Policy Framework for Foreign Direct Investment Promotion in South Africa: Operations, Effectiveness and Sustainability

This research paper by the South African Institute of International Affairs (SAIIA) evaluates the infrastructure and effectiveness of foreign direct investment (FDI) promotion in South Africa. It examines the decentralised system of provincial investment promotion agencies (IPAs) and their relationship with the national agency, Trade and Investment South Africa (TISA). The author argues for increased strategic oversight by TISA to reduce inter-provincial competition and improve the quality and sustainability of FDI inflows, particularly in the context of the Promotion and Protection of Investment Bill of 2013.

• South Africa's investment promotion system is highly decentralised, with provincial IPAs often operating as units within larger provincial economic development agencies. These agencies vary significantly in professionalism, with some maintaining high-quality websites and performance tracking, while others suffer from "institutional mismanagement", high staff turnover, and poor communication.
• There is significant competition for foreign investors between provincial IPAs, which can lead to an inefficient use of public resources. This is evidenced by multiple agencies sending separate staff to the same overseas events, which the author describes as an "unnecessary waste of money".
• The Gauteng Investment Centre serves as a 'one-stop shop' where investors can access business and tax licensing, banking, and strategy consulting in one location. Most other IPAs cannot grant business licences directly, meaning investors must navigate a complex system involving the Department of Trade and Industry, Department of Home Affairs, and the South African Chamber of Commerce.
• The South African government is shifting from a laissez-faire approach to increased regulation of FDI, as seen in the Promotion and Protection of Investment Bill of 2013 and the decision to move away from bilateral investment treaties. This shift aims to give the government more room to pursue social and economic goals, though it risks creating a perception of protectionism that could unsettle investors.
• The author recommends that Trade and Investment South Africa (TISA) take a stronger strategic role to coordinate the system. Specific proposals include creating a single national website for all provinces, establishing a formal inter-provincial referral system, and developing a national central hub (one-stop shop) potentially located at OR Tambo International Airport.
• To ensure FDI is 'sustainable' and aligned with the 2013 Industrial Policy Action Plan, the author suggests TISA refine its incentive policies. Recommendations include tax reductions conditional on profit reinvestment, cash grants tied to employment or training, and the creation of a 'business linkage' programme to connect foreign investors with local supplier firms.

APA

Sharp, M. (2015). Policy Framework for Foreign Direct Investment Promotion in South Africa: Operations, Effectiveness and Sustainability. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2015/04/Occasional-Paper-215.pdf

Chicago

Sharp, Matthew. Policy Framework for Foreign Direct Investment Promotion in South Africa: Operations, Effectiveness and Sustainability. South African Institute of International Affairs, 2015. https://saiia.org.za/wp-content/uploads/2015/04/Occasional-Paper-215.pdf.

Wikipedia

{{cite report |last1=Sharp |first1=Matthew |title=Policy Framework for Foreign Direct Investment Promotion in South Africa: Operations, Effectiveness and Sustainability |publisher=South African Institute of International Affairs |date=May 2015 |url=https://saiia.org.za/wp-content/uploads/2015/04/Occasional-Paper-215.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sharp2015policy, author = {Sharp, Matthew}, title = {{Policy Framework for Foreign Direct Investment Promotion in South Africa: Operations, Effectiveness and Sustainability}}, institution = {South African Institute of International Affairs}, year = {2015}, month = may, url = {https://saiia.org.za/wp-content/uploads/2015/04/Occasional-Paper-215.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }