Foreign investment inflows pick up

The outflows of foreign capital which SA saw in 2021 turned into modest inflows of about 1% of GDP last year, helping to fund the current account of the balance of payments, which swung into deficit last year after two years of surpluses.

Inflows of foreign direct investment outweighed outflows of portfolio investment in the fourth quarter, with foreign direct investment jumping to R67bn in the fourth quarter from R11.9bn in the third quarter.

SA has historically depended more on inflows of foreign portfolio investment – into JSE listed equities and bonds — to finance deficits on the current account of its balance of payments because it does not receive that much by way of more durable growth boosting foreign direct investment flows. Reserve Bank governor Lesetja Kganyago flagged this as a risk at this week’s monetary policy committee, saying SA’s external financing needs were expected to rise, with the current account deficit forecast to deteriorate to 2.7% of GDP for the next three years because of sharply lower export commodity prices, stable oil prices, and weaker growth in export volumes. This would put pressure on bond yields and the rand, he said.

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