Opportunities and Country Issues in South Africa

South African Economic Issues and Opportunities

South Africa, as the most industrialized and populous country in the region, provides investors with a developed and diverse economy with thriving financial and other service industries, as well as access to export markets to other African people. Economic conditions are mostly comparable to those in developing countries, with well-developed infrastructure and a decent and consistent municipal justice system. In the generally prosperous and accommodating atmosphere, there are significant emerging reservations among investors about the country’s government’s direction of systemic reforms to better the lives of the historically disadvantaged. It appears that the transition from apartheid has not produced the expected transformation regarding employment and company ownership. This paper aims to discuss South African economic issues and opportunities any investor needs take into the consideration before venturing into this market.

Government Support for Foreign Investment

The government of South Africa is open to foreign investment as a way to drive economic growth, access foreign investment, and improve international competitiveness. The government has liberalized and enhanced international trade through abolishing of most import controls, lowering tariffs, and reforming the regulatory environment. Acquisitions and mergers of firms require much effort to address potential stakeholders concerns. Virtually, many business sectors are open to foreign investments, but some industries require government approval including banking, insurance, mining, and defense. No government approval is required for other areas, and there are a few restrictions for foreign investments. There are divisions that investors liaise with to provide them with assistance including Trade and Investment South Africa (TISA) who provide information on sectors and industries, environment regulations, links to joint ventures, provision of work permits, and facilitation of investment missions. While the government supports investment principles, the country scrutinizes mergers and acquisitions related to FDI for its impacts on jobs, local industries, and maintaining local ownership of specific vital sectors. There are market commentators concerned with the commitment to assist foreign investors. Some concerns include the notion that national level officials lacked the sense of urgency in supporting investment deals and investors have reported setbacks while accessing senior decision makers.

Labor Relations and Employment Policies

The government has replaced apartheid-era labor legislation and in their places enacted policies that reflect fairness, employment security, decent working conditions, and fair wages (Lundahl & Petersson, 2013). Employment Equity Act of 1998 that was amended in 2014 has prohibited hiring discrimination and requires companies both large and medium-sized to have equity plans to ensure that the historically disadvantaged communities including the blacks, south Asians and Coloreds, women and persons with disabilities are represented adequately in the workforce ( Mebratie & Bedi, 2013). Trade unions are committed to a social compact between employees, employers and the government paving the way for mainly negotiated a resolution of disputes and a fair degree of tension resolution through mediation and arbitration. The amended Labor Relation Act provides guidelines for appropriate dismissal, retrenchment, dispute resolution, and instructions that state employers must consider alternatives to retrenchment and consult relevant parties when considering possible layoffs. Increase in labor strikes in the recent years has been on the rise where agency ratings have warned could lower the credit ratings. Additionally, there is widespread unemployment, short supply of skilled labor and immigration laws that make it difficult for foreign investors to hire foreign employees.

Government Policies and Foreign Investment

Despite the Country’s general openness to investment some of the government ministries and statements by some politicians, present troubling lack of awareness about the impact domestic policies have on foreign investments. FDIs suffer from the inability among some government ministers to consult with stakeholders before the implementation of policies and regulations which on various occasions present serious consequences that hamper foreign investors (Nel & Rogerson, 2013). Political interference in the countries Competition Commission that reviews the ability of national industries to compete internationally results to discrimination against foreign investors through imposing unfavorable regulations.

Organizational Structure and Staffing Strategy

A decentralized organizational structured is ideal for investors aiming to venture in South Africa as it gives more authority to lower level workers and gives a sense of empowerment. It creates a feeling of procedural fairness to employees, therefore, avoiding crossroads with the government and trade unions that play a pivotal role in the negotiation of dispute settlement and achieve collective bargaining. This structure has seen a dramatic decline in the number of work days lost through strikes by workers who are enrolled in various trade unions in vast amounts. Polycentric staffing strategy is efficient in this country due to the immigration laws that make it hard for companies to hire foreign workers. Moreover, there have been several cases of xenophobia in the country where international employees and businesses are targeted and attacked as citizens think that the foreigners take away their jobs.

Conclusion

In conclusion, despite the various policy uncertainties, South Africa is a favorable destination for foreign investment and should remain as such so that the dynamic community remains highly market-oriented and a driver of growth in the economy. The country offers ample economic opportunities and continues to attract many foreign investors seeking entry to the continent and a location to access the rest of Africa nations.

References

Lundahl, M., & Petersson, L. (2013). Post-apartheid South Africa: An economic success story?. Achieving Development Success: Strategies and Lessons from the Developing World, 232.

Mebratie, A. D., & Bedi, A. S. (2013). Foreign direct investment, black economic empowerment and labour productivity in South Africa. The Journal of International Trade & Economic Development, 22(1), 103-128.

Nel, E. L., & Rogerson, C. M. (2013, June). Special economic zones in South Africa: Reflections from international debates. In Urban Forum (Vol. 24, No. 2, pp. 205-217). Springer Netherlands.