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<p>This paper examines the effects of Foreign Direct Investment (FDI) on the productive transformation of Sub-Saharan African (SSA) economies. Using a sample of 47 countries observed over the period 2000–2020, we estimate a panel data model of productive transformation using the two stages least squares (2SLS) technique. Overall, the results show that FDI contributes significantly to the productive transformation of the economies considered. The benefits do not accrue mechanically and evenly across countries. They are driven by factors such as human capital, physical capital and governance, playing a mediating role. However, the effect is countered by the poor quality of governance. The results remain globally stable when controlled for the different dimensions of FDI and indicators of productive transformation. Moreover, they remain robust to the use of competing estimators. We suggest an improvement in the quality of governance. Addressing this challenge is crucial to attracting more FDI and maximizing its effect on productive transformation in SSA countries.</p>

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Foreign Direct Investment and Productive Transformation in Sub-Saharan Africa: Effects and Transmission Channels

  • 期刊论文

  • 发表日期：

    2026年4月1日

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  • Augustin Ngomsi

摘要

This paper examines the effects of Foreign Direct Investment (FDI) on the productive transformation of Sub-Saharan African (SSA) economies. Using a sample of 47 countries observed over the period 2000–2020, we estimate a panel data model of productive transformation using the two stages least squares (2SLS) technique. Overall, the results show that FDI contributes significantly to the productive transformation of the economies considered. The benefits do not accrue mechanically and evenly across countries. They are driven by factors such as human capital, physical capital and governance, playing a mediating role. However, the effect is countered by the poor quality of governance. The results remain globally stable when controlled for the different dimensions of FDI and indicators of productive transformation. Moreover, they remain robust to the use of competing estimators. We suggest an improvement in the quality of governance. Addressing this challenge is crucial to attracting more FDI and maximizing its effect on productive transformation in SSA countries.