FOREIGN DIRECT INVESTMENT: LESSONS FROM SADC

This briefing by the South African Institute for International Affairs (SAIIA) synthesizes four years of research on the relationship between foreign direct investment (FDI), trade liberalisation, and regional integration (RI) within the Southern African Development Community (SADC). It examines the FDI regimes of several member states and specific sectors, such as energy and transport, to identify barriers to broad-based economic development and the creation of regional value chains.

• In Mozambique, poor governance and political instability have made investors cautious, despite the presence of lucrative mineral resources. The country has historically relied heavily on overseas development assistance (ODA), which finances approximately 50% of government spending, and saw public debt rise from 40% of GDP in 2011 to 112% by the end of 2017.
• Namibia's New Investment Bill reflects a shift toward restricting liberal FDI regulation to protect the state's right to regulate in the public interest. This includes provisions for reserving certain sectors for Namibian citizens and introducing performance requirements, though such strict legislation may deter investors in sectors where the state lacks bargaining power.
• Angola is considered one of the least hospitable business environments due to corruption, bureaucracy, inadequate transport infrastructure, and an unpredictable regulatory environment. These factors have limited foreign investment primarily to the oil and mineral sectors, hindering economic diversification.
• South Africa faces challenges in balancing the promotion of inclusive economic development with remaining an attractive FDI destination. Policy uncertainty, exacerbated by state capture scandals during the Zuma presidency and debates over land expropriation without compensation, has created concerns regarding transparency and certainty for investors.
• Tanzania possesses a positive platform for competitive advantage due to its political stability, location, and membership in SADC and the East African Community. However, the country requires large-scale national reform to address structural challenges, including the need to update its bilateral investment treaty network and empower the Tanzania Investment Centre.
• Tanzania's energy and transport sectors illustrate that governance and implementation capacity are critical for FDI success. In the energy sector, disjointed policies and regulations hinder investment despite donor and private sector efforts, while in transport, the ability of the government to coordinate plans is essential for unlocking FDI's spillover potential.
• Regional value chains in SADC are currently few and limited in scope. While donor assistance can initiate these chains—as seen in the soybean industries of Malawi and Zambia—they only become viable when the private sector demonstrates significant interest and investment.
• The primary obstacles to deeper integration in Southern Africa are trade facilitation and the creation of regional value chain opportunities for the private sector, rather than a lack of financing. When these opportunities exist, both public and private financing are typically available.

APA

Bertelsmann-Scott, T., Langalanga, A., Markowitz, C., Mouzinho, A., Ngidi, Z., Parshotam, A., Prinsloo, C., Shipalana, P., Schoeman, M., & Wentworth, L. (2018). FOREIGN DIRECT INVESTMENT: LESSONS FROM SADC. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2018/08/Policy-Insights-65.pdf

Chicago

Bertelsmann-Scott, Talitha, Azwimpheleli Langalanga, Chelsea Markowitz, Aurea Mouzinho, Zinhle Ngidi, Asmita Parshotam, Cyril Prinsloo, et al. FOREIGN DIRECT INVESTMENT: LESSONS FROM SADC. South African Institute of International Affairs, 2018. https://saiia.org.za/wp-content/uploads/2018/08/Policy-Insights-65.pdf.

Wikipedia

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BibTeX

@techreport{bertelsmannscott2018foreign, author = {Bertelsmann-Scott, Talitha and Langalanga, Azwimpheleli and Markowitz, Chelsea and Mouzinho, Aurea and Ngidi, Zinhle and Parshotam, Asmita and Prinsloo, Cyril and Shipalana, Palesa and Schoeman, Mark and Wentworth, Lesley}, title = {{FOREIGN DIRECT INVESTMENT: LESSONS FROM SADC}}, institution = {South African Institute of International Affairs}, year = {2018}, month = aug, url = {https://saiia.org.za/wp-content/uploads/2018/08/Policy-Insights-65.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }