International conference: Dynamics, Economic Growth and International Trade DEGIT – XXI Conference

South Africa - 21 November 2017

Title: Investigating the value chain dimension of FDI in and outflows of the agro-industrial sector of South Africa
Author(s): Kleynhans, E., Bezuidenhout, H. & Grater, S.

Abstract:
The integration of Africa into global trade and production networks, especially in the agro-industrial sector, is changing the traditional way of doing business on the continent. There has been growing pressure for more transparency and best practices. One of the major issues that needs to be addressed by African policymakers is how to encourage integration into global value chains and what the sustainable investment options are. Interestingly, total foreign direct investment (FDI) into Africa increased by 64 per cent in 2014. FDI has started to take centre stage in the foreign landowner debate throughout Africa. This is particularly evident in South Africa where, amidst growing policy uncertainty, efforts are under way to tighten regulations pertaining to foreign land ownership and agricultural activity.

South Africa is the leading recipient of FDI in the agro-industrial sector in Africa, but is also one of the largest suppliers of FDI to the rest of the continent. This study evaluates the nature and dimensions of the different sub-sectors that receive investment in South Africa, and also investigates South African investment patterns into Africa. The study uses qualitative, visual techniques to disambiguate the linkages in FDI patterns. The results indicate that the USA, the UK and the Netherlands are the largest investors in South Africa, with a strong focus on agricultural input production and subsequent agro-processing industries. South African investment into Africa, in turn, follows a similar, albeit narrower and more focused, pattern. The study concludes that foreign multinational enterprises are actively involved in global value chain expansion and South African firms are following suit. However, the lack of FDI in actual agricultural crop production could indicate that the land ownership debate is driven by politics and ideology, which is not evident in the data.

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