Determinants of Foreign Direct Investment of South African Telecommunications Firms into Sub-Saharan Africa

Working Paper 222
Author(s): 
John M. Luiz and Henry Stephan
Publication date: 
June, 2011
Journal: 
2012, Telecommunications Policy: http://www.sciencedirect.com/science/article/pii/S0308596112000705
Classification-JEL: 

The study investigates the main factors considered by South African telecommunications firms when making a decision to undertake Foreign Direct Investment (FDI) into Sub-Saharan Africa (SSA). This encompasses the reasons for investing, the methods of entry into the identified market and the factors influencing their decision. The methodology employs a survey questionnaire which was sent to telecommunication firms representing more than 70% of the revenue generated by this sector in SSA. The research reveals that market size, regulatory environment and government policy are the three most important factors influencing the decision to undertake FDI. Furthermore, the main reasons for deciding to enter SSA are for market and profit growth due to saturation in their existing markets, as well as for diversification of risk. Telecommunications firms wishing to enter SSA must be prepared for an unstable and uncertain policy environment and understand that the cost of starting a new venture in SSA is high.

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