Foreign Direct Investment in Anglophone and Francophone African Countries

Abstract

Foreign Direct Investment plays a very significant role both in the economic and social development of a country. Its potential benefits to developing countries has increased in recent years. The main objective of this paper is to examine the determinants which can attract or deter Foreign Direct investment in Anglophone and Francophone African countries. We used Panel Data from 37 countries covering the period 2004-2012. Results from a Hausman test indicated that the Random effect model is appropriate in performing the estimation. The regression results show the strength to protect investors, the time required to start business, human resources, domestic credit to private sector have significant influence on FDI. We also employ interactive variables, allowing for interaction effect between time required to start a business and strength to protect investors. Further, interaction effect is allowed between electricity production and economic growth. The results indicate that the interactive variables have a great influence on FDI inflows to these countries. Electricity production is still a big challenge for most Anglophone and francophone countries. We suggest that African governments should direct their efforts towards production of power in order to maintain the long-run sustainability of FDI in Anglophone and Francophone African countries.