FDI In Africa
The economic growth of the African countries under the sub-Sahara desert, especially in the SADC region has been significantly low (ujdigispace.uj.ac.za). There has been a significant need for economic improvement in the region in order to effectively address poverty reduction as well as enhancing the standard of living of the people of the region to an accepted level. For this reason countries in the SADC region have relied heavily on the foreign capital, especially in the form of FDI (ujdigispace.uj.ac.za).
However Africa and almost all its regions attract very low amount of FDI. In the countries under the sub-Sahara desert the ratio of FDI to GDP has been around 17% which is lower than that of Latin America and Asia. So the great challenge
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Many factors has been examined in relation to the success of FDI in any country in which the investment is being made, factors such as, institutions (Busse & Groizard 2006). The other important factor is the state of development in a particular country prior to FDI (Alfro, 2003). Furthermore, Kamar (2013) also made a claim that the effect of FDI on growth depends on the sector through which FDI enters the economy (Kamar, 2013). He argues that FDI is mostly successful if it enters the host country through manufacturing sector (Kamar, 2013). He goes on to say that FDI flows through primary sector often have a negative effect on economic growth, while the results are often ambiguous for the service sector (Kamar, 2013). These finding are significantly important since FDI in the sub-Sahara Africa often take place in the primary and service sector (Kamar, …show more content…
(1995) in Kamara (2013) argues that the other greatest effect of the FDI on the economic growth largely depend on human capital. Adam (2009) in Kamara (2013) further argues that “FDI contributes to development through the augmentation of domestic capital and enhancement of technology through the transfer of technology, skills and innovation” (Kamara, 2013)
In the last three decades there has been significant rise in the FDI flows to the Sub- Sahara Africa, however, the overall performance of the region in terms of attracting the FDI has been extremely poor. Despite the noticeable rise of the FDI in the last three decades, it is evident that the flow of FDI in the region is spreading unevenly across the countries in the Sub-Saharan region. This uneven spread of FDI in the Sub-Saharan region reflects the degree of high concentration on few countries (Michalowski, 2012).
In as much as the large body of literature on FDI reveal that there is a great link between the volume of FDI and growth in any country. The higher degree of concentration of foreign investors in few countries results to a mixed evidence regarding FID impact on economic growth in the Su-Saharan Africa. It is also evident that most of FDI activities in the Sub-Saharan region take place in the primary sectors such as the mining sector, backward and forward linkages and spill over effects are very limited (Michalowski,
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