The Importance of Location Factors for South African FDI into East Africa

Abstract

The research contained herein investigates location factors for South African foreign direct investment into East Africa across various industries. The research analyses the importance of these factors as well as how South African companies have managed these factors after the investment has been undertaken. The research follows a qualitative and exploratory paradigm through the use of semi structured interviews with South African companies. The findings of this research indicate that the motivations and method of internationalisation by South African companies into East Africa are connected to the level of commitment invested in the foreign market by the South African company. Various factors affected the mode of entry used to by the South African company such as the quality of infrastructure, the level of certainty regarding the economic and legal systems in East Africa and the motivation for investment. Building relationships and partnerships in East Africa proved to be essential to ensure sustainability and growth in the long term. Furthermore, partnerships assisted South African companies to mitigate risk and overcome some of the factors which may have impacted their operations negatively. Lastly, consumer and market insight in East Africa is not readily available which in turn decreased the level of commitment of South African companies. The study provides insight, regarding various FDI determinants, to South African companies investing in East Africa and will therefore better position them to evaluate their internal strategies and future organisational development