Trade openness, foreign direct investment and sustainable agriculture in Africa

Abstract

This study applied a panel data of 37 African countries in examining the impact of trade openness and foreign direct investment on sustainable agriculture towards the attainment of the United Nation (UN) Sustainable Development Goals (SDGs), especially, SDG-2, with the aim of ending extreme hunger, achieve food security and improve nutrition and promote sustainable agriculture. Data for the study was sourced from the Country Policy and Institutional Assessment (CPIA) and World Development Indicators (WDI) of the World Bank, for the period 2005-2019. To control for endogeneity, the study engaged the system Generalised Method of Moments (GMM). The result shows that FDI and trade openness have significant negative impact on agricultural sustainability in Africa. This result implies that, increase in FDI may decrease agricultural sustainability by 0.00294%, while increase in trade openness may lower agricultural sustainability by 0.430066 %. Therefore, the study concludes that while trade openness is negative, policy to raise local production towards export promotion should be encouraged. In addition, FDI should be encouraged to augment local employment and investment towards increasing output and productivity in the Africa region.