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Inter-company loans push up foreign direct investments

Inter-company loans push up foreign direct investments

According to the Bank of Namibia’s latest data, Namibia recorded net foreign direct investment (FDI) inflows during the second quarter of this year, mainly thanks to an increase in both equity investments and foreign investment in debt instruments.

The data provided by the BoN said, FDI recorded a larger inflow of N$1.872 billion in the second quarter of 2017 from a smaller inflow of N$772 million during the same quarter of last year. Increased net inflows related to equity and investment fund shares (N$320 million) and debt instruments (N$982 million) contributed to this increase.

Furthermore, the central bank stated that increased net FDI inflows during the period under review were mostly supported by a rebound in mining production activities.

“FDI can be a major driver of economic growth and job creation, besides being an important indicator of investor confidence,” according to financial services firm, PSG Konsult.

PSG Konsult advised that the net FDI should be used by subsidiaries either to expand current investment projects or repay outstanding debts, as opposed to greenfield investments that have a stronger impact on economic growth.

“For much of the same reasons as last year, we foresee that net FDI will remain low by historic standards this year. Nevertheless, net FDI should improve somewhat during 2018 on the back of an expected ongoing recovery in commodity prices, which would boost mining companies’ profits and encourage new investment in the industry,” PSG Konsult said.


Caption: Rebound mining activities were identified as contributors to the increased net FDI inflows during the period.


 

 

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