Factors affecting foreign direct investment in Africa
Date
2017
Authors
Singh, Vijen
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Abstract
ABSTRACT
As companies look for new growth opportunities, they are turning to emerging markets as the source of this potential growth. Emerging markets are the fastest growing destination for goods and services over the period 1995 to 2016. (Khanna, 2005; Forum, 2016). Foreign Direct Investment (FDI) has been discussed widely and analysed by many potential investors in Africa (Dupasquier and Osakwe, 2006; Adams, 2009; Hailu, 2010). There have been many studies on determinants of FDI (Asiedu, 2002; Asiedu, 2006; Hailu, 2010). FDI has brought economic success, so it is very important for African countries to improve their economic and social conditions (Claassen & Loots et al., 2011). Developing countries are the fastest growing markets - globally outperforming other emerging market indexes and the S&P 500 over a 10-year period from 2000 to 2010.
While South Africa’s GDP growth is modest, most of the African regions had a high forecasted growth of a minimum of 4.6 per cent for Southern Africa and a maximum of 7.4 per cent for West Africa for 2014. This is one of the reasons investors are attracted to Africa.
While the literature correctly highlights the need for improved investment conditions in Africa and motivates that Multi-National Corporations (MNCs) need not use intermediaries, the literature fails to consider what factors actively contribute to FDI in African countries and what African countries can do to increase foreign direct investment.
The data collected investigated Sub-Saharan African countries, specifically as emerging economies, as it relates to financial and socioeconomic realities with regard to Foreign Direct Investment. All countries are competing against each other for FDI, therefore it is important to analyse competitive pillars that rank each of these countries.
A quantitative methodology was applied in conducting the research which comprised studying and interpreting literature from empirical reports, analyses of regression data, interpretation of this data and examining relationships between dependent and independent variables. Amidst the increase of new product and service advancements, the only source of lasting competitive advantage is arguably the generation of new economic value. This includes the development of new technologies to support the development of innovative services and products within African economies. This research proposed that a so-called Foreign Direct Investment Collaboration Model be adopted and implemented to address and improve each country’s competitiveness.
Description
M.B.A. Thesis
Keywords
Investments, Foreign, International business enterprises -- Africa.