Foreign Direct Divestment Phenomenon in Selected Sub-Saharan African Countries

Ombeswa Ralarala and Masenkane Happiness Makwala

A chapter in Macroeconomic Analysis for Economic Growth from IntechOpen

Abstract: Foreign direct divestment can occur for either external or internal factors. The determinants of FDI are also the same determinants for FDD. FDD might lead to numerous negative economic factors such as a decline in economic development, reduction in employment and might also cripple the facilitation in technology transfers. In this paper, the FDD concept in the Sub-Saharan African countries was investigated using annual data spanning from 1998 to 2018. The panel autoregressive distributive lag was used to develop the FDD model. The findings of the panel ARDL long run equation revealed that lending rates and urbanisation have a negative and significant influence on foreign direct investment. Further, the findings revealed an insignificant influence of real gross domestic product per capita on FDI. Finally, trade openness showed a positive significant impact on foreign direct investment. We recommend policies that increase FDI through the cost of borrowing since increasing this results in foreign direct divestment. Real gross domestic product per capita cannot be used for policy making purposes in the study. Trade openness makes a country more accessible on the world market and thus, policies that promote foreign trade such as exporting complex and sophisticated products, trade liberalisation, free trade agreements and open trade systems could help reduce the presence of foreign direct divestment in the selected countries. Finally, urbanisation deter foreign direct investment, therefore countries should invest more on infrastructure and reduce poverty in rural areas to transform them into urban areas to decrease urbanisation.

Keywords: foreign direct divestment; panel autoregressive distributive lag; Sub-Saharan African countries (search for similar items in EconPapers)
JEL-codes: O40 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ito:pchaps:250678

DOI: 10.5772/intechopen.100304

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