Foreign Direct Investment in Sub-Saharan Africa: Is Tax Obligation Still an Issue?

2020 ◽  
pp. 097215091989024
Author(s):  
Francis K. Andoh ◽  
William G. Cantah
Keyword(s):  
Foreign Direct Investment ◽  
Natural Resources ◽  
Direct Investment ◽  
Negative Impact ◽  
Practical Implication ◽  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
Significant Negative Impact ◽  
Negative Effect ◽  
Sub Saharan

This study examines the extent to which three aspects of tax obligations affect foreign direct investment (FDI) stock in sub-Saharan Africa (SSA). Using a panel of 36 countries in SSA from 2005 to 2016 and employing the dynamic system generalized method of moments (GMM) regression approach, the findings show a significant negative impact of all measures of tax obligations. However, the effect of the number of taxes and the time it takes to honour tax obligations are found to have greater negative effect. The findings show that although foreign investors are attracted by natural resources, they still care about the complicated and bureaucratic tax system. This challenges the conventional notion that FDI will always be attracted to and be maintained in Africa as long as there are natural resources. The practical implication is that reducing the number of taxes as well as the time it takes to honour tax obligations should be among the key measures for SSA economies to maintain high stock of FDI. As a contribution, this study provides an important information for the debate on fiscal environment and FDI in Africa.

Effect of Infrastructure and Foreign Direct Investment on Economic Growth in Sub-Saharan Africa

2019 ◽  
Vol 11 (3) ◽  
pp. 183-201 ◽  
Author(s):  
Edward Nketiah-Amponsah ◽  
Bernard Sarpong
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Multinational Enterprises ◽  
Generalized Method Of Moments ◽  
Business Environment ◽  
Transport Infrastructure ◽  
Sub Saharan Africa ◽  
Economic Infrastructure ◽  
Sub Saharan

This article investigates the effect of infrastructure and foreign direct investment (FDI) on economic growth in Sub-Saharan Africa (SSA) using panel data on 46 countries covering the period 2003–2017. The data were analyzed using fixed effects, random effects, and system generalized method of moments (GMM) estimation techniques. Based on the system GMM estimates, the results indicate that a 1 percent improvement in electricity and transport infrastructure induces growth by 0.09 percent and 0.06 percent, respectively. Additionally, FDI proved to be growth enhancing only when interacted with infrastructure. The interactive effect of FDI and infrastructure improves economic growth by 0.016 percent. The results suggest that public provision of economic infrastructure reduces the cost of production for multinational enterprises, thus providing an incentive to increase investment in the domestic economy to sustain economic growth. The results also suggest that the impact of FDI on economic growth is maximized when some level of economic infrastructure is available. Our findings thus provide ample justification on the need for a significant government investment in infrastructure to provide a less costly business environment for both local and multinational enterprises to improve economic growth.

Human capital threshold, foreign direct investment and economic growth: evidence from sub-Saharan Africa

2020 ◽  
Vol 19 (3) ◽  
pp. 323-337 ◽  
Author(s):  
Friday Osemenshan Anetor
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Generalized Method Of Moments ◽  
Mediating Effect ◽  
Sub Saharan Africa ◽  
Growth Effect ◽  
Content Type ◽  
Sub Saharan

Purpose The purpose of this study is to analyze the mediating effect of human capital in foreign direct investment (FDI) and growth nexus and establish the threshold of human capital in 28 sub-Saharan African (SSA) countries over the period 1999–2017. Design/methodology/approach This study used a secondary source of data obtained from the World Development Indicator and used the system generalized method of moments and dynamic panel threshold regression (TR) to analyze the data. Findings This study found that FDI and human capital have no significant impact on the economic growth in SSA. However, when the interactive term of FDI and human capital was introduced in the model, the economic growth effect of FDI became positive and significant, while the coefficient of the interactive term is negative and significant. This presupposes that SSA does not have a sufficient high-quality workforce that can absorb and transform the spillover benefits of FDI into economic growth. As a result, this study applied the TR to determine the minimum level of human capital and established a threshold level at 63.91%. Practical implications It, therefore, becomes pertinent for policymakers in the SSA region to have a human capital policy to build up their absorptive capacities to fully take advantage of FDI. Originality/value The contribution of this study lies in establishing a threshold of human capital at 63.91% for countries in the SSA region.

scholarly journals Healthcare Expenditure and Economic Growth in Sub-Saharan Africa

2020 ◽  
pp. 1-7
Author(s):  
Birhanu Yimer Ali ◽  
Robert Moracha Ogeto
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Health Expenditure ◽  
Generalized Method Of Moments ◽  
Health Sector ◽  
Sub Saharan Africa ◽  
Domestic Saving ◽  
African Countries ◽  
Sub Saharan

This paper investigated the effect of health expenditure on economic growth in Sub Saharan Africa. The linear dynamic generalized method of moments instrumental variable (GMM-IV) was used on a panel data of 38 Sub-Saharan African countries over the period 2000-2016. Findings reveal that health expenditure significantly improves economic growth in Sub Saharan Africa. The separate effects of Public and private health expenditures have also shown a significant positive relationship on economic growth. In addition to health expenditure, other determinants like gross domestic saving, foreign direct investment, and labor force brought a statistically significant improvement on economic growth, whereas official development assistance has a statistically insignificant effect on economic growth. This study concluded that health expenditure is an important element in attaining improved economic growth in Sub-Saharan African Countries as it assured a healthy workforce and the country’s populace. Therefore, increasing the amount of health expenditure allocated to the health sector yields a better economy. More on, revising policies to improve gross domestic savings and foreign direct investment also assure a better economic growth.

scholarly journals Towards the attainment of sustainable development goal 7: what determines clean energy accessibility in sub-Saharan Africa?

