This marks a notable 6.6% decline from the second quarter of 2023, a period when investment levels had finally surpassed pre-pandemic levels for the first time since the onset of the lockdown. <\/p>\n\n\n\n
The investment rate, which illustrates the proportion of investment in the GDP, decreased to 14.8% from 15.3% in the second quarter of 2023, 15.5% in 2019, and 18% in 2015.<\/p>\n\n\n\n
The steepest decline was observed in private investment<\/strong>, which dropped by 3.3% in the first quarter of 2024. <\/p>\n\n\n\n Similarly, even the government reduced its investment by 2.4%, while state-owned companies saw a decline of 1.3%.<\/p>\n\n\n Concerningly, TIPS added that South Africa’s investment rate is low compared to global standards.<\/p>\n\n\n\n It is similar to Brazil’s investment rate but lower than other African and Latin American countries.<\/p>\n\n\n\n Notably, Asia, particularly China, has a remarkably high investment rate. Most economists argue that an investment rate between 20% and 25% is essential for sustaining long-term growth, and South Africa is well behind this mark. <\/p>\n\n\n\n Higher rates are linked to significant inefficiency and decreasing returns, while lower rates are associated with insufficient maintenance and expansion of productive assets, as well as economic and social infrastructure.<\/p>\n\n\n\n As a result, South Africa has experienced a significant outflow of funds over the past decade. <\/p>\n\n\n\n According to the South African Reserve Bank (SARB), estimates suggest that hundreds of billions, and possibly as much as R1 trillion, have left the country. <\/p>\n\n\n\n In its first Financial Stability Review of the year, the SARB highlighted that both local and foreign investors are withdrawing substantial sums of money from South Africa. <\/p>\n\n\n\n Specifically, in the first quarter of 2024, foreign investors sold R12.4 billion worth of JSE-listed bonds, following net purchases of R11.2 billion in the fourth quarter of 2023. <\/p>\n\n\n\n The SARB also reported that non-residents’ holdings of domestic shares reached a new low of 27.6% at the end of March 2024, indicating a continued outflow from the equity market.<\/p>\n\n\n\n In 2022, the South African Reserve Bank (SARB) took a significant step by increasing the offshore prudential limit for domestic institutional investors. <\/p>\n\n\n\n As a result, all South African institutional investors, including insurance, retirement, and savings funds, are now allowed to allocate up to 45% of their total retail assets for investment outside of South Africa, with an additional 10% Africa allowance. <\/p>\n\n\n\n This adjustment aims to offer local savers the opportunity to diversify their investments in global markets, potentially leading to higher returns. <\/p>\n\n\n\n However, it has also prompted a significant outflow of capital from South Africa.<\/p>\n\n\n\n This has led to the offshore allocation of domestic institutional investors totalling the same value as South Africa\u2019s entire nominal GDP, more than doubling since 2012.<\/p>\n\n\n\n![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/06\/Screenshot-2024-06-19-092016.png\")
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