Colonial spectre and foreign investments concentration: Does African growth escape?

Ludovic Feulefack Kemmanang and Jonas Juleo Dongmo Zamke ()
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Jonas Juleo Dongmo Zamke: Department of Analysis and Economics Policies, University of Dschang

Economics Bulletin, 2021, vol. 41, issue 1, 137-154

Abstract: The concentration of foreign direct investment (FDI) on firms originating in the former colonizing country in the old African colony is the most advanced form of the control strategy that led to colonization. During colonization and 60 years later, this strategy succeeded in guaranteeing property rights' inviolability and the returns on investment of FDI from former metropolises. Yet, economic growth in Africa seems to be a miracle. This study aims to determine whether the impact of FDI differs according to the historical ties between the multinationals' home countries and host African countries and assess the sensitivity of economic growth to the decline in the prominence of FDI from the colonial powers. Data on 38 African countries between 2009 and 2018 are used to estimates a dynamic panel by the two-steps system GMM. Our study finds that the impact of FDI from the former metropolis on economic growth is negative, while the impact of FDI from other countries is positive. The political influences of the colonial powers and the incestuous relations between the host countries' political elites and the multinationals skew the competitive equilibrium and generate distortions that suck the expected benefits for growth. Our study also finds that the impact of FDI on growth strengthens as the country hosts foreign investors from the diverse origin. African countries should consider attracting more FDI from countries other than the former colonizer.

Keywords: Economic growth; FDI; colonization; historical ties; political influences; Africa (search for similar items in EconPapers)
JEL-codes: O1 O4 (search for similar items in EconPapers)
Date: 2021-03-10
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