An Overview of Foreign Direct Investment in Africa: an Analysis of African Governments

No. 44 – June 2015
Author: Elisiana Stanley Malle
Language: English
Economic development

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In 2011 global commerce has become the key driver of economic development and especially so for developing countries that depend largely on foreign direct investment with its attending cash inflows, in particular, for “new entrants” in the international trade arena such as African countries. For many years, the economy of Africa has been labeled as stable but unexciting until the recent finding of large amounts of natural gas deposits and oil in sub-Saharan countries such as Tanzania, Uganda, Mozambique, just to name few which look set to shake up the economy of African countries, not least, because global trade naturally comes along with the increase of FDIs. Already with big players entering the African market, the African continent finds itself the topic of conversation in boardrooms and the subject of articles in business journals and broadsheets with increasing prominence. However, there are a myriad of issues that already are being raised by corporations, public institutions, and civil societies such as clarity on the legal framework guiding the conduct of business such as anti-trust laws, securities and bankruptcy, the rule of law, corruption, and enforcement of contracts, conflict and mediation and the enforcements of judgments. Others include environmental and labour issues. These are all issues that have a direct economic impact not only of the country but also that of the region and on the continent as a whole. This paper will analyze the policy framework adopted by African countries to attract FDI and highlight the implications of such policies for Africa’s sustainable development. It will critically analyze the role of FDI in economic development to assess whether attracting FDI is the source for economic development. The aim will be to recommend a policy framework that would make FDI more beneficial for African countries and highlight the failures of the liberalized policy framework that is foregrounded by mainstream development policies.