Fdi Case South Africa

Lesson 10 – FDI Case

1.) There are many costs and benefits to South Africa having more foreign direct investment. On the benefits side, it is believed that Foreign Direct Investment will yield positive economic growth for the country for the following reasons. This includes a decrease in unemployment due to foreign investments leading to the creation of new jobs, the transfer of management skills from one country to another, and an increase in export competitiveness. On the costs side, Foreign Direct Investments are likely to have a negative impact on domestic competition. Multi National Corporations may damage host economies by extinguishing entrepreneurial efforts by local businessmen and businesswomen. The balance of payments can also be affected. If investors import more than they export, the foreign investments can actually have a negative effect of the economy.

2.) If South Africa is to receive more foreign direct investment, it should make the country an easier place to invest in as its main priority, from a social and political perspective. Reducing restrictions and other regulations that have a negative impact on Foreign Direct Investment would definitely be a step in the right direction. Also, foreign investors may be discouraged from developing in areas with high crime, so reducing the crime rates and emphasizing police efforts throughout the country will help significantly. Finally, if the government were to develop a strategic marketing campaign geared towards promoting investment in the country, it may help attract foreign investors if implemented correctly.

3.) The "guns-for-FDI" program provides several benefits for South Africa, including, the creation of more jobs, increased diversification of businesses within the South African economy, and similarly to creating new jobs, the investments can be used to benefit workers who are physically or mentally incapable of holding employment