Empirical Analysis of Foreign Direct Investment and Export Performance in South Africa

This study analysed the impact of foreign direct investment (FDI) on export performance in South Africa, using annual time series data extracted from the South African Reserve Bank (SARB) over the period 1960-2021. A vector autoregressive (VAR) approach was estimated to empirically analyse dynamic relationships between foreign direct investment (FDI) and export performance in South Africa. The study also employed the Dynamic Ordinary Least Squares (DOLS) method as a robustness model to verify and support empirical findings. The results of the study through the impulse response function and DOLS indicated that FDI is positively associated with export growth in South Africa. This finding suggests that a positive shock of FDI promotes export levels in South Africa's economy. Moreover, GDP growth responds positively to the innovative shocks of export growth in the economy. This study provides rigorous South African-specific empirical evidence on the impact of FDI on exports. The empirical findings of the study proposed that the positive spillover effects of FDI strongly indicate that policymakers ought to strengthen investment-friendly policies earmarked for FDI inflows to promote growth and exports in South Africa's economy.