Identifying the determinants of outward foreign direct investment decisions of South African retail enterprises investing into Africa

Abstract

Foreign direct investment (FDI) is not a new phenomenon. In fact, the significance of FDI as a source of economic growth has increased rapidly over the past decades (Carril-Caccia & Pavlova 2018). Although many definitions of FDI exist in literature, it is widely accepted that FDI is an investment involving a long-term relationship and reflecting a lasting interest of a resident entity in one country on an enterprise resident in another country (United Nations Conference on Trade and Development [UNCTAD] 1999). The ‘lasting interest’ signals a substantial level of control in the management of the FDI enterprise and the continuation of an innate relationship between the foreign direct investor and the FDI enterprise. This is typically evident in the ownership of at least 10% of the voting rights of an entity resident in one country by an entity resident in another country (Organisation for Economic Co-operation and Development 2002). Orientation: Whilst Africa is a lucrative market with many opportunities for all types of retailers, expanding into the continent is not without its own challenges. Therefore, foreign direct investors have to make strategic decisions.