Factors influencing foreign direct investment by multinational corporations in South Africa

• Published in: Journal of Contemporary Management 2021-01, Vol.18 (1), p.362-384
• Main Authors: van der Berg, J.G.M, Mazibuko, N.E, Rootman, C
• Format: Article
• Language: English
• Subjects: Foreign Direct Investment (FDI); Incentives; international marketing environment; multinational corporations (MNCs); Resources; stakeholders
• ISSN: 1815-7440
• DOI: 10.35683/jcm20104.109

Background: One of the major driving forces behind international trade is Foreign Direct Investment (FDI). Research has been carried out to measure the impact of FDI on host countries and to determine the long-term benefits thereof. However, there is a dearth of literature on the unique situation in South Africa and the factors influencing FDI in the South African economy.Purpose of study: This study attempts to address this research gap and to add to the body of knowledge on FDI as a market entry strategy. Thus, the primary objective of this study is to investigate the factors that influence multinational corporations (MNCs) to utilise FDIs as a market entry mechanism into South Africa.Design/Methodology/Approach: A convenience sample of 210 respondents completed a self-administered questionnaire leading to 165 useable questionnaires which were subject to quantitative statistical analyses.Results/Findings: The main results of this study reveal that external stakeholder intervention and FDI resources are the main factors influencing MNCs to utilise FDIs as a market entry strategy into South Africa.Recommendations: The study recommends that external stakeholders support and pave the way for MNCs to increase FDI in South Africa. In addition, role players in the South African business environment should focus on promoting and emphasising the availability of FDI resources to interested MNCs.Managerial implication: FDI into South Africa will improve if government, trade unions, NGOs and other interested parties as well as relevant external stakeholders engage with and assist MNCs planning to enter the South African business environment. To support and encourage these MNCs’ operations, FDI resources should be readily available, and these resources include large market potential, labour, well-developed industrial infrastructure, economic reforms and natural resources.