Wisselkoersblootstelling van multinasionale ondernemings in Suid-Afrika / Z. Blignaut

Multinational enterprises (MNEs) are central drivers behind neo-liberal globalisation.These enterprises are usually centred in developed countries, with competitiveoperations in developing countries. The literature on MNEs and foreign directinvestment usually focus on the motivation for investment, decisions on expansion,the structure of ownership of investment, the mode of entry, and the perception ofrisk.Fluctuation in the exchange rate is a source of uncertainty that affects MNEs' andother enterprises' market values. Enterprises' exposure to changes in the exchangerate has increased with the adoption of floating exchange rates and more intensiveinvolvement in international trade. The conventional belief is that competition in theexport market is positively related to a depreciation of the exchange rate, which will inturn be advantageous to the stock market, while the opposite is true for anappreciation of the exchange rate. If the contribution of import or intermediateimported inputs to the final production were quite large, an appreciation of theexchange rate will have a positive effect on input costs and the stock market.This study investigates the exchange rate exposure of multinational enterprises inSouth Africa to the bilateral exchange rate of the rand against the US dollar and thenominal effective exchange rate of the rand. It presents evidence on the direction andmagnitude of currency exposure. From the empirical results presented in this study itcan be concluded that the majority of MNEs are not significantly exposed to eitherone of the exchange rate changes. It has also been found that the majority ofenterprises lose market value when their local currency depreciate against the USdollar, while the majority of South African enterprises are positively related tochanges in the nominal effective exchange rate of the rand.MNEs that are not significantly exposed to changes in exchange rates could besubject to three possibilities. (1) The most obvious reason is that enterprises are notexposed to changes in the exchange rate. Enterprises in liberated (or •open")countries are more exposed to exchange rate movements as opposed to those inclosed countries, such as the USA. (2) Enterprises could be engaged in on and offbalance sheet hedging activities, which would reduce exchange rate exposures. (3)The methodology used in a study does not present the correct exposure results.