africa

Africa at a Fork in the Road: Taking Off or Disappointment Once Again?
patterns, there is no doubt great uncertainty about the performance of the economies
of donor countries, and therefore future aid flows may at best be described
as uncertain. Clearly, the potential adverse effect of the financial crisis on future aid
flows to SSA suggests that FDI is likely to be more crucial to the region—as a tool
to fill the resource gap, generate growth, and alleviate poverty.
Figure 23.1: Net Foreign Direct Investment Flows to SSA, 1980-2010
(constant 2005 US$, millions)
Source: World Bank (2011) and calculations by authors.
The potential positive effect of foreign direct investment on the host country’s economy
is well articulated in UNCTAD (2002: 5), which notes that:
Foreign direct investment contributes toward financing sustained economic growth
over the long term. It is especially important for its potential to transfer knowledge
and technology, create jobs, boost overall productivity, enhance competitiveness
and entrepreneurship, and ultimately eradicate poverty through economic growth
and development.
Fortunately, FDI to SSA has increased substantially since 2000 (Figure 23.1).
From 2000-09, net FDI inflows to the region increased by about 259 percent in real
terms—from US$81 million in 2000 to about US$259 million in 2009 (WDI, 2011).
An important question is whether countries in SSA will reap the potential positive
externalities generated by FDI. We discuss this issue in detail in Sections 1.4 and 1.5.
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