South Africa - An investment-friendly economy

Résumé du document

This paper is devoted to one of the most advanced, broad-based and productive economy in Africa. This paper is about trying to understand how the Republic of South Africa became "one of the most advanced and productive economies" in Africa. We will pay attention to foreign direct investment and their role in the country's economic growth. The reason for choosing South Africa as an investment destination for some was the fact that it showed the willingness and desire to pinpoint business opportunities in the country. South Africa has enormous potential as an investment destination, offering a unique combination of "highly developed first world economic infrastructure with a vibrant emerging market economy". There are a huge numbers of incentives for the investors.

Introduction

The Republic of South Africa is a country of about 50 million people that is rich in diverse cultures, people and natural heritage. The country is situated on the Southern coast of Africa and its marine frontiers are the Atlantic and Indian Oceans. South Africa has diverse cultures and languages. Between 1948 and 1990 South Africa was under the Apartheid regime. The Apartheid formally divided South Africa in different racial groups- Whites, "Colored", Indians and several separate African racial groups. During the Apartheid regime the situation in South Africa was not favorable for foreign investments and the local firms were not welcomed abroad. By the end of the Apartheid the economic conditions took a sharp turn. The task of the new government was to stabilize the economy and to achieve economic growth and it started achieving its goal by reducing tariffs, reforming the labor market in order to reduce the discrimination, relaxing foreign exchange controls, reining in domestic spending and bringing down inflation.

Extraits

[...] www.themanager.org/pdf/diamond.pdf, accessed Nov The Economic Society of South Africa. www.essa.org.za/download/papers/001, accessed Nov UN Data. http://data.un.org, accessed Nov CEIC Data. www.ceicdata.com, accessed Nov 23, 2010. [...]

[...] Several factors such as the market size, the expectations of growth in aggregate demand, the strategic gain in market share either on a national or regional level, the expected change in the interest and exchange rates should be taken into account, because they may influence financial costs and export earnings, the cost and availability of inputs and the level of protection from foreign competition. The reason for FDI decision is the generation of profit by creating or defending a market or the gain of control of inputs. [...]

[...] As an emerging market it needs foreign direct investment for economic development and the government and NGOs realize that well. FDI in South Africa has been on the increase with intermittent lapses ever since 1956. Mining and Quarrying and Manufacturing industries are traditionally high-level recipients of FDI, however, we see a recent surge in portfolio investment affecting positively increases in FDI for sectors in the Financial, Insurance and Business industries. (Annex Foreign investments are understood as direct when a foreigner has acquired enough interest to influence management decisions. [...]

[...] Foreign investments can be approached by targeted investment opportunities. The government should encourage the identification of joint opportunities that involve foreign and local investors alike. It is a known fact that the quality of investments is pretty low, that's why a new strategy needs to be adopted in order to attract FDI. This strategy consists of the knowledge and understanding of what motivates investors to make investments in different locations. Joint ventures between domestic and foreign firms should be encouraged because in this way South Africans products will be granted entry into global supply chains. [...]

[...] Market seeking investment seeks to access individual or regional markets. Unfortunately the wide diversification of the manufacturing industry suggests more limited opportunities for market capture. Furthermore, the disparities in income between South African Development Community (SADC) countries are also against the market seeking investment. The SADC alliance is not in favor of South Africa. In order to achieve an important role in terms of leadership in SADC and in region marketing, South Africa has to identify itself as an investment destination, separate from the rest of Africa. [...]