FIN713 International Finance Assignment 1 Foreign Direct investment in South Africa Assignment: 1400 words There are plenty of articles, news, reports on FDI. Make a proper and deep search and make a...

Running head: FOREIGN DIRECT INVESTMENT IN SOUTH AFRICA 1
FOREIGN DIRECT INVESTMENT IN SOUTH AFRICA 2
Foreign Direct Investment In South Africa
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Introduction
Foreign direct investment (FDI) is viewed as a way of increasing the efficiency with which world’s scarce resources are put forward in their optimal use. FDI is defined as direct investment into a country by a company in another country in production, either by buying a company in the target country or by expanding operations of an existing business in that country FDI in general take place for various reasons including to take advantage of lower wage rates, investment subsidies offered by the country. This paper analyses the factors favoring and hindering the flow of FDI in South African economy. It focus exclusively on the incentives offered by the country for attracting FDI and the role of FDI on the development of the country. The motive of this paper is to do a detail analysis of foreign direct investment flowing into the country and find out which restriction, if any imposed by South Africa on the flow of foreign direct investment that can be lifted with least opportunity cost to generate handsome gains, In this context I have discussed the linkage between cross-border ownership and international trade policy of South Africa for which I have studied various articles available online. 
FDI refers to investment made to acquire acquiring at least 10% of equity share in an organization operating in a country other than the home country of the investor. FDI can take the form of either “greenfield” investment i.e. the investment involves mainly newly created assets or merger and acquisition (M&A) World Investment Report 2000 by UNCTAD state that, a host country, benefits of M&As are lower and the risks are negative effects are greater when compared to greenfield investments.
In recent years, FDI has been perceived as a major stimulus to economic growth, this is because it increases the ability to deal with a declining the role of development assistance. It also stimulate competition, innovation and capital formation and through these effects raises economy employment rate. International bodies such as IMF and the World Bank have suggested that attracting large inflows of FDI would result in economic development. Partly these advantages and major reforms in domestic policies and practices has made FDI the center of attention for policy makers in South Africa.
As per rethinking the role of FDI by United Nation (Economic Development in Africa : 2005) South Africa’s exports to the rest of Africa have grown phenomenally over the
past decade and a half and currently exceed those to the United States and the European Union.
The South African economy is the most influential country in Africa, it contributes about roughly one-third and two-thirds respectively of the total output of sub-Saharan Africa and the SADC region. It is the second largest producer of gold ilmenite,  palladium,  rutile  and  zirconium.  Also, It is the world's largest producer of  chrome,  manganese,  platinum,  vanadium  and  vermiculite,  It is also the world's third largest coal exporter.  South Africa also has a large agricultural sector and is a net exporter of farming products.  Its Chief exports include  corn, diamonds, fruits, gold, metals and minerals, sugar, and  wool.  Machinery  and transportation equipment make up more than one-third of the value of the South Africa imports.
The factors favoring and hindering the flow of FDI and incentives offered by ...