Developing countries like South Africa needs FDI (Foreign direct investment). They are investments in a business by an investor from another country for which the foreign investor controls the company purchased. The Organization of Economic Cooperation and Development (OECD) defines management as owning 10% or more of the business. Increased FDI in developing countries contributes to economic development because of external capital and increased revenue. Helping developing countries create employment opportunities for their citizens, invest in local skills development, and new local industries.
The developing government can use the capital infusion and tax revenue generated from FDI for economic growth by improving the physical and financial infrastructure of the country. Such as building roads and educational institutions, developing transport and communication systems, and subsidizing domestic industries. Making it possible for all citizens to benefit from the FDI. Besides the monetary aspect, FDI affords developing countries a learning experience, leading to other growth paths.
South Africa is currently losing Barclays, which owns Absa bank, as an investor, and major newspapers report that the country’s wealthiest individuals are taking their money out of the country because they are weary of its economic future. To top things up, according to the latest World Investment Report 2016, FDI in South Africa is sitting at $1.8 billion, the lowest in 10 years, owing to factors such as lackluster economic performance, lower
commodity prices and higher electricity costs.
Policy uncertainty by the government has a significant part to play in the economic misfortune and lack of foreign investment confidence from Western industrialized countries, which happen to be the country’s primary source of FDI. South African households are highly indebted while the government is short of funding, resu,lting in limited investment and domestic consumption growth. The future will only start looking brighter for South Africans once the country improves on domestic investments in the form of foreign direct investment.
According to risk analysts, South Africa has risk factors thatprevent it from being a lucrative investment market , includingthe prevalence of white-collar crime and corruption and the increasingly inevitable outcome that South African bonds will be downgraded to “junk” status. Not to mention that South Africa is Africa’s most targeted region for cybercrime. Risk analysts also conclude that South Africa is still an excellent place to do business. There is plenty of slow and steady money to be made in the country. South Africa’s fundamentals are not as bad as they seem. If you are confident South Africa is worthy of your investment, click HERE for investment insights.
