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Working Paper
Foreign Direct Investment in Emerging Economies
Lessons from Sub-Saharan Africa
This paper analyses prospects for foreign direct investment (FDI) in Africa. The problems with regard to attracting FDI in small economies are not that different than those in larger economies in the developing world. In particular, lack of infrastructure, cumbersome government regulations and restrictions on equity holdings by foreigners are common to both large and small countries. FDI flows could be a lot higher in sub- Saharan Africa if governments implemented a proper set of regulations that enabled investors to do business in a fair and consistent manner. In small countries, a single large project can be very significant in terms of raising interest in FDI. For example, Mozal in Mozambique has given the country greater visibility in the international arena. Also, if a small country is able to successfully implement a large project, it establishes itself as a credible host for FDI, thereby attracting further investment and employment.