**Fatshimétrie: Reflections on the decline in investor confidence in South Africa**
South Africa, long considered an attractive investment destination, is facing a decline in investor confidence from both domestic and foreign investors. This trend is driven by the increasing volatility of the weakening rand, which is pushing local citizens and private companies to park their money abroad for protection.
According to a new study by the Centre for Risk Analysis, foreign and domestic direct investment is declining, while more South Africans are choosing to diversify their investments abroad. This highlights the challenges facing the South African economy, with economic growth falling short of targets and investment levels insufficient to drive the country’s socio-economic development.
The study highlights that South Africa’s economic growth has long lagged that of its emerging market peers, with an average annual growth rate of just 5%. To successfully address current socio-economic challenges, the country would need an investment level equivalent to about 30% of its GDP, a target that remains largely out of reach.
The situation is all the more worrying given that overall investment in South Africa has declined in recent years, from R796 billion in 2013 to R685.6 billion in 2023. This steady decline in investment highlights the lack of confidence among domestic and foreign investors in the growth potential of the South African economy.
The study also reveals an imbalance in the distribution of investment, with sectors such as finance and social services attracting more funds than mining and manufacturing. This trend, combined with insufficient investment in key sectors of the economy, underscores the need for South Africa to diversify its sources of growth and attract more investment in sectors with high development potential.
The report also highlights the growing trend of South Africans investing abroad to protect their assets against the depreciation of the rand and to access higher growth markets. This capital flight highlights the challenges facing the South African economy, particularly in terms of competitiveness and attractiveness to foreign investors.
In conclusion, the decline in investor confidence in South Africa is a warning sign for the country’s economyTo overcome these challenges, it is crucial for the South African authorities to put in place economic policies and structural reforms aimed at restoring investor confidence and stimulating long-term economic growth.