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How effective are fiscal incentives to attract FDI to Sub-Saharan Africa?

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  • Emmanuel Cleeve

    (Manchester Metropolitan University, U.K.)

Abstract

Given the role of foreign direct investment in the development process, one of the most important challenges facing Africa is how to attract foreign direct investment. A number of attempts have been made, but most have been unsuccessful because of various factors that work against the business environment for foreign investment. This paper analyses the impact of fiscal incentives, the most popular instrument, for attracting foreign investment to Sub-Saharan Africa. It uses cross-sectional time series data on 16 Sub-Saharan African countries, and an econometric model of three proxies of fiscal incentive, after controlling for traditional and other policy variables. The results show that traditional variables and government policies to attract foreign investment to Africa are important. Of the fiscal incentives, tax holidays seem to be the most significant. What could also be important are political and macroeconomic stability at the national and regional levels, property rights protection and other investment-supporting regulations and improvements in infrastructure and service support systems.

Suggested Citation

  • Emmanuel Cleeve, 2008. "How effective are fiscal incentives to attract FDI to Sub-Saharan Africa?," Journal of Developing Areas, Tennessee State University, College of Business, vol. 42(1), pages 135-153, September.
    • Handle: RePEc:jda:journl:vol.42:year:2008:issue1:pp:135-153
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    More about this item

    Keywords

    Foreign Direct Investment; Fiscal incentives; Sub-Saharan Africa;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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