Foreign direct investment risk implication on employment in an emerging economy

Abstract

This paper analysed the employment risk-effect of foreign direct investment (FDI) inflow in South Africa for the periods 1991 to 2014. The paper is an attempt to contribute to the growing debate on the role of FDI in economic development, but specifically on employment. The paper applied a quantitative method and used time series data from the World Bank development indicators. The ordinary least square (OLS) regression statistics was used to analyse the relationship between FDI and employment in South Africa for 1991 – 2014. Consistent with some previous research findings, results showed that during the period of study, FDI showed a negative relationship with employment – a growth in FDI had a negative effect on local employment by 1.29 percent. The paper thus highlights that if FDI does not received proper strategy, the host country may run the risk of not benefitting economically from FDI. This unexpected result can be attributed to some causes, which include inter alia reduction in domestic productivity because of FDI, the nature of FDI and the host country regulation of FDI. The paper suggests further research on the role of FDI on domestic productivity in South Africa