The global value chain dimension of foreign direct investment flows in the agro-industrial sector of South Africa, 2003–2014

Abstract

Orientation: African countries offer many investment opportunities and also urgently need global investment finance. Along the value chains of the agro-industrial sector there are many global challenges for African countries to attract foreign direct investment. This article investigates the investment flows in agro-industries and products to and from South Africa.

Research purpose: This study evaluates the nature and dimensions of the agro-industrial sector that receive investment inflows in South Africa, as well as investigating South African investment patterns into Africa.

Motivation for the study: Of particular interest is the relationship between foreign direct investment (FDI) flows, their integration into global value chains and sustainable investment options.

Research design, approach and method: Qualitative data and visual techniques using available data for the period 2003–2014 disambiguate the linkages in FDI patterns with regard to regions, industries and specific companies. Flows between regions and the specific companies are identified and studied.

Main findings: The results indicate that the United States, the United Kingdom 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 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.

Practical/managerial implications: The lack of FDI in actual agricultural crop production in Africa offers future investment opportunities.

Contribution/value-add: This study creates a better understanding of how FDI in agriculture is linked to the development of regional value chains in the Southern African region. The methodology applies a novel approach to an important field of study, of which little knowledge exists, and may contribute to the creation of wealth in the countries of the region and the welfare of its population.