Abstract
PurposeThis paper aims to examine the role of economic integration and natural resources and foreign direct investment (FDI) complementarity in explaining economic growth in the Southern African Development Community (SADC).Design/methodology/approachThe study employed the ordinary least square-random effects and the generalized two-stage least square instrumental variables (IV) regression to examine the relationship between the variables.FindingsThe authors find that regional economic integration and natural resource abundance are essential for promoting economic growth. The results further show a potential resource curse phenomenon, offset by the complementary effect of FDI in resource-rich countries. The findings are robust after conditioning for different measures of institutional quality.Practical implicationsThe findings suggest the need for deeper regional trade integration and international cooperation, prudent natural resource management and concerted effort toward economic diversification.Originality/valueMany studies have examined the determinants of economic growth in the Southern African Development Community (SADC). However, these studies did not incorporate or assess the potential of economic integration in the region. Moreover, studies that examined the growth effects of FDI did not assess the complementary role of the region's natural resource endowment which potentially drives FDI inflows. This study fills these gaps and provides a robust analysis of economic growth drivers in the region.
Highlights
The continent of Africa provides the empirical space to examine existing economic growth models and the opportunity to unearth growth catalysts specific and endogenous to the region
Conclusion and policy recommendations This study sought to examine the impact of regional economic integration on economic growth and the relative contributions and complementarity between natural resources and foreign direct investment (FDI) in the Southern African Development Community (SADC) region
A critical contribution has been the control for two crucial variables that have been omitted from previous growth regressions, namely the impacts of economic integration and natural resource endowment on economic growth
Summary
The continent of Africa provides the empirical space to examine existing economic growth models and the opportunity to unearth growth catalysts specific and endogenous to the region. Despite the tremendous potential for growth and development, with an endowment of vast reserves of mineral resources and substantial human capital, sustained economic growth and development that translate into poverty reduction and improvement in the quality of life remain a major challenge in most countries. Increasing population growth and density, and resultant pollution poses a threat to the region’s development and the global community. Climate change has emerged as a significant and increasing threat to development on the continent. Some have suggested that external resource inflows and international development aid for Africa are legitimate to enable the continent to mitigate and adapt to the threat of climate change for which the continent is least responsible and to promote sustained economic growth and development (Guillaumont, 2012). The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
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