Multinational Enterprises in Africa - A Study of German Firms in South Africa

A key feature of globalisation is the increasingly important role of Multinational Enterprises (MNEs) as vehicles for Foreign Direct Investment (FDI). Economic Theory recognises that MNEs can benefit from economic growth in developing countries through generating positive externalities (so-called spill-over effects). These spill-over effects occur predominantly through the R&D and innovation of MNEs, their outsourcing to local firms, their training of local labour and the payment of higher wages by MNEs to retain good labourers. All of these benefits can be important for Africa, the world's poorest continent, in order to accelerate groth. However, the extent to which African countries benefit from spill-over effects of MNEs remains to be empirically investigated. The need for such an investigation can be motivated with reference to the trickle of annual FDI flows destined for Africa. In this line the present paper presents results from an empirical survey of German firms in South Africa. South Africa may be an interesting case in which to study the impacts of MNEs on African development as it has a significant presence of foreign firms. German MNEs specifically have been involved in the South African economy for over a century.