Faculty of Commerce, Law and Management (ETDs)

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Subject: search.filters.subject.Foreign direct investment

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    The key determinants of foreign direct investment in South Africa
    (2021) Rama, Kamil
    This study investigates the determinants of foreign direct investment (FDI) in South Africa using annual data for the period 1994-2018. The importance of FDI inflows to South Africa cannot be underestimated, it assists in creating value for investible assets and capital formation, but also brings much-needed stimulus to efficiency, productivity and economic growth. Despite being one of the major recipients of FDI in Africa when compared to other emerging countries the value of these inflows can be considered low and volatile. Based off the literature, Pesaran’ s Autoregressive Distributed Lag (ARDL) model was chosen as the method used to test for cointegration. The ARDL model tests the long-run relationship between FDI and its potential determinants and the error correction model (ECM) estimates the short-run dynamic parameters within the ARDL model. The empirical results show that in the long run exchange rate, trade openness and political stability are the most important factors in determining FDI inflows to South Africa. The short-run coefficients show that political stability has a significant positive effect on FDI inflows, while the number of BITS signed has a significant negative effect. The negative short-run coefficients seen with GDP and exchange rate are not notable due to the coefficients being statistically insignificant. The study recommends that he government should look to implement policies which help promote the liberalisation of restrictions around trade and the movement of capital. This should also include looking into increasing the consistency and transparency of fiscal, monetary and trade policies. Exchange rate targeting strategies should be implemented to help stabilize the exchange rate. Lastly the South African government should maintain regulatory policies which promote political stability and invoke investor confidence.
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    The impact of mineral resources on foreign direct investment in the southern African development community: a panel data analysis
    (2020) Nyangoni, Kudzai Kudziyamira
    This study analyses the impact of mineral resources on Foreign Direct Investment (FDI) flows to the Southern African Development Community (SADC) region. Absence of studies linking FDI to mineral resource endowment prompted this study. Therefore, the purpose of this study is firstly, to establish whether mineral resource endowment influences foreign direct investment flows to the SADC region and secondly, to establish the extent to which government institutions improve the impact of mineral resource endowment on FDI flows to the SADC region. The study employs use of generalized methods of moments (GMM) estimation technique to test the impact on FDI of various factors identified by existing literature as having effect on FDI flows. The study suggests that in addition to natural resource endowment, other factors included in the model do influence the movement of FDI. The level of political and legal instability experienced in the SADC region negatively affects FDI inflows. This result infers that SADC member countries should review their legal and political infrastructures so as to attract FDI into their countries. High Inflation rates in SADC region also negatively affect FDI flows to the region. Therefore, in addition to political and legal instability, economic instability in SADC member countries may also deter foreign investors from investing in SADC region. The results also show that trade openness and GDP growth have significant effect on FDI flows into the region. Other than mineral resource endowment, all other factors are within the control of SADC state governments. Instituting the right policies can go a long way in creating the right environment to attract FDI flows to the SADC region. The results of the study may not be applicable to SADC member countries only. Therefore, a research with a larger sample of African countries might reveal more interesting features.
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    The effects of politics, institutions and corporate governance on South Africa’s FDI flows
    (2021) Mokgashi, Moshibudi
    This paper explores the linkage between political risk, corporate governance, institutions and foreign direct investment inflows in the context of South Africa. The study was prompted the by the ever-changing political stability of the country, corporate governance and corruption challenges and their impact on doing business in SA. It is conducted using secondary data for World Governance Indicators (WGI) collected from World Bank’s online database and World Competitiveness from the World Economic Forum (WEF). The relationship was estimated using the Generalised Method of Moments (GMM) econometric technique for the period of 1996 to 2019. For political risk and institutions, governance variables were used. These are rule of law, political stability, control of corruption, voice and accountability, government effectiveness, and regulatory quality. For corporate governance, Ethical Behaviour of Firms and Efficacy of Corporate Boards competitiveness variables were used. Trade Openness, Inflation Rate and Gross Domestic Product growth were used as control variables. The findings of this report indicate that weak governance impacts FDI inflows negatively. The econometric estimates show that tolerance for corruption, government ineffectiveness, lack of rule of law, political instability, poor regulatory quality and accountability have negative impact on FDI inflows. Whilst all six variables indicated significant impact on FDI, rule of law and lack of control of corruption show the most impact. The implication is that this should be an area of focus to improve and therefor positively impact FDI. Overall, the government should reduce political instability and policy makers should employ policies and strategies to improve doing business in South Africa to attract and maintain investors
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    The key determinants of foreign direct investment in South Africa
    (2021) Rama, Kamil
    This study investigates the determinants of foreign direct investment (FDI) in South Africa using annual data for the period 1994-2018. The importance of FDI inflows to South Africa cannot be underestimated, it assists in creating value for investible assets and capital formation, but also brings much-needed stimulus to efficiency, productivity and economic growth. Despite being one of the major recipients of FDI in Africa when compared to other emerging countries the value of these inflows can be considered low and volatile. Based off the literature, Pesaran’ s Autoregressive Distributed Lag (ARDL) model was chosen as the method used to test for cointegration. The ARDL model tests the long-run relationship between FDI and its potential determinants and the error correction model (ECM) estimates the short-run dynamic parameters within the ARDL model. The empirical results show that in the long run exchange rate, trade openness and political stability are the most important factors in determining FDI inflows to South Africa. The short-run coefficients show that political stability has a significant positive effect on FDI inflows, while the number of BITS signed has a significant negative effect. The negative short-run coefficients seen with GDP and exchange rate are not notable due to the coefficients being statistically insignificant. The study recommends that he government should look to implement policies which help promote the liberalisation of restrictions around trade and the movement of capital. This should also include looking into increasing the consistency and transparency of fiscal, monetary and trade policies. Exchange rate targeting strategies should be implemented to help stabilize the exchange rate. Lastly the South African government should maintain regulatory policies which promote political stability and invoke investor confidence