INVESTIGATING THE IMPACT OF FOREIGN DIRECT INVESTMENT ON POVERTY REDUCTION EFFORTS IN AFRICA

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Published: 06-12-2018

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Kunofiwa TSAURAI
Associate Professor, Department of Finance, Risk Management and Banking, University of South Africa. Address: P.O. Box 392, UNISA 0003, Pretoria, South Africa
South Africa
Vol 27 No 2 (2018), Articles, pages 139-154
DOI: https://doi.org/10.15304/rge.27.2.5664
Submitted: 06-12-2018 Accepted: 06-12-2018 Published: 06-12-2018
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Abstract

The study explored whether the complementarity between foreign direct investment
(FDI) and natural resources availability led to poverty reduction in Southern and Western
African nations using panel data analysis (fixed effects, random effects, pooled ordinary
least squares (OLS) and dynamic generalised methods of moments (GMM) with data
spanning from 2002 to 2012. The objective emanates from the theoretical view that if the
countries that are receiving FDI have abundance of natural resources, a large number of
the unemployed people are likely to get jobs, earn income and get out of poverty zone.
Three measures of poverty were used in the current study, namely life expectancy at
birth, total (years), household consumption expenditure as a ratio of gross national
product and mortality rate and infant (per 1 000 live births). Generally, all the four panel
data analysis methods produced similar finding: the interaction between FDI and natural
resources reduced poverty levels in African countries studied. Southern and Western
African nations are therefore urged to implement FDI enhancement policies which attract
foreign investors into the natural resources extraction sector if they want to sustainably
reduce poverty. Future studies should investigate other macroeconomic factors that must
be available in the host country before FDI reduce poverty in all its forms.

Keywords:

FDI, Natural Resources, Poverty, Panel Data Analysis, Africa
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