portfolio investments
THE IMPACT OF PORTFOLIO INVESTMENT ON ECONOMIC GROWTH IN SOUTH AFRICA
South Africa is committed to maintaining an open environment for investment. This is core to long-term, sustainable, economic growth. As a low-savings developing economy, with high domestic investment requirements, South Africa requires to attract foreign direct investment in order to support domestic investment financing requirements (National Treasury, 2011). South Africa has re-entered this changing environment in full awareness of the pressing need for economic growth and development, for the creation of jobs and for the generation of income to improve the standard of living of its entire population. Out of its own saving, running at an unsatisfactorily low rate, it will hardly be possible to sustain a high economic growth rate. A net inflow of foreign capital therefore becomes a basic precondition if South Africa is to catch up on the huge backlogs of existing unemployment.
The South African Reserve Bank has recently reclassified capital flows by using three main categories for describing foreign investment flows, namely: foreign direct investment, which involves investment in a firm where foreign investors have at least 10 per cent of the voting rights; foreign portfolio investment which includes the purchase and sale of bonds and equities listed on international and domestic capital markets; and other foreign investment which consists of foreign loans and deposits between banks, companies and governments.
South Africa, just like other several developing countries has recorded large capital inflows in recent years, reversing a trend of outflows. Much of this new capital inflow has been in the form of portfolio investment. This has been attributed to large domestic capital markets in South Africa. The African Economic Outlook 2013 report shows that portfolio investment in South Africa increased from US$ 6.5 billion in 2011 to US$ 18.5 billion in 2012. However, this surge in portfolio
South Africa is committed to maintaining an open environment for investment. This is core to long-term, sustainable, economic growth. As a low-savings developing economy, with high domestic investment requirements, South Africa requires to attract foreign direct investment in order to support domestic investment financing requirements (National Treasury, 2011). South Africa has re-entered this changing environment in full awareness of the pressing need for economic growth and development, for the creation of jobs and for the generation of income to improve the standard of living of its entire population. Out of its own saving, running at an unsatisfactorily low rate, it will hardly be possible to sustain a high economic growth rate. A net inflow of foreign capital therefore becomes a basic precondition if South Africa is to catch up on the huge backlogs of existing unemployment.
The South African Reserve Bank has recently reclassified capital flows by using three main categories for describing foreign investment flows, namely: foreign direct investment, which involves investment in a firm where foreign investors have at least 10 per cent of the voting rights; foreign portfolio investment which includes the purchase and sale of bonds and equities listed on international and domestic capital markets; and other foreign investment which consists of foreign loans and deposits between banks, companies and governments.
South Africa, just like other several developing countries has recorded large capital inflows in recent years, reversing a trend of outflows. Much of this new capital inflow has been in the form of portfolio investment. This has been attributed to large domestic capital markets in South Africa. The African Economic Outlook 2013 report shows that portfolio investment in South Africa increased from US$ 6.5 billion in 2011 to US$ 18.5 billion in 2012. However, this surge in portfolio