The Nexus between Corporate Governance and Foreign Direct Investment: Comparative Study of Kenya and South Africa

A weak corporate governance system has adverse effects on foreign direct investment trends. Losses on the stock market for both domestic and international investors has been caused by corporate governance malpractices. When this state of affairs is coupled with a hostile business environment, the investors are deterred. The study set out to identify the corporate governance framework in Kenya and South Africa. It was also carried out to explore the extent to which corporate governance influences FDI decisions and compare the corporate governance development about FDI in the two countries. The sample for the study was Kenya and South Africa as they are both very high recipients and both subscribe to the Commonwealth Codes of corporate governance practice. The Researcher collected data from library sources, reports, international codes, and national statutes, casual interviews with local experts, newspapers and internet sources. Descriptive statistics in forms of indices and bar charts were utilized to describe the trend of the result. The result shows that Kenya has a bulkier corporate governance framework than South Africa, but South Africa has a sturdier framework and better enforcement. It further demonstrated that a robust corporate governance system has a positive effect on FDI and adverse changes in FDI affect corporate governance. The implications of the outcome were discussed and recommendations proffered. Also, corruption seems to plague both countries and hurts foreign direct investment especially in the case of South Africa. One of the major recommendations is that both countries ensure that corruption is aptly dealt with. It is also suggested that the national governments unite with stakeholders during the drafting of legislation toe ensure an inclusive legal regime. It is the expectation of the researcher that the findings of the study will be of relevance to Kenyan policy makers, government agencies dealing with both FDI and corporate governance, the academic body of International Relations, Business Management, and potential international investors.