Foreign direct investment and Africa’s social and economic development
Date
2020
Authors
Rangwaga, Joan
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Abstract
The study investigates the impact of FDI on social and economic development in Africa. This study analyses panel data for 52 African countries for the period 1990 to 2017 by undertaking a quantitative research strategy. The longitudinal/panel research design was used. Secondary data taken from the African Development Bank Group’s Information Highway Portal was used. The study uses multiple regression models to analyse the impact of FDI on three dependent variables for social and economic development. To estimate the impact of FDI on economic growth, the model will control for some of the standard growth factors such as capital, labour, government expenditure, technology transfer, and inflation/price stability. When running the inequality and poverty regression models, the model will control for other factors such as level of literacy and education, employment and population growth, in addition to the standard growth factors.
The findings establish the importance of FDI in economic development, however, FDI did not make significant contribution towards reducing income inequality. The study also establishes the importance of FDI in poverty alleviation. The overall conclusion is that FDI is important to social and economic development. The study recommends that African countries create a favourable investment environment by improving institutional qualities (e.g. lower corruption, lower the number of days it takes to start a business, improve political stability, rule of law etc). The results of this study show that the internal factors (labour and domestic investment) are more effective than the external factors (FDI and technology transfer). FDI inflows should be directed to projects which fit with the host country development strategy and can transform host countries through the transfer of technology, human capital development and increased competition in domestic markets.
Description
A research report submitted in partial fulfilment of the requirements for the degree of Master of Management specialising in Finance and Investments to the Faculty of Commerce, Law and Management, School of Business, University of the Witwatersrand, Johannesburg, 2020
Keywords
FDI, Economic development, Foreign Direct Investment