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Foreign direct investment in sub-Saharan Africa

  • Cockcroft, Laurence
  • Riddell, Roger C.
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    The authors of this paper examine trends in private foreign direct investment in sub - Saharan Africa, assess how this has affected the host economies, and discuss the prospects for increased investment in the 1990s. They examine new or nontraditional forms of investment as well as more traditional stock and flow trends. They also focus on the relationship between structural adjustment programs and foreign private investment. Foreign investment in the 1990s (as in the 1980s) is likely to flow to a few key sectors: energy, selected export manufacturing sectors, and possibly the tourist industry. The least attractive area for the foreign investor is exclusively import-substituting industrialization. Interested investors are more likely to commit technology and management than equity capital. As a result, development finance institutions are likely to play an increasingly important role in meeting the need for capital. Thus, activity in sub - Saharan Africa may be more effective at raising the total volume of investment than any change in the climate of fiscal and other incentives. There is no prospect whatsoever for foreign investment to meet sub - Saharan Africa's rising foreign exchange and savings gaps. For one thing, prospects in other parts of the rapidly changing world look brighter and less risky and are closer to home. For another (Catch 22), sub - Saharan Africa is unlikely to attract capital until the prospects for growth improve.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 619.

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    Date of creation: 31 Mar 1991
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    Handle: RePEc:wbk:wbrwps:619
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