FDI in South AFrica
FDI in South AFrica
Since the removal of Apartheid South Africa has been in serious need of faster economic growth and development. The most apparent way for the country to stimulate these types of changes in the economy lies within the realm of foreign direct investments. For many years the country of South Africa has suffered tremendously due to the fact that many investors did not want to be involved with a country with as many of the political and social issues that it had. It was believed that the country would flourish with foreign direct investments from many different companies once a change in political structure and power was implemented; however, this proved not to be the case.
South Africa is truly in need of foreign direct investments for many reasons. One of the most important reasons is due to the country’s need for jobs. Another reason is for because of the countries need for further growth. Also if foreign direct investments are placed within currently existing stated-owned companies, then their products and services would improve, thus creating better and more attractive markets.
Some of South Africa’s key issues with receiving foreign direct investment revolve around the crime rate (despite the political stability) and frequent changes in tax policies. Each issue plays a pivotal role in keeping South Africa from being as attractive to foreign direct investors as some other countries. Also among these issues remains the fact that the country has a strong need for operational improvement. From this standpoint it is understandable that investors would be wary of bring business to the country. Issues such as requests for bribery and lack of skilled workers play instrumental roles to the business should an investor decide to take business to the country.
As it should be, “the government of South Africa is convinced it needs to do a better job of marketing itself to potential investors.” It is believed that with the issues that the country has, that it should focus on creating better solutions to the problems that is has. It proves to be a far more difficult task to try to try to seek out investors while having essential issues that would make investors wary and expect a higher return on their investment. Besides exporting, other methods of entry may be needed.
South Africa may want to consider other methods of attracting entry to the company because it will allow easier transitions to foreign direct investments. It may not be the most educated move to go straight to one of the most risky methods of entry. The country may want to consider starting with methods such as mixed or joint ventures, strategic alliances, or contract manufacturing. If the country really wants to prove to investors that they are serious about attracting the investors business then they may consider licensing or franchising some foreign company’s business. This is suggested because South Africa would be able to show its willingness to invest in itself and prove to investors that benefits can arise from foreign direct investments.
It can be argued that the international business environment (uncontrollables) have played a major role in South Africa’s lagging sources of foreign direct investment. As stated earlier economic, political and social uncontrollables make it hard for South Africa to obtain the investors that they so desperately need and want. Among the uncontrollable that were not mentioned that also play a major role for the lack of foreign direct investment are technology, legal, and social issues.
South Africa’s lack of technology, in some aspects, could be considered a major reason for investors steering clear of foreign direct investments. Investors may consider it extremely risky to have to implement technological advancements just to start up their businesses in South Africa. It may be cheaper for them to consider moving their investments into locations where the technology that is needed has already been implemented. Also with social and legal issues, investors may not be willing to conform to local laws and social standards.
It is believed that in order for South Africa to reach the level of foreign direct investments that it needs in order to further facilitate its growth that the country needs to implement deeper studies into the Marketing Intelligence G.R.A.S.P (Gathering, Recording, Analyzing, Storing, and Presenting data). Through this South Africa would be more equipped to study different approaches and develop a plan of action that is most inline with their goals of achieving foreign direct investments. Also through this plan, South Africa would be able to better assess the growth of foreign direct investments and how it has aided the country.