FOREIGN-CAPITAL AND ECONOMIC-DEVELOPMENT IN SOUTH-AFRICA - RECENT TRENDS AND POSTAPARTHEID PROSPECTS

This paper examines the major trends in foreign capital flows to South Africa in recent years against a background of global trends in (and projections of) foreign capital flows to developing countries. It also assesses postapartheid South Africa's strengths and weaknesses in attracting foreign capital. It is argued that although some global and domestic factors, both economic and political, suggest that a resumption of flows of some kinds of foreign capital to a postapartheid South Africa may occur, these are unlikely to be sufficient or of the form necessary, to contribute significantly to addressing the country's legacy of economic and social inequality. This view is supported by an introductory theoretical and empirical review which demonstrates that although foreign capital can carry both advantages and disadvantages, on balance the real benefits of foreign capital to growth and development are limited. Although appropriate forms of foreign capital directed at addressing inherent weaknesses in the South African economy may play some role as South Africa makes the transition from an apartheid to a democratic economy, the country's development strategy should be geared principally toward the mobilization of domestic resources.