Foreign Direct Investment, Demand-driven and Structural Factors at Play in Africa

Abstract To African developing countries seeking to attract and keep foreign investors, this paper suggests that FDI is predominantly demand-driven. To evidence this hypothesis, we reviewed four critical theories and used for application, a sample of twenty-one (21) middle income countries (MICs) in Africa. The data covers the period 1990-2017. Net FDI inflow (% of GDP) has been used as the dependent variable. By employing the Feasible Generalized Least Squares (FGLS) method, we found that it’s only through FDI active policy conducts that a country can become preferred target for foreign firms. In practice, our findings imply that liberalization through facilitating trade measures, political reforms, skill upgrading for industrial requirements, infrastructure development, and government discipline need further improvement to create an appropriate, accessible and a secure environment for all investors.