Foreign Investment in South Africa

SOUTH AFRICA: EFFECTS OF FOREIGN INVESTMENT ON GOVERNMENT POLICIES

This research paper discusses the effects on foreign investment on government policies in South Africa, historically and with special reference to the post-apartheid period (1993-present). Even since it became a part of the global economy, foreign investment, both portfolio and direct investment, has played a critical role in the development of South Africa's mineral rich economy and has impacted the nature of that nation's political and social structure. The enforced segregation and backwardness of South Africa's black and colored (mixed race) and majority population and the accompanying system of political and legal oppression (apartheid) was a logical consequence of the manner in which foreign and domestic capital was employed, but by the mid-1980s South Africa's social structure inhibited the health of the economy and hastened the end of apartheid. The new, black-African dominated government led by President Nelson Mandela after the 1994 elections was faced with unpleasant policies because of the effects of apartheid. It has thus far opted for policies which have been designed to encourage foreign investment in South Africa; however, not much new foreign investment has entered the country since 1994 and conditions have only improved marginally for the black and colored majority, leaving open the possibility that serious conflicts will arise between the interests of private foreign investment and other s

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m of a recession in 1978 which was prompted in part by the Arab oil embargo of 1973 and was reinforced by the Iranian oil embargo of 1979. South Africa then had no domestic sources of oil, other than that produced by expensive coal-to-oil conversion plants. International gold prices fell from a high of $613 an ounce in 1980 to $350 an ounce in 1982. According to Byrnes, by 1989 at least half of the nation's gold mines were operating at a loss (1997, p. 208). Droughts increased food imports. These unfavorable international developments were accompanied by even more ominous rumblings of internal discontent. The increasingly militant black minority had erupted in protests, which were orchestrated by the then weak anti-apartheid African National Congress (ANC), which led to the Sharpeville massacre in 1960 and the Soweto demonstrations in 1976. A deeper structural problem in the economy was surfacing. According to Waldmeir, by the end of the 1960s, apartheid had become an obstacle to growth . . . the economy began to outgrow its traditional pool of skilled workers: whites. A shortage of two million such workers was anticipated by 1980, as a result of the declining importance of primary industries like agriculture and mining, and t

Category: Economics - F