Green Finance ◽  
2021 ◽  
Vol 3 (3) ◽  
pp. 268-286
Author(s):  
Paul Adjei Kwakwa ◽  
◽  
Frank Adusah-Poku ◽  
Kwame Adjei-Mantey ◽  
◽  
...  
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Poverty Reduction ◽  
Random Effect ◽  
Clean Energy ◽  
Ordinary Least Squares ◽  
Policy Implications ◽  
Sub Saharan Africa ◽  
Political Regime ◽  
Sub Saharan

<abstract> <p>Access to clean energy is necessary for environmental cleanliness and poverty reduction. That notwithstanding, many in developing countries especially those in sub-Saharan Africa region lack clean energy for their routine domestic activities. This study sought to unravel the factors that influence clean energy accessibility in sub-Saharan Africa region. Clean energy accessibility, specifically access to electricity, and access to clean cooking fuels and technologies, were modeled as a function of income, foreign direct investment, inflation, employment and political regime for a panel of 31 sub-Saharan countries for the period 2000–2015. Regression analysis from fixed effect, random effect and Fully Modified Ordinary Least Squares show that access to clean energy is influenced positively by income, foreign direct investment, political regime and employment while inflation has some negative effect on its accessibility. The policy implications from the findings among other things include that expansion in GDP per capita in the sub-region shall be helpful in increasing accessibility to clean energy. Moreover, strengthening the democratic institutions of countries in the region shall enhance the citizens' accessibility to clean energy. Ensuring sustainable jobs for the citizens is necessary for access clean energy.</p> </abstract>

scholarly journals Foreign Direct Investment, External Debt, and Balance of Payment: A Causality Analysis for Bangladesh

2020 ◽  
Author(s):  
Muhammad Mahmud Mostafa
Keyword(s):  
Foreign Direct Investment ◽  
Granger Causality ◽  
Direct Investment ◽  
Negative Impact ◽  
External Debt ◽  
Causality Analysis ◽  
Causality Test ◽  
Long Run ◽  
Significant Negative Impact ◽  
Short Run

The purpose of this study is to analyze the causal relationship of external debt and balance of payment with foreign direct investment (FDI) in Bangladesh for the period of 1980 to 2017 through the application of Johansen Cointegration technique, Vector Error Correction Model (VECM), and Granger Causality approach. Results of cointegration and VECM indicate a significant long-run relationship between dependent (FDI) and independent variables (external debt and balance of payment). External debt is found to have a significant negative impact on FDI in the long-run, but it is found insignificant in the short-run. In contrast, the balance of payment has a significant positive effect on FDI both in the long-run and short-run. Results of the Granger causality test reveal that there exists bidirectional short-run causality between the balance of payment and FDI; that is, both the balance of payment and FDI affect each other. But no unidirectional or bidirectional short-run causality is found between external debt and FDI. Keywords: FDI, external debt, balance of payment, cointegration, VECM, causality

scholarly journals The Relationship Between FDI, Poverty Reduction and Environmental Sustainability in Tunisia

2018 ◽  
Vol 1 (1) ◽  
pp. p114
Author(s):  
Marwa Lazreg ◽  
Ezzeddine Zouari
Keyword(s):  
Sustainable Development ◽  
Foreign Direct Investment ◽  
Co2 Emissions ◽  
Direct Investment ◽  
Gini Index ◽  
Poverty Reduction ◽  
Negative Impact ◽  
Cointegration Test ◽  
Foreign Investments ◽  
Significant Negative Impact

Our goal in this paper is the study of the impact of FDI on poverty and sustainable development in the case of Tunisia and during the study period from 1985 to 2015. In addition, we use the test unit root of cointegration test, the model error correction of FMOLS and Granger causality. In the case of Tunisia, we find that all variables are integrated of order 1. Thus, we can use the cointegration test. Indeed, the result of the null hypothesis test of no cointegration was rejected at the 5% threshold, which explains the presence of a cointegration relationship between FDI, sustainable development and poverty. Finally, we present and interpreted the results of the estimated FMOLS model and Granger causality test to study the contribution of FDI to the poverty reduction and sustainable development in Tunisia. We find that the LIDE variable measuring foreign direct investment has a significant negative impact on the GINI index. We notice the LCO2 variable that measures the CO2 emissions has a negative and significant impact on poverty as measured by the poverty gap at $ 1.91. We prove that direct foreign investments have a significant negative impact on CO2 emissions. We find that the LIDE variable measuring foreign direct investment has a significant negative impact on the GINI index. We notice the LCO2 variable that measures the CO2 emissions has a negative and significant impact on poverty as measured by the poverty gap at $ 1.91. We prove that direct foreign investments have a significant negative impact on CO2 emissions. We found that the LIDE variable measuring foreign direct investment has a significant negative impact on the GINI index. We notice the LCO2 variable that measures the CO2 emissions has a negative and significant impact on poverty as measured by the poverty gap at $ 1.91. We prove that direct foreign investments have a significant negative impact on CO2 emissions.

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