Escape FDI and Institutional Arbitrage : Home-Country Drivers of South African Investment in Hungary

Sass, Magdolna and Ayanda Sithole, Mbali (2026) Escape FDI and Institutional Arbitrage : Home-Country Drivers of South African Investment in Hungary. KÖZ-GAZDASÁG, 21 (2). pp. 43-62. ISSN 1788-0696

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Abstract

Foreign direct investment from emerging economies has increasingly diversified geographically, yet investments from African multinationals into Central and Eastern Europe remain underexplored. In particular, South African FDI in Hungary represents an unusual case, given the limited historical and economic ties and structural differences between the two countries. This paper investigates the drivers, structure and developmental implications of South African FDI in Hungary, with the aim of explaining why firms from a distant emerging economy invest in a medium-developed EU member state. The analysis adopts a mixed-method approach, combining macro-level FDI statistics, foreign affiliates statistics, firm-level database analysis, and five interviews with company representatives and experts. The results show that South African FDI in Hungary is small, volatile and structurally heterogeneous. Investments are dominated by financialised real estate and service-sector activities embedded in broader Central and Eastern European portfolio strategies, while manufacturing presence remains limited. The evidence highlights the marginal role of South African firms in employment and value-added.These findings suggest that South African FDI in Hungary is driven primarily by home-country push factors—such as institutional instability, macroeconomic risks and corruption—rather than strong host-country pull factors. Internationalisation thus serves as a form of institutional arbitrage and risk diversification, rather than conventional market- or efficiency-seeking expansion. The paper contributes to the literature on emerging market multinationals by demonstrating that the developmental impact of FDI depends critically on its qualitaty and strategic motivation, and that financialised, portfolio-type investments generate limited local embeddedness and spillovers.

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