Natural Resource Rents, Chinese Financing and Sustainable Economic Growth nexus in sub-Saharan Africa

Abstract

Sub-Saharan Africa (SSA) has abundant natural resources and attracts substantial investment, especially from China, but sustainable growth remains limited. This study examines the persistent disconnect between resource wealth, foreign financing, and long-term economic performance in the region. Using 20 years of panel data from 31 SSA countries, we estimate seven econometric models — including fixed effects, dynamic panels, and instrumental variables (IV) — to assess the long-run impact of natural resource rents, Chinese investment, trade flows and foreign direct investment (FDI) on GDP growth. Exports are consistently associated with stronger economic growth. By contrast, Chinese investment does not show a robust effect across specifications. Natural resource rents have a weak or no correlation with growth, but become significant in the IV model, suggesting that their impact is mediated by institutional quality. Imports are negatively or insignificantly associated with growth until endogeneity is addressed, after which their effect turns positive indicating the importance of trade efficiency. FDI consistently correlates with lower growth, pointing to problems such as capital flight or extractive investment practices. This study challenges the assumption that Chinese finance and resource abundance are driving development in SSA. The findings highlight the critical role of effective governance, transparent resource management, and coherent trade and investment policies. Policymakers need to align external finance and natural resource use with institutional reforms to promote sustainable growth.