FAQs on Foreign Direct Investment

The document provides a conceptual overview of foreign direct investment (FDI), categorizing it into types such as greenfield, brownfield, mergers and acquisitions, and joint ventures. It argues that while FDI can drive growth through employment and technology transfer, its benefits depend on a host country's absorptive capacity and industrial policy. Focusing on South Africa, the text details a strategic shift from a liberal, treaty-based approach to a domestic regime aimed at maximizing domestic benefits, including black economic empowerment and inclusive growth. It notes that South African FDI has been volatile and historically dominated by mergers and acquisitions in the mining, finance, and retail sectors.

• Foreign direct investment (FDI) is categorized into four primary types based on the nature of the investment: greenfield (new production capacity), brownfield (improving existing facilities), mergers and acquisitions (capital inflow without necessarily adding capacity), and joint ventures (strategic alliances with local companies).
• The economic benefit of FDI to a host country is conditional upon the existence of adequate human capital, financial capital, and 'absorptive capacity', as well as industrial policies that prevent domestic businesses from being 'crowded out' by foreign competition.
• South Africa is transitioning its FDI strategy from a liberal approach based on numerous bilateral investment treaties (BITs) toward a domestic investment regime. This shift aims to ensure FDI achieves specific policy goals, such as fighting unemployment and promoting inclusive growth, while reclaiming policy space for initiatives like black economic empowerment.
• Historically, FDI in South Africa has been volatile and lower than in comparable developing nations, with a heavy reliance on mergers and acquisitions rather than greenfield investments. As of 2009, the primary sectors for FDI stocks were mining (33%), finance (27%), and other services (11%).

APA

South African Institute of International Affairs (2015). FAQs on Foreign Direct Investment. https://saiia.org.za/news/faqs-on-foreign-direct-investment/

Chicago

South African Institute of International Affairs. FAQs on Foreign Direct Investment. 2015. https://saiia.org.za/news/faqs-on-foreign-direct-investment/.

Wikipedia

{{cite report |author=South African Institute of International Affairs |title=FAQs on Foreign Direct Investment |date=6 April 2015 |url=https://saiia.org.za/news/faqs-on-foreign-direct-investment/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{southafricaninstituteofinternationalaffairs2015faqs, author = {{South African Institute of International Affairs}}, title = {{FAQs on Foreign Direct Investment}}, institution = {South African Institute of International Affairs}, year = {2015}, month = apr, url = {https://saiia.org.za/news/faqs-on-foreign-direct-investment/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }