FOREIGN DIRECT INVESTMENT AND THE NATURAL RESOURCE CURSE IN SUB-SAHARAN AFRICA: PATHWAYS TO SUSTAINABLE DEVELOPMENT

Abstract

This study examines the relationship between foreign direct investment (FDI) and the natural resource curse in Sub-Saharan Africa (SSA) from 2011 to 2020, framed within Sustainable Development Goal (SDG) 8 on Decent Work and Economic Growth. Despite abundant natural resources, many SSA countries face the paradox of resource wealth impeding long-term development under weak institutional and structural conditions. Using panel data from 46 SSA countries, fixed and random effects models assess the impact of FDI inflows and natural resource rents on GDP across Eastern, Central, Western, and Southern Africa. The results show a negative and significant relationship between resource rents and GDP for the aggregated SSA sample, consistent with the resource curse hypothesis. However, subregional analysis reveals variation, with Southern Africa and other selected subregions showing positive and significant effects. FDI demonstrates a growth-enhancing role, particularly in regions where governance and policy frameworks are more conducive to investment benefits. These findings underscore the importance of context-specific policies that strengthen resource governance, promote economic diversification, and invest in human capital. Enhancing FDI-led sectors and fostering inclusive employment are essential for advancing SDG 8, unlocking SSA’s economic potential, and improving livelihoods across the continent.