An examination of the determinants of inward FDI and the attractiveness of South Africa comparatively to Ethiopia.
Fredekind, Janet (2019)
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Over the past 70 years foreign direct investment has been desired for by many countries in the world. Africa has never caught up on other continents in the world in regards of attracting inward FDI; some countries have been able to draw the attention of investors. Especially the Sub-Saharan area had difficulties to attract investors, nevertheless South Africa belongs to the same region and has one of the biggest economies and receives one of the biggest share of FDI on the continent. The interest of this study lies in comparing two economies from the sub-Saharan area that are in different development stages to try and highlight the determinants that can enhance the locational attractiveness. The countries chosen in this study are South Africa and Ethiopia. The need to evaluate how one country performs differently to another is underpinned by the need of understanding what theories in regards to motivations for foreign firms to explore foreign markets as well as empirical studies that explore macroeconomic determinants. Furthermore, two case studies that concentrate on the different determinants such as exchange rate, GDP, labour cost, trade barrier, institutional incentives and many more have been represented in data with further literature. Those case studies create a common ground to compare both countries in regards to their qualities, concluding that South Africa performance is significantly better.