Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
Foreign Direct Investment and Economic Growth in
Africa: a Comparative Analysis
Olawumi D. Awolusi* and Theuns G. Pelser**
Several studies have been conducted to examine the influence of Foreign Direct
Investment (FDI) inflow on economic growth. Indeed, the overall evidence is best
characterized as mixed. This paper investigates the effect of Foreign Direct
Investment (FDI) on economic growth in some randomly selected African
economies from 1980 to 2013 using a modified growth model. Based on a
framework from Agrawal and Khan (2011), OLS-Ordinary Least Squares and
GMM- Generalized Method of Moments were used as the estimation techniques.
Of all the results, only gross capital formation, human capital, international
technology transfer in Central African Republic were found not to have any
statistically significant influence on economic growth amongst all the selected
countries during the study period. Specifically, except for Central African
Republic, the estimate of FDI was significant and positive for both GMM and OLS
in all the countries. This indicates that inflows of FDI contributed positively to the
level of economic growth in these countries. Findings based on this study also
revealed that South Africa’s growth is more affected by FDI, than other four
countries. The study also provides possible reasons behind South Africa’s great
show of FDI and the lessons other African countries could learn from South
Africa for better utilization of FDI.
JEL Codes: F13, F14 and O57
Field of Research: Economics
*Dr. Olawumi D. Awolusi, Graduate School of Business and Leadership, University of KwaZulu-Natal, South
Africa. E-mail: awolusi@ukzn.ac.za
**Prof. Theuns G. Pelser, Graduate School of Business and Leadership, University of KwaZulu-Natal, South
Africa. E-mail: pelser@ukzn.ac.za