Understanding the Role of Foreign Direct Investment in the Economic Development of South Africa

Master Thesis


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The focus of the study is to explore on the role of Foreign Direct Investment (FDI) in the Economic Development of South Africa. South Africa is a developing country and, just like other developing countries around the world, it requires FDI for its socio-economic and political development. Using the quantitative research methods, and following the descriptive analysis of data gathered from a questionnaire, the study is presented based on the relevant information gathered on the role of FDI on Economic Development of South Africa. This study found that FDI plays an important part within South Africa. Firstly, the study gathered information about factors that impact on the flow of FDI within South Africa. Amongst these factors there is the political nature of the country in which more stable political environment and the investment policies. FDIs within South Africa are a source of external capital which can lead to economic development. Furthermore, within the country, the study concludes that FDI leads to increased revenue and to the development of new industries. Technological advancements have also been brought about by FDI leasing to the socio-economic development of South Africa. The study however concludes that within South Africa, FDI can be a hindrance to domestic investment since it challenges the survival of domestic industries. The thrust with FDI is the focus on resources and capital elsewhere other than the investor's home country. In this regard, FDI has a negative impact on the country's investment. Ideally, the rules that govern foreign exchange rates and investments negatively impact on the investing country. The study therefore recommends the adjustment of investment policies that attract investments, such as policies promoting fair business practices.