5 reasons SA needs foreign investment to radically transform the economy

South Africa needs foreign investment.

Here’s why, according to Dr Adrian Saville, Professor at Gordon Institute of Business Science (Gibs):

  • Filling the investment-savings gap. In its current form, the South African economy is unable to generate sufficient capital to fund the required investment rate. President Cyril Ramaphosa cites a required investment rate of 30%, yet the country can, currently, not fund much more than 20% from domestic savings.

  • As opposed to FPI (hot money) - by being bricks and mortar capital - FDI (foreign direct investment) has the propensity to contribute to employment and to fill the skills and technology gaps through transfer of know-how, know-why and innovation spill-overs, adoption and adaptation (Japan being a great example).

  • It helps plug the fiscal deficit through revenue contribution.

  • It has a role in net export promotion and the ability to fill the current account deficit.

  • A critical consideration is the type of capital that is attracted. Its worst form? Extractive-sweat-shop capital. It’s most functional form? Agglomeration, clustering, spill-overs and linkages that have the capacity to promote human capital formation, contribute to international trade integration, create a more competitive business environment, enhance enterprise development and lift socio-economic prosperity (Chile, Costa Rica and Switzerland being good examples).

The Money Show’s Bruce Whitfield interviewed Saville.

For more detail; listen to the interview in the audio below.

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