case study – Foreign direct investment (FDI) in South Africa

Various factors influence the level of Foreign Direct Investment (FDI) that a particular country attracts. Some of these include the cultural, administrative, geographical and economic distance between the host and home countries of organizations making the investment decisions. Although expanding to foreign markets offers benefits such as higher economies of scale and reduced risk to country-specific macroeconomic shocks, such markets also present challenges that could curtail realization of these benefits. To engage in prudent expansion plans, entities thus evaluate country factors that may help them achieve growth and those that present a threat to their growth.

This paper presents a case analysis of South Africa to identify factors that affect the level of FDI in the country. Firstly, the costs and benefits of having more FDI in the country and those of having less are considered. Secondly, the approaches that a company can use to assess the opportunities and risks associated with FDI in South Africa is considered. Thirdly, the policies that the country should prioritize to attract higher FDI are evaluated. Finally, a comparison of South Africa with other emerging markets and other African countries as a destination for FDI for a non-south African entity is presented. Go to part 2 here.

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