Foreign direct investment and economic growth in Africa: a comparative analysis

Abstract

This paper investigates the effect of foreign direct investment on economic growth in selected African economies (South Africa, Nigeria, Egypt, Kenya, and Central African Republic) from 1980 to 2014, using a modified growth model by Agrawal and Khan (2011). The paper examines how country-specific factors can explain variations in the growth benefits of FDI. Ordinary least squares (OLS) and dynamic panel estimation were used as the estimation techniques. The only unusual results of the study were the inability of gross capital formation, human capital, and international technology in the Central African Republic to influence economic growth. In general, the impact of FDI on economic growth in African countries is limited or negligible for both OLS and dynamic panel estimations. The findings also revealed that South Africa's growth is more affected by FDI than in Nigeria, Egypt, Kenya, and Central African Republic. The paper therefore finds that government policies on FDI play significant roles in facilitating improved economic growth in African countries during the study period.