FDI in Africa: potential implications of Brexit on South Africa’s financial sector

Abstract

Purpose This paper aims to investigate whether any potential weakening of the UK’s financial sector, as a result of Brexit, will have a negative impact on South Africa’s financial sector given the close ties between the countries’ financial systems. This paper seeks to also argue that Brexit may provide an opportunity for South Africa to pursue new trade linkages with other countries in Africa and Asia. Design/methodology/approach This paper is a review of relevant sources from foreign direct investment (FDI) and international economic literature. It analyses comparative and cross-disciplinary research and examines the current trends in the legal and economic climate in South Africa – within the context of economic growth and FDI inflows patterns. Findings This paper finds that Brexit does not pose a systemic risk to South Africa’s financial system. This paper also finds that South Africa’s recent policy changes may serve as obstacles to South Africa attracting new FDI. Research limitations/implications The implications of Brexit on the investment in the economy of African countries are under-researched, and this paper provides an additional contribution to the euro-centric discussion of the ramifications of Brexit on the economic developments in the financial sector after Britain’s exit. Originality/value This paper argues for an enhanced FDI system for South Africa and its policy proposals can be used to further the independence of African countries from European investment streams.