FDI inflows to Sub-Saharan Africa - An empirical study over SACU's impact on FDI

Abstract: Some of the world's poorest countries are located in Sub-Saharan Africa. FDI inflows have the potential to over time accelerate economic growth. Since domestic investments are typically scarce in developing and emerging countries, FDI is necessary in order to pursue economic growth. Using panel data for 40 countries in Sub-Saharan Africa during the period 1996-2011, this study investigates the impact of the free trade agreement SACU on FDI inflows to member countries. By combining results from two different fixed effect models, it is concluded that SACU has a positive and indirect influence on FDI inflows to member countries through the channel openness. FDI can be seen as a positive external effect from a free trade agreement. This is important information for developing countries trying to grow and integrate into the global economy.