The literature-based master thesis provides a detailed assessment of South Africa’s potential to attract foreign direct investment (FDI). The significance of so called ‘emerging economies’ as investment locations for foreign firms takes various forms, ranging from a growing middle class over cheap unit labour costs to the availability of natural resources. Generally, their relevance has gained impetus in recent years, when FDI flows to developed countries started to drop. The ‘emerging economy’ South Africa in 2013 was by far the top FDI host economy in Africa, but her share of FDI inflows compared to other emerging economies is relatively small. It is hence questionable whether South Africa is de facto an ‘emerging lion,’ an up-and-coming location choice for foreign investors, or rather a ‘white elephant,’ something useless and expensive to maintain. In order to grasp the local conditions in South Africa, comprehensive background information on the country’s history, economic development, current market and FDI structure, and various socio-economic factors is provided. Subsequently, based on a literature review and investor survey results, ten potential determinants of FDI inflows are identified: domestic market size and market demand; corruption; natural resource endowment; cost-related locational factors (including unit labour costs, level of taxation, and exchange rate); talent and skill level of the labour pool; general security environment; government incentives; quality of infrastructure (in terms of transportation, electricity, telecommunications, and financial services); participation in regional trade agreements; and cities and clusters. For each of these factors, South Africa’s performance is assessed. Further chapters encompass issues such as South Africa’s national culture in the business context, exemplified cases of foreign firms in South Africa, and the potential impact of the prevailing FDI types in South Africa on the economy. The findings suggest that South Africa’s potential to attract FDI can be attributed mostly to the country’s mineral wealth and its growing middle class, while manufacturing plays a subordinate role. Factors such as high crime and corruption levels, relatively high labour costs combined with low productivity, and major electrical power supply shortages are likely to deter foreign investors.
La tesi di Laurea Magistrale offre un’analisi dettagliata del potenziale attrattivo del Sudafrica di investimenti diretti esteri (IDE). L’importanza delle cosiddette ‘economie emergenti’ come luogo d’investimento per aziende estere è determinata da differenti fattori, per esempio da una classe media crescente, da un basso costo salariale unitario e dalla disponibilità di risorse naturali. In generale il loro peso è aumentato nei recenti anni, durante i quali i flussi IDE verso i paesi avanzati sono iniziati a diminuire. Nel 2013 il ‘paese emergente’ Sudafrica è stata la prima economia ricevente d’IDE nel continente africano, ma in confronto ad altre economie emergenti mondiali la sua percentuale di flussi IDE è relativamente bassa. Pertanto è incerto se il Sudafrica sia effettivamente un ‘leone emergente’, quindi una location promettente per investitori esteri, oppure un ‘elefante bianco,’ termine inglese utilizzato per riferirsi ad una cosa inutile e costosa da mantenere. Per comprendere appieno le condizioni locali del Sudafrica, sono esposte nella tesi informazioni complessive relative alla storia del paese, al suo sviluppo economico, alla struttura attuale del suo mercato e dei IDE ed ai vari fattori socio-economici. In seguito, sulla base di un’analisi della letteratura scientifica e dei risultati d’inchieste con gli investitori, sono stati identificati dieci possibili fattori di flussi IDE: grandezza e domanda del mercato; corruzione; presenza di risorse naturali; fattori di costo (compresi costi salariali unitari, aliquota fiscale e corso del cambio); talento e capacità della manodopera; ambiente generale di sicurezza; incentivi governativi; qualità dell’infrastruttura (riguardante trasporto, elettricità, telecomunicazione e servizi finanziari); partecipazione in trattati commerciali regionali; città e clusters. Per ognuno di questi fattori è stata valutata la performance del Sudafrica. Ulteriori capitoli contengono aspetti riguardanti la cultura sudafricana nel contesto del business, casi esemplari di aziende estere operanti in Sudafrica ed il possibile impatto sull’economia sudafricana dei predominanti tipi d’IDE. I risultati ottenuti dimostrano che il potenziale del Sudafrica di attrarre IDE si basa principalmente sulla ricchezza minerale e sulla classe media crescente, mentre il settore manifatturiero riveste un ruolo subordinato. Fattori come livelli alti di criminalità e corruzione, costi di lavoro relativamente alti in combinazione con una produttività bassa e seri problemi di approvvigionamento d’energia potrebbero bloccare investitori esteri.
Emerging Lion or White Elephant? The Potential of South Africa to Attract Foreign Direct Investment
GOTTHARDT, THERESA
2014/2015
Abstract
The literature-based master thesis provides a detailed assessment of South Africa’s potential to attract foreign direct investment (FDI). The significance of so called ‘emerging economies’ as investment locations for foreign firms takes various forms, ranging from a growing middle class over cheap unit labour costs to the availability of natural resources. Generally, their relevance has gained impetus in recent years, when FDI flows to developed countries started to drop. The ‘emerging economy’ South Africa in 2013 was by far the top FDI host economy in Africa, but her share of FDI inflows compared to other emerging economies is relatively small. It is hence questionable whether South Africa is de facto an ‘emerging lion,’ an up-and-coming location choice for foreign investors, or rather a ‘white elephant,’ something useless and expensive to maintain. In order to grasp the local conditions in South Africa, comprehensive background information on the country’s history, economic development, current market and FDI structure, and various socio-economic factors is provided. Subsequently, based on a literature review and investor survey results, ten potential determinants of FDI inflows are identified: domestic market size and market demand; corruption; natural resource endowment; cost-related locational factors (including unit labour costs, level of taxation, and exchange rate); talent and skill level of the labour pool; general security environment; government incentives; quality of infrastructure (in terms of transportation, electricity, telecommunications, and financial services); participation in regional trade agreements; and cities and clusters. For each of these factors, South Africa’s performance is assessed. Further chapters encompass issues such as South Africa’s national culture in the business context, exemplified cases of foreign firms in South Africa, and the potential impact of the prevailing FDI types in South Africa on the economy. The findings suggest that South Africa’s potential to attract FDI can be attributed mostly to the country’s mineral wealth and its growing middle class, while manufacturing plays a subordinate role. Factors such as high crime and corruption levels, relatively high labour costs combined with low productivity, and major electrical power supply shortages are likely to deter foreign investors.È consentito all'utente scaricare e condividere i documenti disponibili a testo pieno in UNITESI UNIPV nel rispetto della licenza Creative Commons del tipo CC BY NC ND.
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https://hdl.handle.net/20.500.14239/4108