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

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  • Nomathemba Mhlanga
  • Garrick Blalock
  • Ralph Christy

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.

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  • Nomathemba Mhlanga & Garrick Blalock & Ralph Christy, 2010. "Understanding foreign direct investment in the southern African development community: an analysis based on project‐level data," Agricultural Economics, International Association of Agricultural Economists, vol. 41(3‐4), pages 337-347, May.
    • Handle: RePEc:bla:agecon:v:41:y:2010:i:3-4:p:337-347
    DOI: 10.1111/j.1574-0862.2010.00440.x
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    6. Maxime Delabarre, 2021. "The Economic and Institutional Determinants of Foreign Direct Investments," SciencePo Working papers Main hal-03334549, HAL.
    7. Morgan, Stephen & Farris, Jarrad & Johnson, Michael E., 2022. "Foreign Direct Investment in Africa: Recent Trends Leading up to the African Continental Free Trade Area (AfCFTA)," USDA Miscellaneous 329077, United States Department of Agriculture.
    8. Teixeira, Aurora A.C. & Forte, Rosa & Assunção, Susana, 2017. "Do countries' endowments of non-renewable energy resources matter for FDI attraction? A panel data analysis of 125 countries over the period 1995–2012," International Economics, Elsevier, vol. 150(C), pages 57-71.
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    10. Rao, R. Kavita & Sengupta, D.P., 2014. "Action Plan on Base Erosion and Profit Shifting: An Indian Perspective," Working Papers 14/133, National Institute of Public Finance and Policy.
    11. Assad Ullah & Yang Qingxiang & Mohammad Abdul Kamal & Zahid Ali4, 2015. "Domestic Investment Climate And Foreign Direct Investment In South Asia: A Panel Data Evidence," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 11(2), pages 11-12.
    12. Branca, Giacomo & Lipper, Leslie & Sorrentino, Alessandro, 2012. "Benefit-costs analysis of climate-related agricultural investments in Africa: a case study," 2012 First Congress, June 4-5, 2012, Trento, Italy 124109, Italian Association of Agricultural and Applied Economics (AIEAA).
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    15. Maxime Delabarre, 2021. "The Economic and Institutional Determinants of Foreign Direct Investments," Working Papers hal-03334549, HAL.
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