Understanding foreign direct investment in the southern African development community: an analysis based on project‐level data

Abstract

This article uses a uniquely rich project-level data set to analyze determinants and trends of foreign direct investment (FDI) flows to the Southern African Development Community region. We control for the source of the investment, the sector in which the investment is undertaken, and the investment type in addition to project size. The results indicate market size to have a positive impact on FDI flows under all specifications-a result consistent with earlier studies. Other variables are unstable depending on specification and the subset of the data used. Furthermore, we find no significant differences in factors that drive FDI flows by source country, while greenfield investments are seen to respond more to the growth potential of the market relative to other forms of investment. In general, we find macroeconomic variables to be poor at explaining project-level FDI in the region. The descriptive analysis of the data points us more in the direction of the gravity model, with factors such as colonial ties and proximity of the investing country appearing to matter. Limited flows and minimal sectoral diversity call for enhanced investment promotion and collaborative efforts among member states. Copyright (c) 2010 International Association of Agricultural Economists.

Agribusiness innovation: A pathway to sustainable economic growth in Africa

“…Mhlanga (2010) states that the lack of access to markets and natural resources, good infrastructure, and a stable macroeconomic and political environment limits development in Africa (Mhlanga, Blalock, & Christy, 2010). Further, mismanagement and/or weak regulation 21 can generate serious issues for many poor people (Oxfam, 2012).…”

“…At the country level, South Africa and Nigeria are the main countries in undertaking agribusiness activity, having the greatest number of companies (FAO, 2013a). Overall, country comparisons conducted by Mhlanga (2010), show that the size of the country's economy is the main determinant of agribusiness investment activity when measured by GDP or population size.…”

“…[insert Figure 1] Other factors influencing private investment in agribusiness in this region include not only the positive factor of an abundance of natural agricultural resources, but also potential barriers such as the existing level of infrastructure development in an economy, the availability of a supportive macro-economic environment, challenges with corruption and/or trade regulation, political instability, limited access to not only finance and technology, but also institutions and support services, and the degree of development of farmer/producer organizations (Mhlanga, 2010).…”

Determinants of Foreign Direct Investment: An Empirical Analysis for Turkey

“…They find corporate tax rates and degree of openness to foreign direct investment to be significant determinants of FDI. Kravis and Lipsey (1982), Culem (1988), Edwards (1990), Sun (2002, Kuo and Huang (2003), Asiedu (2006), Cleeve (2008), Mhlanga et al (2010) find significant positive effects on FDI also. Schmitz and Bieri (1972) and Wheeler and Mody find insignificant effects of openness on FDI.…”

“…al., 1998;Ekholm, 1998;Zhang and Markusen, 1999;Barros andVolume 5 Number 2 Fall 2015 Cabral, 2001;Chakrabarti, 2001;Moosa, 2002) on the determinants of FDI lead us to select a set of explanatory variables that are widely used and found to be significant determinants of FDI. For example Markusen and Maskus (1999), Love and LageHidalgo (2000), Lipsey (2000), Lim (2001), and Moosa (2002), Asiedu (2006), Cleeve (2008), Mhlanga et al (2010), Vijayakumar et al (2010), Wang and Swain (1995), Liu (1997), Dees (1998) and Cheng and Kwan (1999) highlight how the domestic market size can relate to the location of FDI. Mainardi (1992) emphasizes the level of importance and growth prospectus of the real per capita GDP in taking investment decisions in a region.…”