The Geography of Foreign Direct Investment in Africa (at mid-point) for the UN Millennium development Goals (MDGs)

This paper examines the geographic determinants of foreign direct investment (FDI) into Africa since the UN Millennium Development Goals (MDGs) declaration in 2000. Given FDI’s importance with regard to Goal Eight: “Global Partnership”, we examine FDI patterns and explanations using data through 2007. Although a growing literature sheds light upon the importance of macro-level economic, social, and political variables, this paper contributes comprehensiveness by applying a combined methodology of OLS regression and factor analysis, to this vital time period during which FDI inflows have escalated dramatically. We find that Africa’s uneven FDI landscape is related to both the distribution of natural resource endowments and their associated trade patterns. Market size is also found to be a significant determinant, as are follow-the-leader strategies, especially among British Commonwealth states. Counter to our expectations that transparency helps FDI flourish, we find scant evidence that inflows are facilitated by the adoption of International Accounting Standards. This observation, as well as clear importance of Internet access in landlocked countries, yields suggestions for government policy and the allocation of international aid.