Multinational Enterprise, Foreign Direct Investment (FDI), and Trade Flows: Africa (2008-2014)

Abstract

Africa’s poor growth performance after decolonization has been called “the worst economic tragedy of the 20th century” (Artadi and Sala-i-Martin, 2004). Between 1960 and 1980, the per capita GDP of the continent of the continent increased slightly, but has since then stagnated at a very low level (UNDP, 2007). As such, the 1980s was a lost decade for most of sub-Saharan Africa, and the 1990s were only marginally better. (UNDP, 2007).Foreign direct investment (FDI) which, according to Sichei and Kinyondo (2012), entails an investor acquiring substantial controlling interest in a foreign firm or sets up a subsidiary in a foreign country, is an integral part of an open and effective international economic system and a major catalyst to development. (OECD, 2002). Africa’s failure to attract FDI is highlighted by the declining share of Africa in global FDI flows; from 4.6% in the 1970s, to 1.6% in the 1990s, though Africa recovered somewhat in the first half of 2000s. (UNDP, 2007). FDIs are one of two categories of activities conducted by Multinationals Enterprises (MNEs) in the course of carrying out International Business. International Business is transactions taking place across national borders for the purpose of satisfying the needs of individuals and organisations. The other category of activities conducted by MNEs is Trade, which is subdivided into Services and Merchandise. (Rugman and Collinson, 2006). In this essay, Multinational Enterprise, the Foreign Direct Investment (FDI), and Trade flows into and out of Africa are discussed. Due to the voluminous nature of the data, only Merchandise Trade flows are discussed. The scope of the essay is limited to the displaying, in Tabular form, of the Foreign Direct Investment (FDI) and the Merchandise Trade flows from, the perspective of World total flows, the perspective of Africa’s top ten import and export trade partner flows, the perspective of Total Africa flows; the perspectives of flows into and out of Eastern Africa, Middle Africa, Northern Africa, Southern Africa, and Western Africa; and the perspective of the flows into and out of the individual economies of Africa. Such issues as why do nations trade, and barriers to trade, are outside the scope of this essay. Despite the limited scope of the essay, the data non-the-less, provides adequate information to trace the FDI and Merchandise trade flows into and out of Africa, from where in the world they come from and go; to which parts of Africa they come from and go; and even to which individual economies they come from and go to.