Chinese foreign direct investment in South Africa - distinguishing constructive from destructive investment

Abstract

The report examines Chinese Foreign Direct Investment (FDI) into South Africa and distinguishes between constructive and destructive Chinese FDI in the host country. The literature does not always agree on the factors distinguishing constructive and destructive FDI flows, but the central and definitive points remain broadly similar. Apart from reviewing the published literature and in order to gain a better understanding behind the dynamics of Chinese FDI into South Africa and the related positive and/or negative effects associated with Chinese FDI into South Africa, the research study focuses on two separate samples, one expert Chinese sample (seven interviewees) and one expert South African sample (seven interviewees). The key findings of the report, the factors, which distinguish constructive and destructive Chinese FDI in South Africa, are very similar to the conclusions drawn in the published literature and the results of the interviews. Job creation, social upliftment and technology „know-how‟ transfer being associated with „constructive‟ Chinese FDI, while environmental damages, exploitive labour practices, anti-competitive practices, and unavailability of local beneficiation being associated with „destructive‟ Chinese FDI. Despite the availability of several „destructive‟ examples of Chinese FDI/trading inflows into South Africa‟s economy, the overall conclusion of the study is that Chinese FDI into South Africa is a mutually beneficial phenomenon for both countries. Large Chinese FDI projects in South Africa contribute positively toward the country‟s development plans, improve South Africa‟s manufacturing facilities and know-how, create employment and help develop various previously troubled mining projects. Chinese companies, in turn, benefit from South Africa‟s availability of natural resources, stable economy, sophisticated infrastructure, government support, and proximity to large international ports.