Assessing location choices of Swedish firms: South Africa and beyond

Abstract

South Africa is considered the most developed country in sub-Saharan Africa and has since the end of apartheid experienced political, economic and social development. After apartheid, investments increased rapidly, including those sourcing from Swedish firms. Location-specific factors that attract investments to a specific market have somewhat been neglected in scientific research. The purpose of this study is to gain a deeper understanding of the location-specific factors that Swedish firms find most important when choosing South Africa as a location for investments. This includes investigating South Africa as gateway into sub-Saharan Africa as well as to explore risks and challenges, which together form the research questions. To fulfill the purpose, interviews were conducted with nine Swedish firms and organizations established in South Africa in order to obtain personal insights. According to this study, several location-specific factors are attractive for Swedish firms. Some of the most emphasized are market size, growth, a generally easy business environment and cultural similarities between Sweden and South Africa. For some firms, personal preferences were described as crucial factors when choosing South Africa. Historical and political relations seemed to be of less importance while the good reputation of Sweden and Swedish products was beneficial for firms. In line with previous research, an attractive factor for some Swedish firms is the possibility to use South Africa as a gateway into other markets in sub-Saharan Africa. Swedish firms in South Africa face several risks and challenges, such as crime and political instability. However, segregation seems to be the most imminent risk since it leads to difficulties in recruiting black competent employees. Nevertheless, most of the risks and challenges can be alleviated and do not pose a threat to Swedish firms. In conclusion, South Africa is a complex market where it is important to understand both the business environment as well as the South African society in general.