Original Research

Considering barriers to investment in South Africa

KB Afful, CC Okeahalam
South African Journal of Economic and Management Sciences | Vol 8, No 2 | a1230 | DOI: https://doi.org/10.4102/sajems.v8i2.1230 | © 2014 KB Afful, CC Okeahalam | This work is licensed under CC Attribution 4.0
Submitted: 25 September 2014 | Published: 20 October 2014

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KB Afful, Benefit Advisory Research, Johannesburg, Nigeria
CC Okeahalam, Benefit Advisory Research, Johannesburg

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Abstract

This paper examines the effect of South Africa’s economic fundamentals on net direct investment and net portfolio investment. The results suggest that the main determinants of investment in South Africa are resource prices, input productivity and the economic performance of the domestic economy. The results illustrate that net direct investment and net portfolio investment are close but not perfect substitutes. In addition, we find that an increase in labour input costs reduces both net direct investment and net portfolio investment. Further, an increase in fixed capital productivity increases net direct investment. Further, also the results illustrate that subsidies increase both net direct investment and net portfolio investment. Moreover, an increase in exports increases both net direct investment and net portfolio investment. Policy recommendations are thus proposed that may increase foreign direct investment in South Africa.


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