Investing in South Africa

10 October 2016

β€œIn what way could the huge cultural diversity in South Africa pose challenges for MNCs seeking to set up a business there? ” South African has been referred to as the ‘rainbow nation’, a title which epitomises the country’s cultural diversity. The population of South Africa is one of the most complex and diverse in the world. Of the 45 million South Africans, nearly 31 million are Black, 5 million White, 3 million Coloured and one million Indian. The population density is 32. 9 people per km? 1 β€œMNC’s” are corporations that are registered in more than one country or that has operations in more than one country.

These large corporations both produce and sell goods or services in internationally. MNCs play influential roles in shaping the economies of developing countries. Investing in these countries provide market to the MNC but provide employment, choice of multi goods etc. MNCs are likely to adapt production processes in many of their operations to conform to the standards of the most rigorous jurisdiction in which they operate As for labor costs, while MNCs clearly pay workers in developing countries far below levels in countries where labor productivity is high.

Finally, depending on the nature of the MNC, investment in any country reflects a desire for a medium- to long-term return, as establishing plant, training workers, etc. , can be costly. Once established in a jurisdiction, therefore, MNCs are potentially vulnerable to arbitrary government intervention such as expropriation, sudden contract renegotiation, the arbitrary withdrawal or compulsory purchase of licenses, etc. Having to be aware of all of the nations different and unique cultures and races would be extremely tricky.

Multi national companies are able to be successful by molding themselves to key parts of the culture where they located. Having to weave through 12 different cultures, which almost all include a unique language, would be more than challenging. Not only do the different states have multiple ethnic groups and different languages, but the infrerstructure between states is not evenly dispursed. Therefore, planning transportation within the country is always difficult. Among these previously listed problems, race is still a huge issue in the country.

The gap between the poor and the uneducated versus the educated and wealthy is vastly polar opposites. Leaving a small population of a trained or educated work force. While South Africa could prove to be profitable, getting to that point would take lots of careful planning and blind risk taking. Question #4 “What do you think are the most pressing social issues in South Africa and how is the country doing in resolving them? ” South Africa suffers from many issues that all contribute to the prevention of or slow progression of progress.

Poorly located and inadequate infrastructure limits social inclusion and faster economic growth . The role and function of local government is not fully understood by most of those in administrative and political positions at the local level; that the institutions of national government do not pay sufficient attention to the policy failures at the local level; and that these failures are then exacerbated by one or a combination of these three factors: administrative incompetence, corruption and non-communication or, worse, unaccountability by local government officials to their constituencies. This issue would make it most certainly difficult for foreign companies to make secure investments in South Africa. After all, the depth of corruption and the total lack of secure infrastructure would make operating a business there unattractive. On the demand side, we must solve the problem of businesses that would rather poach employees from other companies than employ and train talented people who lack skills and work experience but could add value in the long term. This, in spite of the fact that while the unemployment rate in South Africa is astounding, businesses struggle to fill vacancies. ) And we also need to address the structural constraints of a large, poorly educated, mostly black population without the social capital to get workplace skills, work experience, and job placement.

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