Foreign Direct Investment (FDI) has been perceived by most developing countries, emerging economies and countries in transition as a major vehicle for development that would not only boost a host country’s economic development but also enhance its integration into the global economy. The common assumption is that presence of foreign companies in a host country, particularly a developing country, would lead to economic benefits; among them, transfer of technology, and skills and human capacity development. The establishment of special “development zones” and the roll-out of incentives to attract FDI are often predicated on the expectation by host countries that these benefits would be achieved. It is against this background that this study sought to find out the character of FDI in the East London Industrial Development Zone (ELIDZ), located in the Eastern Cape. The study focused on the institutional preconditions and incentives used by the ELIDZ to attract FDI into the zone, and on whether these had any bearing on labour and environmental standards as well as on local skills development. Empirical data for the study were collected using in-depth interview with senior management staff of both the ELIDZ as an organisation, and one of the foreign companies located in the zone (a “tenant” of ELIDZ). In addition, a mini survey was conducted with a random sample of employees of the selected ELIDZ company. Among the key findings of the study was that the ELIDZ had in place a range of incentives and preconditions for the attraction of FDI, and that there were concerted efforts on the part of ELIDZ management to compel companies operating in the zone to adhere to specific iv standards – especially on the environmental front. From the mini survey results, however, the study established that achievements on the labour front were mixed. While most of the responses indicated that ELIDZ was playing a positive role in terms of employment creation, a high number of responses (from surveyed employees in the selected ELIDZ company) pointed out that employment standards were in question. For example, 41% of respondents reported “unhappiness” with their conditions of employment, while 50% deplored the fact that they were not allowed to belong to unions. Furthermore, responses were nearly evenly split (53%/47%) between those who reported that their employment had resulted in the acquisition of new skills and those who reported that it had not. From these and other findings, the study concluded that ELIDZ was facing a “balancing act” by expecting foreign companies to create jobs, transfer technology and contribute to local skills development while at the same time adhering to strict environmental and labour standards. The study thus confirmed a major consensus in the FDI literature, while FDI could bring about important socio-economic achievements in a host country, foreign companies and host governments are not necessarily motivated by the same set of factors. Indeed, at least a small facet of the study’s findings seemed to confirm the well-documented anti-FDI sentiment that the faith placed in FDI by host governments (especially in developing countries) does not always have a sound basis.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:ufh/vital:11942 |
| Date | January 2012 |
| Creators | Marawu, Sithembele |
| Publisher | University of Fort Hare, Faculty of Social Sciences & Humanities |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis, Masters, M Soc Sc (Rural Development) |
| Format | xv, 110 leaves; 30 cm, pdf |
| Rights | University of Fort Hare |
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