FDI in Sub-Saharan Africa

Are the determinants of FDI in Sub-Saharan Africa and Mauritius from Chinese companies different than for companies from the rest of the world?


Title of Study

Nature of Study

Nature of Sample

Time Period

Determinants Used in Sample

Major findings

Billington (1999)

The location of foreign direct investment: an empirical analysis

Cross-Sectional Study using Regression model

138 Countries


8 determinants - GDP, Growth rate, Export, Political Risk, Educational Level, Energy, Telephone lines, Capital stocks

Countries better suited to attract FDI are developed countries with high GDP, growth rate, export, capital stock and educational level, good infrastructure level and low risk. Therefore, SSA needs to improve these to attract FDI.

Asiedu (2002)

On the Determinants of Foreign Direct Investment to Developing Countries: is Africa Different?

Ordinary Least Square

31 SSA Countries and 39 Non-SSA Countries


Return on Investment, Infrastructure Development, Openness, Political Risk, Economic Variables

FDI determinants in these 2 set of countries are different. For instance, infrastructure and increase capital return it important for SSA countries. Openness is important for both and the most important finding is that FDI hugely depends on the location of the country.

Ancharaz (2003)

Determinants of Trade Policy Reform in Sub-Saharan Africa

Quantitative analysis

37 African Countries


Macroeconomic Variables, Crisis Indicators, Structural, Political and Institutional Variables

Results were that more international aid, development of the country, well-built current account and big manufacturing sector inc0reases FDI. The study also proved that economic crisis also promotes FDI inflows. High taxes, foreign competition and big government do not favour FDI. The significant determinants are market size, government size, taxes, foreign aid and current account balances.

Ancharaz (2003)

The Determinants of Foreign direct Investment in a Comparative Perspective: Is there a Bias against Sub-Saharan Africa?

Regression Analysis

84 Countries


Real GDP and GDP per capita, Growth Rate, Government Size, Investment Ratio, Real Exchange Rate, Debt Service Ratio and Political Instability

Africa is responsible for small inflow of FDI during that period and there exist a huge difference in the determinants FDI inflow between the rest of the world and SSA.

Onyeiwu and Shrestha (2004)

Determinants of Foreign Direct Investment in Africa

Fixed and random effects model

29 African countries


Economic and reforms

Their study showed that the determinants of FDI to Africa were inflation, openness, economic growth, international reserves and natural resources.

Zafar (2007)

The Growing Relationship Between China and Sub-Saharan Africa: Macroeconomic, Trade, Investment and Aid Links

Quantitative Analysis

All SSA countries


Natural resources

China is increasing the trade indices between countries with plenty of resources and resource-poor countries. Important variables are export level in natural resources and textile.

Sawkut et al. (2007)

Determinants of FDI: Lessons from African Economies

Hausman specification test

20 African countries


Natural Resource Intensity, Market Size, Labour Cost, Human Capital, Corporate Tax Rates, Openness and Political Instability

Most determinants showed a positive result as confirmed by previous literatures. Only political instability and labour cost produced negative results.

Cleeve (2008)

How effective are fiscal incentives to attract FDI to Sub-Saharan Africa?

Multiple Regression Analysis

16 SSA Countries


GDP per capita, GDP growth, Political Stability, Tax Incentives and Concessions, Repatriation of Profits, Human Capital, Infrastructure, Exchange Rate and Corruption Perception Index

Conventional factors affecting FDI are important determinants of FDI such as labour cost and skills, infrastructure, growth. The study showed that policies implemented by the government are important.

Please be aware that the free essay that you were just reading was not written by us. This essay, and all of the others available to view on the website, were provided to us by students in exchange for services that we offer. This relationship helps our students to get an even better deal while also contributing to the biggest free essay resource in the UK!