FDI in Services in SADC: Key Issues for Regional Integration Trudi Hartzenberg June 2005 Regional Integration Workshop Windhoek

2 Introduction  FDI Performance in SADC: What does the data say?  What influences FDI location decisions in SADC?  Key FDI developments in SADC  FDI in services in SADC  FDI and Regional Integration  Conclusions

3 FDI Performance in SADC  Slight slowdown in early 2000s after significant increase in late 1990s  Angola and South Africa key destinations (cautionary notes)  Industry focus Primary sectors – oil and gas (Angola): resource seeking Manufacturing – clothing and textiles: trade preference driven (Lesotho, Botswana, Namibia, Swaziland) Services – diverse locations (telecoms, banking) – South African investment in the region potential links between banking and mobile telephony  New MNCs in the Region - South African firms

4 What influences FDI location decisions in SADC  Trade Preferences (AGOA – Lesotho, Namibia..)  Technology-induced opportunities (telecoms, IT industries)  Consumer demand growth (retail chains)  Econ and social stability  Large & expanding mkts  Low & stable interest rates and inflation  Effective competition policy  Low business transaction costs  Human capital and skills (modern & diverse)  Low cost infrastructure  Free trade and forex regimes

5 FDI in Services  Key industry focus (telecoms, banking, tourism)  Role of domestic regulatory reform Privatisation Public-private ownership Market outcomes  Case Studies Telecoms: MTN Group (mobile telephony) Banking: Standard Bank Group (M&A), Barcalys/ABSA deal in South Africa  Tourism, mining and related

6 FDI and Regional Integration  What kind of FDI promotes regional integration?  Trade and investment linkages in the region (cautionary note – lack of backward linkages in host country)  Domestic regulatory reform and FDI  Producer services, FDI and regional integration – regional commodity chains and business transaction costs  Mega Projects and Corridors  Small-scale/informal FDI – farmers, tourism infrastructure, consumer or personal services (hairdressing etc), language related, catering  Beyond South African FDI in the region

7 Conclusions  FDI matters  Links between infrastructure-related FDI and private FDI (CORRIDORS)  Focus on services  South Africa in the region (MNCs)  Trade-investment linkages  Smaller-scale cross-border FDI