According to the Global Entrepreneurship Monitor survey, South Africa has a low early stage
entrepreneurial activity rate of 7.8%, which is significantly lower than the average for all
efficiency-driven economies (11.4%) as well as the average for all middle to low income
countries (13.2%).Also, high levels of poverty, income inequality and unemployment are major
issues that impact the economic growth of South Africa. Pahad (2008) acknowledged that South
Africaâs social-economic goals are to reduce inequalities, reduce wealth and asset gaps between
rich and poor, halve unemployment by 2014 and meet the Millennium Development Goals.
However, one way of solving these issues is to encourage more foreign SMEs as they are
capable of providing investment injections in various sectors of South Africaâs economy, such as
agriculture, industry, education, and health. Likewise, these foreign SMEs can help eradicate
poverty, improve employment and reduce income inequality and wealth disparity between the
rich and poor.
The main objective of this study was to investigate the motives of Chinese SMEs foreign direct
investment in the Free State Province (FSP) and their perception about the external business
environment in South Africa. The study examine empirically the motives of Chinese SMEs
operating in the Free State province and determined if they were driven by the supply/resourcebased
or the market driven factors. The study also identified the external environmental factors
which can hinder foreign SMEs from investment in South Africa.
Across-sectional study using the survey method was used to collect the data. Simple random
sampling method and a non-probability snowball sampling method were used to determine the
sample size of Chinese SMEs in the Free State province. A standard questionnaire was designed
after a detailed literature review of the business environment and foreign SMEs investments.
Data was gathered through self-administered questionnaires. The specific methods of data
analyses used include descriptive statistics, cross-tabulations, frequency tables and T-tests.
Reliability was tested using the Cronbachâs Alpha. Pre-testing the research instrument in a pilot
study was used to determine the validity of the research. The research findings showed that the motives of the Chinese SMEs foreign direct investment in
the Free State was predominantly market-seeking FDI. The findings also showed that the many
external factors were impacting the operation of the foreign businesses negatively with crime,
corruption, labour regulations and xenophobia being reckoned as the main external factors
severely impacting the businesses. In addition, the Chinese SMEs had a negative perception
about the external business environment of South Africa with 86% of them indicating that they
had suffered from crime. Furthermore, the empirical findings revealed that SMEs in the
manufacturing sector employed the highest number of employees and have stayed in SA for a
longer period. Similarly, most of the exporters were in the manufacturing sector. However, the
majority of those who were unsatisfied about their investment decisions and were willing to
leave South Africa were in the manufacturing sector.
The study provided some recommendations to improve the external business environment of SA
so that more effective and efficient FDI is attracted. The recommendations include the need to
improve the fight against crime as it is seen as the number one factor impacting and deterring
away FDIs from SA. To attract sufficient supply/resource-based FDI, the government also needs
to improve its labour regulations, thus easing the hiring process. To add, South Africa has to
make its legal system more efficient by shortening the long procedures and duration of court
judgments as well as making it more affordable. A better legal system can reduce crime,
corruption and unethical behaviour.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:ufs/oai:etd.uovs.ac.za:etd-08182011-144004 |
| Date | 18 August 2011 |
| Creators | Ngam, Emmanuel Fru |
| Contributors | Prof AvA Smit |
| Publisher | University of the Free State |
| Source Sets | South African National ETD Portal |
| Language | en-uk |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.uovs.ac.za//theses/available/etd-08182011-144004/restricted/ |
| Rights | unrestricted, I hereby certify that, if appropriate, I have obtained and attached hereto a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to University Free State or its agents the non-exclusive license to archive and make accessible, under the conditions specified below, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. |
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