Journal of Business & Financial Affairs

The Perception of the External Investment Environment of South Africa: The Case of Chinese SMEs FDI

Abstract

Emmanuel Fru Ngam

The purpose of this paper is to investigate how the Chinese SMEs in the Free State Province (FSP) perceive the external environment of doing business in South Africa and identifying the external environmental factors impacting foreign businesses investing in South Africa. A standard questionnaire was designed and self-administered to Chinese SMEs operating in different industries and towns in the Free State province. A total of 96 Chinese SMEs owners participated and the data obtained was analysed using descriptive statistics, frequency distribution tables and T-tests. Exploratory factor analysis identified four major external environmental factors (economic, political/institutional, sociocultural and legal systems factors) which included 36 sub-factors or items. The research findings showed that the Chinese SMEs have a negative perception about the external business environment of South Africa as they perceive the political/institutional factors (3.31), socio-cultural factors (3.05) and the legal system (3.20) as negative while the economic factors (4.01) are perceive as neutral. Crime, theft, security and xenophobia were being perceived the most negative sub-factors/items. Also external factors such as crime, corruption, labour regulations and xenophobia were being reckoned as the main external factors severely impacting the foreign businesses in SA.