South Africa ranks 2nd amongst BRICS in converting FDI into social progress - Deloitte

MARCH 18, 2015

South Africa was the second best performer amongst the so-called BRICS nations in terms of converting foreign direct investment (FDI) into social progress, according to a new Deloitte report titled Foreign Direct Investment and Inclusive Growth: The impacts on social progress.

A Social Progress Index (SPI) score of 63 puts South Africa behind Brazil, the top performing BRICS nation with an SPI of 70, but ahead of Russia (60.8), China (58.7) and India (50.2), based on Deloitte’s findings in the report which provides a holistic measurement of FDI’s impact beyond gross domestic product (GDP) for 132 countries.

The BRICS (Brazil, Russia, India, China and South Africa) are among the top 30 recipients of gross FDI but lag on social progress measures such as nutrition and basic healthcare; water and sanitation; personal safety; access to basic knowledge; ecosystem sustainability; tolerance and inclusion; and access to advanced education.

“While the economic benefits of FDI inflows are well understood, the contribution of FDI to social progress is less clear cut,” said Carlton Jones, Associate Director, Deloitte.

“This report demonstrates how the Social Progress Index can act as a guide for business and other organisations to make smarter strategic investments and shows governments that policies focused on driving social progress can attract FDI, which in turn advances both economic and social development.”

Deloitte’s report found that while FDI can typically help foster rapid economic growth, it does not always translate into improved social progress regardless of whether the social variables being considered are typically investment-related such as employment and higher incomes or whether they extend to factors such as quality of life, tolerance and inclusion.

Nations such as China and Kazakhstan attract significant levels of FDI without realising higher social progress, a situation that normally typically occurs when investment is disproportionately directed towards certain industries such as natural resources or when the policy environment does not encourage investment diversity.

South Africa performed best in areas including Access to Basic Knowledge (92.85); Nutrition and Basic Medical Care (75.9); Personal Rights (74.94); Personal Freedom and Choice (70.82) and Access to Information and Communication (70.52).

The country did moderately in terms of Water and Sanitation (69.8); Shelter (64.2); and Health and Wellness (62.36) but significantly underperformed when it came to Ecosystem Sustainability (44.21); Access to Advanced Education (40.66); and Personal Safety (30.9).

“This report demonstrates that in the right circumstances, FDI delivers real benefits to the lives of ordinary people above and beyond its economic impact,” says Michael Green, Executive Director of the Social Progress Imperative.

“Yet, crucially, it also shows that business tends to thrive even more in societies that are doing well in terms of their social progress index measures.”


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