Natural Resource Endowments and Foreign Direct Investment Flows in Sub-Saharan African Countries

Abstract

The objective of this paper is to analyze the effects of natural resource endowment on Foreign Direct Investment (FDI) inflows in Sub-Saharan African countries. The data cover the period of 1996-2019 and are extracted from UNCTAD and World Bank databases (WDI, 2019; WGI, 2019). A dynamic model with individual effects is estimated in four partially homogeneous panels using the one-step generalized method of moments. The results obtained show that 1) forest resources have a beneficial but negligible effect on FDI inflows in Sub-Saharan Africa; 2) oil and mining resources have significant and negligible adverse effects on FDI inflows in Central Africa and West Africa, respectively; and 3) oil and mining resources, in contrast, have significant and negligible positive effects on FDI inflows in Southern Africa and East Africa, respectively. Regarding the development of the forestry industry in Sub- Saharan Africa, the strengthening of political stability and control of corruption in Central and West Africa and the strengthening of corruption control in Southern and East Africa are the main economic policy implications.