General Overview
South Africa has had issues in terms of foreign investments especially during apartheid. When people in South Africa first discovered the wealth of natural resources foreign investment was at an all time high. However things have dramatically changed since those days; therefore, the landscape of foreign investment has changed. During apartheid there was more foreign divestment than investment because so many countries disagreed with the South African policies. Since apartheid was abolished foreign investment has risen again and South Africa is now a premier country to invest in.
Foreign Investment During Apartheid
South Africa struggled to get other countries to invest in their businesses during apartheid. The two biggest sectors for investment in South Africa were mining and manufacturing. These two sectors steadily grew during the 1960s. However by around 1970 companies and people almost completely pulled out of South Africa. When foreign investment declined South Africa’s government started relying on loans, which brought in around 70% of South Africa’s foreign income while direct investment fell to around 27%. Then when loans were cut off in 1985 due to divestment the South African economy suffered sharply (There was a large movement for divestment in colleges around the US. The goals of the protests were to end apartheid. However traditional methods would not work in this case so students pressured their universities to divest any stocks of companies doing business in the country. If enough companies stopped doing business in South Africa then the economy would take a turn for the worse causing the country to change its policies Divestment began to affect South Africa as corporations let apartheid leaders know that it had become too expensive to continue operating there. Some would argue that many corporations simply shifted to indirect investments, but when banks began to refuse to renew loans it caused some real pain as the value of the South African currency fell).
By 1988, 155 universities had divested. In 1986, the University of California divested, selling $3.1 billion worth of stock. Faith organizations, unions, cities, counties and states joined in. In 1986 Congress passed the Comprehensive Anti-Apartheid act that banned new investment in South Africa. Soon companies withdrew from South Africa such as IBM and General Motors. Doing business in South Africa became too expensive and there was no gain in investing in South Africa. The economy in South Africa was also weak which led to divestment. Overall investment was minimal in South Africa during apartheid and there was a lot of divestment, which caused the economy to decline forcing South Africa to change its severe policies. Every small piece of divestment helped to abolish apartheid even things like foreign artists refusing to play in Sun City, the music capital of South Africa.
Artists Against Apartheid – Sun City (https://www.youtube.com/watch?v=aopKk56jM-I)
By 1988, 155 universities had divested. In 1986, the University of California divested, selling $3.1 billion worth of stock. Faith organizations, unions, cities, counties and states joined in. In 1986 Congress passed the Comprehensive Anti-Apartheid act that banned new investment in South Africa. Soon companies withdrew from South Africa such as IBM and General Motors. Doing business in South Africa became too expensive and there was no gain in investing in South Africa. The economy in South Africa was also weak which led to divestment. Overall investment was minimal in South Africa during apartheid and there was a lot of divestment, which caused the economy to decline forcing South Africa to change its severe policies. Every small piece of divestment helped to abolish apartheid even things like foreign artists refusing to play in Sun City, the music capital of South Africa.
Artists Against Apartheid – Sun City (https://www.youtube.com/watch?v=aopKk56jM-I)
Post-Apartheid
There is disagreement over investment in South Africa today. Some people see it as a place where investment is not high. However I will be focusing on the reasons why investing in South Africa is a good idea and the potential of investment in South Africa. South Africa is one of the most sophisticated, diverse and promising emerging markets globally. South Africa has a wealth of natural resources (including coal, platinum, coal, gold, iron ore, manganese nickel, uranium and chromium) and it enjoys increased attention from international exploration companies, particularly in the oil and gas sector. As well as a wealth in natural resources the country has world-class infrastructure, innovative ideas, a good manufacturing base and research and development capabilities. South Africa has political and macro-economic stability as well as many skilled workers. Labor is also relatively cheap compared to other places in the world. South Africa also has a thriving tourist industry, which many countries look to invest in. South Africa is a popular trade destination because the country can meet specific trade requirements of prospective investor.
Countries are now investing more in South Africa due to its, developed infrastructure, competitive domestic economy, appreciation for the rule of law, stable government, economic stability, large stock exchange, wealth of natural resources and the promising tourism and retail sectors.- Nicholas Klingen