The foreign direct investment friendliness of Botswana and Tunisia : a comparative study of two of Africa's most competitive nations

Darwood, Alun Rhys (2001-12)

Thesis (MBA)--Stellenbosch University, 2001.

Thesis

ENGLISH ABSTRACT: Today, Foreign Direct Investment (FDI) has become the principle source of foreign capital in many developing countries and has been used to stimulate the local economy - thereby creating economic growth and employment. Although vast amounts of FDI into Africa have been limited to investments in highly profitable natural resources' like petroleum and mining, many African countries now actively seek FDI as a means of obtaining capital, creating export opportunities and generating management skills and technology. These African countries are encouraging foreign investment into their economies by providing policy and business facilitation frameworks and economic determinants that should attract foreign investors. These frameworks and determinants (or criteria) include access to natural resources, markets and domestic efficiencies; as well as tax and other incentives; reduced trade regulation and policies; agreements with respect to FDI; foreign equity ownership and relaxed exchange controls; political stability and sound economic policies; a good quality of life for the local population; improved technological capabilities and environmental conservation. By addressing the above criteria, host countries hope to attract foreign investors and thereby "spur development - within a national context." This study project aims to show, how foreign direct investment friendly Botswana and Tunisia are, in terms of the above criteria. While both countries are highly rated as progressive, democratic, stable and competitive African nations, an investigation of their foreign investment friendliness will show what these two countries offer, on a comparative basis. Botswana, in Southern Africa, has had a stable democratic existence since independence in 1966. Botswana has successfully utilised its mineral wealth, in particular the income generated from diamond mining, not only to grow the economy (at an average annual GNP growth rate of over 6% for the last decade), but also to improve social and physical infrastructure. Although highly rated by some investors, Botswana still faces the challenge of broadening its narrow economic basis, namely mining! In contrast to Botswana, Tunisia in North Africa, followed a socialist economic system until the 1980's. Since then, Tunisia has opened up with a programme of gradual economic liberalisation. Although Tunisia has a high external debt and the Tunisian government still plays an active role in the domestic economy, Tunisia has successfully diversified its economy into important agricultural, mining, energy, tourism and manufacturing sectors. While both Botswana and Tunisia have created FDI friendly environments with several similarities, the investment decision will generally depend on what the investment and investor requires. This includes the determination of: required and available natural resources, available markets, labour skills requirements and it is these differences between Botswana and Tunisia (as well as other differences in their FDI friendliness) that will determine if they succeed in attracting Foreign Direct Investment.

AFRIKAANSE OPSOMMING: Direkte buitelandse beleggings is vandag 'n belangrike bron van buitelandse kapitaal in baie ontwikkelende lande en speel ook 'n belangrike rol om die plaaslike ekonomie te stimuleer, ekonomiese groei te bevorder en werksgeleenthede te skep. Alhoewel baie buitelandse beleggings in Afrika beperk is tot winsgewende natuurlike hulpbronne soos olie en mynwese, is baie Afrika lande aktief besig om direkte buitelandse beleggings te bekom wat daartoe kan bydra om nuwe uitvoer markte te skep en nuwe bestuursvaardighede en tegnologie te genereer. Afrika lande moedig buitelandse beleggings aan deur beleid te formuleer en besigheidsraamwerke en ekonomiese determinante te aanvaar wat buitelandse beleggings lok. Dié raamwerk en determinante (of kriteria) sluit in: die beskikbaarheid van natuurlike hulpbronne, plaaslike en buitelandse markte, plaaslike kundigheid, belasting- en beleggingsaansporings, stroombelynde handelsregulasies en - beleide, ooreenkomste met betrekking tot buitelandse direkte beleggings en buitelandse kapitale eiendom, verslapping van valutabeheer, politieke bestendigheid, stabiele ekonomiese beleide, verbeterde lewenskwaliteit vir die plaaslike bevolking, verbeterde tegnologiese vermoëns en omgewingsbewaring. Deur die bogenoemde kriteria te aanvaar hoop gaslande om buitelandse beleggers te lok wat ontwikkeling binne 'n nasionale konteks kan bevorder. Die studie projek ondersoek die mate waarin Botswana en Tunisië 'beleggingsvriendelik' is vir buitelandse beleggers in terme van die bogenoemde kriteria. Alhoewel hierdie twee lande beskryf word as vooruitstrewende, demokratiese, stabiele en mededingende Afrika lande; sal 'n ondersoek na hul buitelandse beleggingsbeleide dui hoe hierdie lande vaar op 'n vergelykende grondslag. Botswana, in suidelike Afrika, het 'n stabiele demokrasie wat sedert sy onafhanklikheid in 1966·bestaan. Dié land het sy minerale rykdom baie goed benut, veral inkomste uit diamante. Dit het nie net ekonomiese groei bevorder nie (met 'n jaar-op-jaar Bruto Nasionale Produk (BNP) per kapita groei van meer as 6% vir die laaste dekade), maar ook tot die bevordering van sosiale en fisiese infrastrukture gelei. Alhoewel Botswana hoog aangeskrewe is by beleggers, staan die land steeds voor die uitdaging om hulle beperkte ekonomiese basis uit te brei. In vergelyking met Botswana het Tunisië, in noord Afrika, 'n sosialistiese ekonomiese stelsel gevolg tot laat in die 1980's. Sedertdien het Tunisië 'n program van geleidelike ekonomiese liberalisering gevolg. Alhoewel Tunisië redelike mate van buitelandse skuld het, speel die regering steeds 'n sentrale rol in die plaaslike ekonomie. Tunisië het verder daarin geslaag om sy ekonomie te diversifiseer in sektore soos landbou, mynbou, energie, toerisme en produksie. Beide Botswana en Tunisië het 'n beleggingsvriendelike omgewing geskep. Die besluit om te belê sal egter tot 'n groot mate afhang van die tipe belegging en die belegger se vereistes. Dit sluit in die beskikbaarheid van natuurlike hulpbronne, beskikbare markte, aarbeidsvaardigheid, ens. Die verskille tussen Botswana en Tunisië se buitelandse direkte beleggingsvriendelikheid in vergelyking met die bogenoemde kriteria sal bepaal of hierdie twee lande buitelandse beleggings sal lok.

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