Investing in South Africa

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Question #1 “In what way could the huge cultural diversity in South Africa pose challenges for MNCs seeking to set up a business there?"

South African has been referred to as the 'rainbow nation', a title which epitomises the country's cultural diversity. The population of South Africa is one of the most complex and diverse in the world. Of the 45 million South Africans, nearly 31 million are Black, 5 million White, 3 million Coloured and one million Indian. The population density is 32.9 people per km²1

“MNC’s” are corporations that are registered in more than one country or that has operations in more than one country. These large corporations both produce and sell goods or services in internationally. MNCs play influential roles in shaping the economies of developing countries. Investing in these countries provide market to the MNC but provide employment, choice of multi goods etc.MNCs are likely to adapt production processes in many of their operations to conform to the standards of the most rigorous jurisdiction in which they operate As for labor costs, while MNCs clearly pay workers in developing countries far below levels in countries where labor productivity is high. Finally, depending on the nature of the MNC, investment in any country reflects a desire for a medium- to long-term return, as establishing plant, training workers, etc., can be costly. Once established in a jurisdiction, therefore, MNCs are potentially vulnerable to arbitrary government intervention such as expropriation, sudden contract renegotiation, the arbitrary withdrawal or compulsory purchase of licenses, etc.

Having to be aware of all of the nations different and unique cultures and races would be extremely tricky. Multi national companies are able to be successful by molding themselves to key parts of the culture where they located. Having to weave through 12 different cultures, which almost all include a unique language, would be more than challenging. Not only do the...
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