Does the departure of the oil giant signal a divestment trend by international investors from South Africa?

Bongani Bingwa speaks to chartered accountant Kaya Sithole.

Foreign investors, jittery about the outcome of South Africa’s general election on 29 May, are adopting a ‘wait-and-see approach’.

After over a century of operating in Africa’s most developed country, oil giant Shell is heading for the hills.

Last year, Volkswagen CEO Thomas Schafer raised serious concerns regarding the future of the German automaker’s presence in South Africa.┬áSo, are we seeing the start of a divestment drive out of South Africa?

Not necessarily, says Sithole.

“International investers obviously have the choice to decide where to invest and how to invest their money.”

– Khaya Sithole, Chartered accountant

Sithole distinguishes between those who invest in fixed capital assets versus those who invest in floating assets.

“The distinction between the two is that if somebody wanted to come and build a factory here, they’re here for the long haul. But, comparatively, those who want to invest in shares that are listed in South Africa; they’ve got easier ways of exiting in and out of the market.”

– Khaya Sithole, Chartered accountant

A recent PWC report suggests South Africa has attracted net foreign direct investment (FDI) of around R96 billion (1.4% of GDP) since the financial crisis.

But are these investors looking to make a quick buck in South Africa, or are they here for the long haul?

“Obviously one has to figure out what it is that we think drives investment decisions… so that particular report, it will say that, on the long-term basis, there’s been a net inflow of capital, but that may simply be a reflection of South Africa being the most mature market in Africa and still regarded as a gateway to the African continent.”

– Khaya Sithole, Chartered accountant

Sithole says these investors must be distinguished from those who have been in South Africa for some time.

“There isn’t a linear process, there may be one sector where there is a clear investment drive to come to South Africa based on South Africa’s economic fundementals, and there may be one sector where everybody says well we’re exiting South Africa because that market has matured and we’ve found a new market elsewhere.”

Khaya Sithole, Chartered accountant