The determinants of foreign direct investment in Sub-Saharan Africa

Abstract

The study examined the determinants of foreign direct investment (FDI) in Sub Saharan Africa between 1970 and 2000. Results indicate that trade liberalization has been the main determinant of FDI over the three decades. However, the low level of FDI inflows to the region, suggest that liberalization policies are necessary but insufficient in attracting FDI. Policy makers in the region should therefore focus on institutional reforms and improve the business climate to enhance the region's chances of attracting more FDI. On the other hand, multinational enterprises could exploit the favorable FDI policy environment to negotiate favorable terms of entry and reap the benefits of beingfirst-movers.