South Africa: Multinational Corporations Essay Example
South Africa: Multinational Corporations Essay Example

South Africa: Multinational Corporations Essay Example

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  • Pages: 8 (2036 words)
  • Published: October 27, 2017
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South Africa: Multinational Corporations What do we know about South Africa and the effects that multinational corporations have on the economy, culture and people of this diverse country? The next few pages will provide the information that will fully answer the above question. Multinational corporations have funneled foreign direct investments into South Africa due to the diverseness and rich resources that has made South Africa very desirable. Unfortunately, there have also been many economic and political entanglements that have influenced, and in some cases, stalled the influx of foreign direct investment.Facing this economic reality, South Africa has had to make significant improvements in order to foster an environment that would attract investors. South Africa is at the southern tip of the continent of Africa.

The terrain of South Africa can vary


from farmland to tall mountain ranges. What is not obvious is that underneath those mountain ranges are vast amounts of crystalline rock formations. This is an invaluable resource, because this allows South Africa to be the world’s largest producer of gold. It is also instrumental in allowing this country to be a top exporter of coal, diamonds and platinum.South Africa also has a very diverse population that is made up of many different races and ethnic groups. Although for most countries this is desirable, South Africa has suffered due to its diversity in many various ways.

The population of South Africa is 24 million and it is composed of multiracial and multiethnic people of all walks of life. Three quarters of the population is black and they represent various tribes as the Zulu, Xhosa, Sotho, and Tswana. The remainder is Caucasian, Indian, Asian and

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mixed race. There is an obvious racial distortion when looking at where the population lives.

Blacks live in shantytowns located outside of the city limits. Whites, Asians and other races live in the city limits. Racism is obvious by the living conditions of the minorities in this country and has become a way of life. South Africa’s government goes back to 1910; this is when the Union of South Africa was formed. Congress was the actual decision maker even though there was a monarch on the throne. South Africa and other British Commonwealths were given their freedom from Britain and became a republic in 1961.

Once the new republic was established so was a democratic government that consisted of a president and a three-house parliament.But unfortunately, there was no minority representation in the newly established government. This set a precedent that encouraged discrimination and the upcoming apartheid. Apartheid is the name given to the system of segregation that was instituted by the government against the minorities of South Africa. Segregation was evident in all aspects of South African life such as employment, education and where the segregated were allowed to live and who they were allowed to marry.

The minority population was forced to work low wage jobs and was not allowed to attain higher education.This was also mirrored in the nonparticipation of minorities in government and in cultural affairs. The South African government defended apartheid by holding itself up as a model society. Their belief was that the races should be separated in order for the society to work and that minorities should be oppressed in order to keep control within the country. This ideology

continued even though the majority of the population was against it. Uprisings began in protest of apartheid through boycotts, demonstrations and strikes.

Violence became the norm and many lives were lost.This became a daily visual on the news that was broadcasted internationally. Therefore, many countries decided to impose sanctions and tariffs on South Africa. This in turn isolated South Africa from the rest of the world community. In 1962, the United Nations General Assembly urged its members to break diplomatic and economic ties with South Africa until Apartheid was abolished.

During the 1980’s a widespread economic boycott of South Africa took hold. In response to domestic and international pressure, South Africa began repealing apartheid laws in the 1970’s and 1980’s. (Moskowitz 78)Finally, apartheid laws were repealed in 1991 due to internal protests and international pressure upon the government of South Africa. This was a victory for the ethnic groups of South Africa, but discrimination is still a part of life in this country. The official languages of South Africa are African and English.

Those who were privileged to attend school learned English as their primary language. During apartheid there were ten different education systems that were established to accommodate the various ethnic groups. The quality of education for whites was far more superior to that of non-whites.Once apartheid was repealed, there was only one education system that allowed equality for all of the students that attended. Even though apartheid has been repealed, it has left a legacy of racism but it has not affected the fact that the country is full of resources that has drawn foreign direct investors to South Africa.

South Africa was

strictly known for being a producer of raw materials such as gold and diamonds. As time has passed, the economic environment has changed from one of an agricultural economy to an industrialized economy.This is due to the insurgence of metal and engineering industries that have taken South Africa from strictly being know for its raw materials only to an axis of commercial manufacturing. Apartheid had a detrimental effect on the progression of the ability of South Africa to be competitive due to the sanctions and tariffs that were imposed upon it. This was very damaging to the economy in the 1980’s but relief and prosperity was not far away once the repeal of apartheid took place in the early 1990’s.

As a result, manufacturing has developed into a key component of the South African economy. Manufacturing’s contribution exceeds that of the two primary sectors, mining and quarrying, and agriculture, forestry and fishing, combined. ”(Seidman 16) As a result of technology that has been introduced in to the manufacturing sector, great inroads have occurred in the streamlining of manufacturing firms. The size of manufacturing firms has increased although the number of firms have decreased. Technology has allowed a plant to be able to produce more, therefore, the need for more facilities has decreased exponentially.

