If the conditions in sub-Saharan Africa are arguably worse, why are South African firms investing there?

Foreign direct investment (FDI) flowing into sub-Saharan Africa from firms operating in other developing countries have sharply increased in recent years. These new flows have significantly changed the composition of FDI in the region compared to a years ago when FDI was mostly from multinationals hailing from the former colonial powers, France and the United Kingdom. Figures 3.3 and 3.4 demonstrate respectively the major investors for overall FDI and manufacturing FDI in the five sample countries. As the composition of investors has changed and the variety of investor groups in terms of size of firms, sectors, capital intensity, and business models has increased – so has the diversity of the motives and drivers of investment of the different groups.
At the end of 2002 [based on total FDI stock] South Africa was the third largest foreign investor in Africa after the United Kingdom ($20 billion) and the USA ($19 billion). Furthermore, in 2005 South Africa was the largest source of new FDI into Africa. South African investors have a very large presence in the extractive industries on the continent, however, a fair amount of this investment dates back more than two decades. Since the advent of democracy in South Africa, South African firms have tended to spearhead moves into the establishment of capital-intensive business services such as telecommunications and banking, and have also made inroads into food and beverage manufacturing.
The motivations and drivers attracting South African firms into sub-Saharan Africa vary greatly depending on the nature of the industry. For example, the majority of financial service firms emphasized that push factors weighed strongly in their decision to undertake FDI. In most instances, the push factors weighed more heavily than