded foreign direct investment inflows of R24.4 billion in the first quarter of 2024.
According to the SARB’s latest Quarterly Bulletin, this was significantly higher compared to a downwardly revised R2.5bn in the previous three-month period ending December 2023.
“The inflow in the first quarter of 2024 largely reflected the acquisition of a domestic publicly listed vehicle tracking company by a foreign company,” said the SARB.
In February, Midrand-based fleet management and vehicle-tracking company MiX Telematics completed a merger with US-based internet of things (IoT) specialist PowerFleet, after receiving approval from the Competition Commission.
The combination with PowerFleet is expected to create a business with total revenue of $279m (R5.3bn), $39m of adjusted earnings before interest, tax, depreciation and amortisation (EBIDTA) and combined service gross margins of 67%.
The SARB yesterday also said portfolio investment liabilities recorded a substantial outflow of R52.0bn in the first quarter of 2024 following an outflow of R9.0bn in the fourth quarter of 2023, marking a seventh consecutive quarter of outflows.
According to the SARB, non-residents’ disposal of domestic equity securities increased slightly from R21.6bn in the fourth quarter of 2023 to R24.2bn in the first quarter of 2024.
This was while they also disposed of debt securities to the value of R27.8bn in the first quarter of 2024 compared with a net acquisition of R12.6bn in the fourth quarter of 2023.
“The outflow recorded for debt securities in the first quarter of 2024 could mainly be attributed to the maturity of a $1.5bn international bond of the national government,” the SARB said.
Meanwhile, the SARB said real gross fixed capital formation contracted for a third successive quarter in the first quarter of 2024 as capital outlays by the private sector decreased notably while fixed investment spending by the public sector increased.
It said the decrease was broad-based among the different asset categories, with the level of real gross fixed capital formation 2.8% lower in the first quarter of 2024 than a year earlier as business confidence remained low amid the prevailing weak economic growth outcomes.
Economists and analysts have berated the delays in the formation of the GNU as they have resulted in policy uncertainty and volatility in the markets.
According to the North West University (NWU) Business School Policy Uncertainty Index (PUI) for the second quarter of 2024, policy uncertainty rose further into negative territory to 68.3 from 65.8 in the first quarter.
NWU said the main driver of the PUI outcome in the second quarter was the perceived high level of uncertainty surrounding the recent South African elections, as business and the markets over this period took a precautionary stance up to and around the elections on May 29.
“Of course, it is still early days for the GNU and there remain political pitfalls and risks in what is still untested governance. SA has, after all, embarked on a new political terrain in which governance arrangements are having to be re-imagined afresh and negotiated at both national and provincial levels,” said the NWU in its report.
“Some grey political and policy areas may persist for now. But the rating agency S&P nonetheless sees the outcome of the elections as pointing to ‘broad policy continuity’ in SA.
“What is important now is that the GNU prioritises the higher fixed investment and real economic growth that SA now needs.
“If setting the broad national agenda for the GNU is now its main task, then staying on the right economic track is another crucial one. A successful GNU, therefore, needs to create a policy environment that raises the level of overall fixed investment that SA so badly requires to achieve higher job-rich growth.”
BUSINESS REPORT