This has had positive and negative effects on the economy of South Africa.A reduction in jobs has occurred since the numbers of plants have decreased, but the increase in size of plants have slightly offset this slightly noticeable reduction. Since jobs have been at a minimum it has encouraged the population to seek further education in order to vie for more technologically

based positions. So in the long run, manufacturing has had a positive effect on South Africa. The roots of foreign direct investment stem from the South African capitalist system. The African National Congress was in the majority and was geared to increasing economic growth and attracting foreign direct investment.

South Africa’s natural wealth has attracted foreign direct investment. The growth of the country’s economy has, in fact, depended to a large extent on capital from abroad, principally Great Britain and United States. ” (Wicker A33) The economy of South Africa would have never risen to the heights that it has if not for Foreign Direct Investments (FDI) and the export trade. “Foreign direct investment is when another country invests in a recipient country and sets up a corporation there. It also usually means that there is a transfer of technology to the recipient country.

This occurs when the labor force of the recipient country becomes educated and experts in whatever field that the foreign country brought in. The FDI returns in Africa have averaged 29% since 1990. ” (Thompson 127) There was a long delay in the development of FDI in South Africa due to the apartheid situation. This discouraged many companies from investing in South Africa while they watched violence in the streets and civil unrest.

There were several other factors such as tariffs and sanctions that were being imposed by other countries that affected investment opportunities.With the over due end of apartheid came governmental reforms that were designed to improve the FDI climate. Of which were improving the economic environment, stabilizing the economy, and encouraging the private sector to invest in South Africa. These

reforms became the catalyst for the United States to become the forerunner in South African investment, especially some of our most influential and powerful MNCs.

“U. S. based multinationals expanded their investments in South Africa more rapidly than any others.They provide about a fifth of all foreign direct investment, second only to British firms. ” (Seidman 74) There are other countries that are investing in South Africa other then the United States. The amount of foreign direct investment has tripled over the past 50 years.

Western European multinationals have been investing at a rapid rate and have come close to outpacing the United States and Britain. A significant aspect to also consider is that not only is South Africa attracting foreign investment but it is also investing in other countries as well. South African investment outside of South Africa totaled over $4 billion in 1992, equal to a third of all foreign capital invested in South Africa. ” (Seidman 75) A total of almost four hundred multinational corporations have invested in South Africa. There are thirteen US companies that have contributed to the awaking of the South African economy.

One such company is Telecommunications and Broadcasting of Republic of South Africa (Telekom S. A. Ltd. ). This company was created by the merging and acquisition of Telekom of San Antonio based Southwestern Bell Corporation (SBC) and Telekom of Malaysia.This merger is proof that US multinational corporations are confident in the investment opportunities and advantages that have presented themselves in South Africa.

With the rise of telecommunications, many companies are interested in investing in other undeveloped countries in this lucrative field. This is especially true due

to the impact of the information society on the world as a whole and the worlds need for multimedia computer services and mobile communications and satellite networks. “The telecommunications sector is among the fastest growing sectors in the global economy, ranking third after banking and health. (Moskowitz 339) Telecommunications has become a basic need in today’s society regardless of the country one may live in and it is essential for a healthy growing economy. Apartheid caused a deficit in the telecommunications sector of South Africa and once it ended this need was recognized and filled by the acquisition and merger that created Telekom S.

A. Ltd. This is a prime example of the effects of apartheid on South Africa and the resulting effect that multinational corporations have had on the economy. MNCs are bringing much needed services, products and jobs to South Africa that have been much needed since the creation of apartheid.So in conclusion, South Africa has become a growing source of foreign direct investment (FDI) by the United States and many other western European countries.

Due to the improved economic and political climate, many countries are encouraged to invest in South Africa and help build the country into a multinational hotbed. The increased investment aspect has also aided the people of South Africa by providing them with increased employment opportunities and technological expertise, as well as improved products and services.It has become a win-win situation for South Africa; corporations have benefited from the investment climate and South Africa has benefited from the improvement of their economy. Works Consulted Fine, Ben.

“Industrial policy and South Africa: A Strategic View. ” 1999 http://www. niep. org.

za/ Johnson, Elias. “South Africa. ” 2002 http://www. eia. doe.

gov/emua/cabs/safrica (2 Sept. 2002) Madsen, Axel. “Private Power: Multinational Corporations for the Survival of our Planet. ” NY, NY: Random House, 1972 Mallaby, Sabastian.

“After Apartheid: The Future of South Africa. NY, Random House, 1972 Moskowitz, Milton. “The Global Market Place. ” NY, NY: MacMillan Publishing Corp.

, 1987 Naidoo, Jay. “Investment in South Africa Telecommunications Sector. ” http://docweb. pwv.

gov Seidman, Ann and Neva. “South Africa and US Multinational Corporations. ” Tanzania, S. F.

Tanzania Publishers House, 1977. Thompson, Leonard. “A History of South Africa. ” CT: Yale University Press, 1990 Tugendhat, Christopher.

“The Multinational. ” NY,NY: Random House, 1972 Wicker, Tom. “A Measure of Apartheid. ” New York Times, p. A33, 1978

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