South Africa boasts one of the largest economies in Africa, offering a diverse range of business opportunities and investments for foreign corporations. According to BMI research, South Africa’s Trade and Investment Risk Index is placed second in the region, and displays one of the most attractiv...
South Africa boasts one of the largest economies in Africa, offering a diverse range of business
opportunities and investments for foreign corporations. According to BMI research, South
Africa’s Trade and Investment Risk Index is placed second in the region, and displays one of
the most attractive places for investors as a result of it’s trade and investment openness. Despite
this, South Africa poses many macro political risks that are not favourable for foreign investors.
This essay thus aims to give a critical explanation and understanding of the potential risks
associated with expanding business and investment into South Africa for the year 2017. In
doing this, this essay will inform the management team of 5 major macro political risks in
South Africa, which will be factored into the decision making process of whether South Africa
is a suitable destination for foreign businesses and investment. It will begin by providing an
understanding of what macro political risks are, followed by the 5 major macro political risks
associated with South Africa, as well as preventative measures to minimize risk for foreign
corporations. By giving a detailed explanation of these risks, this essay aims to give concluding
remarks of whether a foreign corporation and investors should pursue their business interests
in South Africa, given the associated risk factors.
Prospects for Investment
South Africa’s performance under the BMI research of South Africa’s Trade and Investment
Risk Report (2016) presents several favourable factors for investment and business
opportunities in South Africa. BMI research explains that South Africa’s most fundamental
characteristics that have contributed to their high ranking in the SSA region are; “highest levels
of trade volumes and FDI inward stocks in the SSA region, an efficient tax system and
competitive corporate taxation rates; a stable and advanced financial services sector; a
relatively efficient and incorrupt judiciary and a competent bureaucratic system”, as well as
South Africa’s highly favourable tax environment, trade and investment openness, well
established international ties, high level of protection for international stake holders, and the
countries access to international financial markets for foreign investors (BMI, 2016). The
macro political environment that these characteristics create are essential for the success of
major foreign corporations and investors. South Africa, as one of the largest economies on the
African continent, thus provides many opportunities for businesses to flourish, which is why
there are more than 550 companies listed on the JSE at present. Although there are many macro
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