Working Paper 3-2008: TNC FDI Firms and Domestic SME Linkages Reflecting on three SADC Case Studies

The research process underpinning this article was focused on casting some light on factors influencing the way in which developing countries can enhance linkages between Transnational Corporation (TNC) Foreign Direct Investment (FDI) firms and domestic small and medium enterprises (SMEs). It sought to do this through identifying the major lessons from SME-TNC linkage programmes from three South African Development Community (SADC) case studies: Mozambique and the Mozal aluminium smelter; Lesotho and the clothing and textile investment related to the African Growth and Opportunity Act (AGOA); and South Africa's experience with SME suppliers and Toyota. The process of securing developmental impacts from FDI for developing countries has been a considerable challenge for many countries and has become a greater imperative in a context of relative declines in official development assistance in the past decade. Other authors have explained how FDI can compensate for domestic savings shortfalls and reduce BOP imbalances. This study tries to explore some ways in which FDI can contribute to lasting structural change in developing country production and productivity dynamics.