Abstract:

Asia has emerged as one of the most successful continents to attract foreign investors from around the world.  Its success has been attributed to its ability to enhance its competitiveness at country, sub-regional and continent-wide levels.  In each level, investment policies are set out with the mindset that Asia is open for business and the creation of investment friendly environment.  However, in Africa, while there may be individual country investment policies, there is no continent-wide investment strategy to enhance its competitiveness.  The purpose of this paper is to investigate whether Sub-Sahara Africa’s (SSA) inability to attract sufficient foreign direct investment (FDI) relative to other continents is as a result of its lack of competitiveness and to recommend a regional investment policy that will increase its competitive edge.  It is argued that there is a strong correlation between SSA’s competitiveness and FDI on the one hand and effective regional policy to enhance its competitiveness on the other. Using ordinary least squares (OLS) and fixed effects (FE) analysis for 36 African countries from 1970-2014, results obtained reveal that contrary to expectations, SSA’s competiveness is a significant driver for greater FDI inflows in addition to increase in market share, per capita GDP and its abundant natural resources.  However, a critical analysis of the data further shows that relative to West African region, the Central African region witnessed low inflows throughout the period under review while South African region witnessed higher significant inflows between 1980 and 1989. The conclusion establishes the need for an SSA Investment Board, the development of a common investment policy, and the introduction of regional investment zones in order to create an investment friendly environment for equal regional development.