Original Research

Trade openness and foreign direct investment in Africa

T Kandiero, M Chitiga
South African Journal of Economic and Management Sciences | Vol 9, No 3 | a1093 | DOI: https://doi.org/10.4102/sajems.v9i3.1093 | © 2014 T Kandiero, M Chitiga | This work is licensed under CC Attribution 4.0
Submitted: 05 June 2014 | Published: 05 June 2014

About the author(s)

T Kandiero, National Treasury
M Chitiga, Human Sciences Research Council, South Africa

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Abstract

Africa’s share of foreign direct investment (FDI) has lagged behind other regions in the world, despite a sharp increase in FDI inflows to the region in 2001. Factors contributing to this circumstance include perceptions of high corruption, weak governance and poor infrastructure. The motivation of this paper is to investigate the impact of openness to trade on the FDI inflow to Africa. In addition to economy-wide trade openness, we also analyse the impact on FDI of openness in manufactured goods, primary commodities and services. The empirical work uses cross-country data from selected African countries observed over four periods: 1980-1985, 1985-1990, 1990- 1995 and 1995-2001. We find that the FDI to GDP ratio responds well to increased openness in the whole economy and in the services sector in particular.

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Crossref Citations

1. Economic growth and openness in Africa: What is the empirical relationship?
Ching-Cheng Chang, Michael Mendy
Applied Economics Letters  vol: 19  issue: 18  first page: 1903  year: 2012  
doi: 10.1080/13504851.2012.676728