January 10th, 2018
Comparison of South Africa with Emerging, Developed and African Markets
A comparison of South Africa with emerging markets such as India, Brazil and China favor such other markets for FDI. Firstly, these other markets have a far much higher population than that of South Africa hence provide a larger market. Even with the population of adjacent countries such as Zimbabwe and Botswana being accounted for, these emerging markets provide a larger market. Secondly, emerging markets such as Brazil are nearer to foreign investment sources such as Norm America than is South Africa. This reduces the cost of transportation to these areas hence could favor FDI more. South Africa’s high crime rate also makes it rate unfavorably as compared to other emerging markets. On the positive end, the increasing focus on Africa as the next frontier to reduce overreliance on oil from OPEC region and to reduce terrorism risk, presents South Africa with the opportunity to attract FDI.
Comparison of South Africa with developed nations as FDI destinations present mixed results. In the area of economic, technological and infrastructural development, such developed nations present a better market than South Africa. Similarly, some of the developed nations (e.g. the U.S, Canada and Japan) have huge populations that could offer a larger market than that offered by South Africa. On the other hand, South Africa offers entities with the potential to enter into an unexploited region. Many of the developed nations present highly competitive and fully exploited markets thus may not offer opportunities for expansion. In this respect, South Africa would be a better market to seek expansion opportunities.
South Africa’s comparison with rest of Africa makes it a prudent expansion destination. This arises from its comparatively advanced economic, financial and infrastructural framework, as well as a relatively stable political background. Governance transitions in South Africa have for instance been devoid of violent occurrences of transitions in other African countries. Additionally, South Africa’s vast mineral resources and recent product diversification have made it a net exporter thus boosting its continued leadership of the economic affairs of the continent. The disadvantage of South Africa in comparison with other economies however arise with the low growth rates whereas countries that have discovered oil resources have achieved massive growth rates in recent years. When this is coupled by the high population in countries such as Nigeria, such countries could compete favorably with South Africa for FDI.
Various factors affect the attractiveness of a country to FDI. This paper evaluates the factors that affect FDI in South Africa. On the positive end, economic endowment, relative political stability compared to other countries in the region and unexploited markets, present South Africa with opportunities to attract FDI. On the other hand, high crime rates and lack of skilled labor impact negatively on the country as a FDI destination. To better its chances of attracting higher FDI, the country should thus address such insecurity concerns and institute measures such as training that will provide skilled labor in the future.