Factors Influencing Foreign Direct Investment of South African Financial Services Firms in Sub-Saharan Africa

TLDR: In this paper, the authors investigated the key elements that South African financial services firms consider before making foreign direct investments in Sub-Saharan African (SSA) markets, and found that financial service firms are most strongly influenced by the political and economic stability of the country in question as well as the profitability and long-term sustainability of its specific markets.

Abstract: This research investigates the key elements that South African financial services firms consider before making foreign direct investments in Sub-Saharan African (SSA) markets. The results show that South African financial services firms are most strongly influenced by the political and economic stability of the country in question as well as the profitability and long-term sustainability of its specific markets. The degree of available infrastructure in terms of Information and Communication Technology as well as the existence of credible financial systems was also viewed as highly important considerations affecting investment decisions in SSA. Given the uncertainty and ambiguity of most SSA markets, many South African financial services firms prefer to enter existing markets via a majority stakeholder joint venture with a local partner or via a new investment if the market does not currently exist. The nature of the financial services firm also seems to influence the entry method and once in a new country, most firms seem to prefer a full service presence. Additionally, the key motives cited for expansion northward were to broaden revenue bases and improve profit margins as well as to stay close to local customers.