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Determinants of Foreign Direct Investment of South African Telecommunications Firms into Sub-Saharan Africa

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  • John M. Luiz
  • Henry Stephan

Abstract

The study investigates the main factors considered by South African telecommunications firms when making a decision to undertake Foreign Direct Investment (FDI) into Sub-Saharan Africa (SSA). This encompasses the reasons for investing, the methods of entry into the identified market and the factors influencing their decision. The methodology employs a survey questionnaire which was sent to telecommunication firms representing more than 70% of the revenue generated by this sector in SSA. The research reveals that market size, regulatory environment and government policy are the three most important factors influencing the decision to undertake FDI. Furthermore, the main reasons for deciding to enter SSA are for market and profit growth due to saturation in their existing markets, as well as for diversification of risk. Telecommunications firms wishing to enter SSA must be prepared for an unstable and uncertain policy environment and understand that the cost of starting a new venture in SSA is high.

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Bibliographic Info

Paper provided by Economic Research Southern Africa in its series Working Papers with number 222.

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Length: 25 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:rza:wpaper:222

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Keywords: Telecommunications Africa FDI;

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  1. John Luiz, 2010. "Infrastructure investment and its performance in Africa over the course of the twentieth century," International Journal of Social Economics, Emerald Group Publishing, vol. 37(7), pages 512-536, July.
  2. John M. Luiz, 2009. "Institutions and economic performance: Implications for African development," Journal of International Development, John Wiley & Sons, Ltd., vol. 21(1), pages 58-75.
  3. Johannes Fedderke & John Luiz, 2005. "Fractionalization and Lon-Run Economic Growth: Webs and Direction of Association between the Economic and the Social - South Africa as a Time Series Case Study," Working Papers 22, Economic Research Southern Africa.
  4. Fagerberg, Jan, 1994. "Technology and International Differences in Growth Rates," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1147-75, September.
  5. John M. Luiz, 2006. "The wealth of some and the poverty of Sub Saharan Africa," International Journal of Social Economics, Emerald Group Publishing, vol. 33(9), pages 625-648, September.
  6. J. W. Fedderke & J. M. Luiz, 2008. "The Political Economy of Institutions, Stability and Investment: A Simultaneous Equation Approach in an Emerging Economy. The Case of South Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 44(7), pages 1056-1079.
  7. Dupasquier, Chantal & Osakwe, Patrick N., 2006. "Foreign direct investment in Africa: Performance, challenges, and responsibilities," Journal of Asian Economics, Elsevier, vol. 17(2), pages 241-260, April.
  8. Lim, David, 1994. "Explaining the Growth Performances of Asian Developing Economies," Economic Development and Cultural Change, University of Chicago Press, vol. 42(4), pages 829-44, July.
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