Dr. Francois Wehncke, Prof. Dr. rer. pol. habil. Heinz Eckart Klingelhöfer

Abstract

This study investigates the intricate determinants of Foreign Direct Investment (FDI) in 54 African countries, focusing on the roles of political stability, natural resource endowments, and property rights-based governance quality. Employing a longitudinal research design and panel data analysis with the World Bank’s World Development Indicators from 2012 to 2022, the research explores how these factors influence FDI across diverse socio-economic landscapes. The findings reveal that political stability is pivotal in attracting FDI, underscoring the importance of a stable and transparent political environment and effective governance. Natural resource rents exhibit a dual-edged nature, attracting FDI but potentially hindering sustainable economic development. Detailed econometric analyses, including the Random-Effects model application and cointegration tests, illustrate the complexity of fostering an investment-conducive environment in Africa. The study concludes that integrated strategies addressing political, economic, and governance dimensions appear to be crucial. Recommendations for policymakers include enhancing political stability, effectively managing natural resources, and strengthening property rights to improve the continent’s attractiveness to foreign investors.