Thesis (MBA)--Stellenbosch University, 2005. / ENGLISH ABSTRACT: FOI has become a very important tool for the socio-economic development in developing countries. Three important factors need to exist before an investor will decide to invest in a foreign country. These factors are the presence of an ownership specific advantage, location advantages in the host country and superior commercial benefits for the investor. In order to detennine the host countries potential to attract FDI was it therefore important to analyse the second factor, which are the country specific advantages. The host country detenninants of UNCfAD and the ideal investment criteria of WAIPA have been combined in order to get a standardized framework for analysis and comparison. The starting point was therefore to analyse the availability of resources within these countries. In Botswana can we see that the diamond mining industry is the largest econOITllC contributor and in Tanzania do we find that their agricultural sector is the biggest economic contributor. In both instances do these countries have to import their oil, seeing that they are not producing their own petroleum products. Tanzania is exploring some opportunities with regard to oil reserves and also offers significant incentives for companies in this instance. In the case of Tanzania are the islands of Zanzibar a large tourist attraction and in Botswana does the Okavango delta offer a variety of tourist attractions. The potential of attracting FDI within these tourist industries is very large with regard to both countries. The domestic market in Tanzania is also much larger compared to that of Botswana and can offer the foreign investor with some great opportunities. Due to the small size of the domestic market in Botswana are they focusing more on export manufacturing and can we also see that their total exports are much larger than that of Tanzania. Exports under AGOA as a percentage of total exports to the US are currently almost double in Botswana compared to Tanzania. Through their membership to the SADe do both these countries have access to the European markets under the EU Free Trade Agreement. The European markets are also the largest markets for export in both cases. Efficiencies with reference to the banking system and physical infrastructure are also better in the case of Botswana. Botswana is rated as having one of the best banking systems in Africa. In order for Tanzania to improve trade within its region will it be important to upgrade their road and rail transport. The lack of skilled labour is a very big problem within both countries. The skill shortage is further worsened by the inefficiency of the education systems in order to address these problems. Electricity and' telecommunication is also very expensive in both countries, but can be addressed if the privatisation process within these sectors are speeded up. The biggest problem that both these countries face though is the significant impact that the HIV/AIDS virus is having and going to have on their current and future development. The tax laws in both these countries are very favorable and we can see that Tanzania and Botswana both have more attractive corporate tax rates than most of the other SADe states. Both countries are aiming at attracting FDI through export manufacturing and this is promoted through incentives such as duty· free imports of raw materials and special tax conceSSIOns. We can therefore see that both these countries have a lot of positive aspects, which will attract the foreign investor. The risk factor in combination with the negative factors will have to be weighed up against the positive factors, but in the end will it be the investor that has to decide which country 's characteristics suites its specific requirements best. / AFRIKAANSE OPSOMMING: Direkte Buitelandse Belegging het 'n belangrike broan geword vir die sosio-ekonomiese ontwikkeling van ontwikkelende lande. Drie belangrike faktore is geidentifiseer wat teenwoordig moet wees alvorens so 'n buitelandse investering sal plaasvind, naamlik 'n eienaar spesifieke voordeel, tuisland liggingsvoordeel asook 'n besondere kommersieIe voordeel. Die liggingsvoordeel verwys na die spesifieke eienskappe van die gasheerland. Vir die doel van hierdie werkstuk wat is om te bepaal wat die potensiaal van die gasheerland is om buitelandse investering te lok, was dit dus belangrik om 'n reeks faktore te identifiseer wat gebruik kan word om as raamwerk van vergelyking te dien. Die gasheerland vereistes soos uiteengesit deur UNCTAD en die eienskappe van WAIPA is gekombineer om hierdie raamwerk te skep. Eerstens word daar dus gekyk na die natuurlike hulpbronne in hierdie twee lande. Nie een van die twee lande beskik oor olie hulpbronne nie en moet al hul olieverwante produktte invoer. Toerisme is 'n groot bron van inkomste en in die geval van Botswana speel die Okavango delta 'n groot roI. In Tanzania is die eilande van Zanzibar weer 'n groot toeriste aantrekking wat nog baie potensiaal vir ontwikkeling bied. Landbou in Tanzanie is die oorheersende ekonomiese aktiwiteit, waar die ontginning van diamante weer die grootse bydraende faktor tot die ekonomie van Botswana is. Tanzanie se plaaslike mark is ook baie groter as die van Botswana en het dus ook baie potensiaal vir ontwikkeling. A.g.v. Botswana se klein plaaslike mark word daar ook meer gefokus op uitvoer vervaardiging. Botswana vaar ook tans beter met die uitvoer van produkte na Amerika onder die AGOA wetgewing en totale uitvoere onder AGOA as persentasie van totale uitvoere na Amerika is bykans dubbel die van Tanzanie. Beide lande is lede van die SADC en geniet dan ook die voordele van die vrye handelsooreenkoms met die Europese Unie wat ook in beide gevalle die grootste uitvoermarkte van hierdie lande is. Onder die effektiwiteitseienskappe kan ons sien dat Tanzanie 'n drastiese verbetering aan hul pad en spoorvervoer netwerke moet aanbring om handel in hul streek te verbeter. Die hoe koste van elektrisiteit en telekommunikasie in beide lande is ook 'n bron tot kommer, maar kan beter aangespreek word indien die privatiseringsproses in hierdie sektore versnel word. Een van die grootste faktore wat ook dringende aandag in beide die lande sal moet geniet is die groot tekort aan 'n opgeleide werkerskorps. In beide gevalle sal die onderwysstelsels drastiese veranderings moet aanbring om hierdie probleem aan te spreek. Die rol wat HIV/VIGS speel m.b.t. lewenskwaliteit in hierdie lande is ook 'n bron van kommer wat die huidige en toekomstige ontwikkeling van hierdie lande gaan beinvloed. Korporatiewe belasting in beide lande is beter as in meeste van die ander SADC state. Die feit dat beide lande fokus op die uitvoervervaardigingsmark is daar baie goeie aansporingsinisiatiewe om die belegger te lok, soos bv. geen doeane tariewe op die invoer van rou produkte nie, in kombinasie met spesiale belasting toegewings. Dit is dus duidelik uit hierdie werkstuk dat elke land verskeie positiewe asook negatiewe aspekte het. Die uiteindelike keuse sal op die skouers van die belegger berus nadat aIle voor en nadele teen mekaar opgeweeg is oor watter land die beste aan sy spesifieke vereistes voldoen.