Foreign direct investment and inclusive green growth in Africa: Energy efficiency contingencies and thresholds

Despite the growing number of empirical studies on foreign direct investment (FDI) and energy efficiency (EE) as they relate to green growth, there remains an empirical research gap with respect to whether EE can engender positive synergy with FDI to foster inclusive green growth (IGG) in Africa. Also, little has been done to show the IGG gains from improving EE in both the short and long terms. Thus, this paper investigates whether EE interacts with FDI to foster IGG in Africa. According to our findings, which are based on 23 African countries and the dynamic GMM estimator, FDI hampers IGG in Africa, while EE fosters IGG. Notably, in the presence of EE, the IGG-deteriorating effect of FDI is reduced. Additional evidence by way of threshold analysis indicates that, improving EE in Africa generates positive sustainable development gains in both the short and long terms. This study suggests that, a country's drive to attract FDI needs to be accompanied by appropriate policy options to promote energy efficiency.