When foreign direct investment is threatened: Rio Tinto and Richards Bay Minerals

Abstract

Theoretical basis The theoretical basis of the teaching note is grounded in theory associated with macroeconomics and foreign direct investment (FDI); in particular why FDI is important to a developing country. Research methodology A secondary research methodology was used for the research and writing of this case study. Data (news articles and relevant readings) was obtained via the internet. Case overview/synopsis The case highlights the interrelated factors (civil society infrastructure, local and political unrest and community instability) that led to global mining company Rio Tinto announcing the halt of its operations and force majeure at its only South African business, Richards Bay Minerals (RBM). RBM was the largest business and employer in the province. Following the destruction of some of its equipment, civil unrest such as blocking of roads and intimidation of staff and the murder of one of their executives, Nico Swart, RBM management consequently announced all supplier contracts and operations would be halted until it was safe for work to be resumed.The case allows students to consider the interrelated factors that multinationals operating in developing countries are subject to in terms of different sub-national institutions and the potential impact of a large multinational ceasing operations in a local economy, both directly and indirectly. It concludes with considerations of what needs to be in place for RBM to continue operations. Complexity academic level This case can be used in undergraduate- and graduate-level courses, in management development programs or in short executive education courses focusing on the environment of business, macroeconomics and FDI.