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The FDI potential of Botswana and Tanzania compared

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.

Identiferoai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/50490
Date12 1900
CreatorsDe Kock, Michiel Josias
ContributorsBreytenbach, W. J., Stellenbosch University. Faculty of Economic and Management Sciences. Graduate School of Business.
PublisherStellenbosch : Stellenbosch University
Source SetsSouth African National ETD Portal
Languageen_ZA
Detected LanguageUnknown
TypeThesis
Format133 p. : ill.
RightsStellenbosch University

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