What drives large South African corporations to invest in sub-Saharan Africa? CEO's perspectives and implications for FDI policies

Abstract

Foreign direct investment (FDI) flowing into Africa is highly diverse in terms of the origin of the investors, size of the firms, and the sectors of activity. The motivations and factors driving firms' decisions to invest in Africa are equally diverse. A direct survey of senior management in South African firms that are operating in sub-Saharan Africa reveals that the drivers of foreign investment as well as the risks and the strategies to overcome them differ markedly between sectors. A further finding is that there is a limited pool of FDI promotion policies and incentives that governments can institute that are effective in impacting South African corporations' investment decisions. As a consequence, broad-based FDI promotion policies aimed at attracting FDI across all investor groups are likely to have limited impact in attracting FDI from any particular investor group, or in attracting any FDI from multinational companies similar to the South African companies studied here. Such broad based policies probably need to be complemented with policies targeting those specific firms or sectors which countries hope to attract. © 2009 The Author. Journal compilation © 2009 United Nations.