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Factors Influencing Foreign Direct Investment of South African Financial Services Firms in Sub-Saharan Africa

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  • John Luiz
  • Harry Charalambouse

Abstract

This research investigates the key elements that South African financial services firms consider before making foreign direct investments in Sub-Saharan African (SSA) markets. The results show that South African financial services firms are most strongly influenced by the political and economic stability of the country in question as well as the profitability and long-term sustainability of its specific markets. The degree of available infrastructure in terms of Information and Communication Technology as well as the existence of credible financial systems was also viewed as highly important considerations affecting investment decisions in SSA. Given the uncertainty and ambiguity of most SSA markets, many South African financial services firms prefer to enter existing markets via a majority stakeholder joint venture with a local partner or via a new investment if the market does not currently exist. The nature of the financial services firm also seems to influence the entry method and once in a new country, most firms seem to prefer a full service presence. Additionally, the key motives cited for expansion northward were to broaden revenue bases and improve profit margins as well as to stay close to local customers.

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Bibliographic Info

Paper provided by Economic Research Southern Africa in its series Working Papers with number 118.

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Date of creation: 2009
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Handle: RePEc:rza:wpaper:118

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Keywords: Foreign Direct Investment; Financial Services; Sub Saharan Africa;

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  1. Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Munich Reprints in Economics 20408, University of Munich, Department of Economics.
  2. Moshirian, Fariborz, 2001. "International investment in financial services," Journal of Banking & Finance, Elsevier, vol. 25(2), pages 317-337, February.
  3. Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Journal of Public Economics, Elsevier, vol. 71(1), pages 121-139, January.
  4. Franklin R Root & Ahmed A Ahmed, 1978. "The influence of policy instruments on manufacturing Direct Foreign investment in developing countries," Journal of International Business Studies, Palgrave Macmillan, vol. 9(3), pages 81-94, September.
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  8. Bouquet, Cyril & Hebert, Louis & Delios, Andrew, 2004. "Foreign expansion in service industries: Separability and human capital intensity," Journal of Business Research, Elsevier, vol. 57(1), pages 35-46, January.
  9. Michael Porter, 1994. "The Role of Location in Competition," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(1), pages 35-40.
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Cited by:
  1. Simplice A, Asongu, 2012. "Linkages between investment flows and financial development: causality evidence from selected African countries," MPRA Paper 38719, University Library of Munich, Germany.
  2. Ouédraogo Nosseyamba Benjamin, 2012. "Foreign direct investment in Sub-Saharan Africa," African Journal of Economic and Sustainable Development, Inderscience Enterprises Ltd, vol. 1(1), pages 49-66.

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