Foreign Direct Investment in Africa – Does Human Capital Development Matter?

The aim of this study was to examine the effect of human capital development on foreign direct investment (FDI), using a panel of nine African countries, during the period 2009 -2016. Building on from the eclectic paradigm, the results from the random effects model show that human capital developmen...

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Bibliographic Details
Published inEuroEconomica Vol. 38; no. 2; pp. 33 - 42
Main Author Makoni, Patricia Lindelwa Rudo
Format Journal Article
LanguageEnglish
Published Galati Danubius University Press 2019
Editura Universitară Danubius
Universitatea Danubius Galati
Subjects
Accumulation
Capital formation
Competitive advantage
Cost control
Developing countries
Economic development
Economic growth
Economic models
Education
Efficiency
Employment
Foreign exchange rates
Foreign investment
Host country
Human capital
Infrastructure
International finance
LDCs
Macroeconomics
Multinational corporations
National Economy
Natural resources
Productivity
Random effects
Secondary schools
Skill development
FDI
human capital development
Africa
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Summary:The aim of this study was to examine the effect of human capital development on foreign direct investment (FDI), using a panel of nine African countries, during the period 2009 -2016. Building on from the eclectic paradigm, the results from the random effects model show that human capital development positively influences inward FDI, and that the relationship is statistically significant. Other FDI determinants that emerged were real exchange rate that was positive and very significant at 1%, while the lag of FDI and infrastructural development were positive and significant at 5%. In light of these findings, we therefore recommend that host countries promote the attainment of secondary school education and post-school skills in order to enhance the attraction of host countries to FDI inflows. This was also reiterated at the recent World Economic Forum (WEF)in Davos. The fourth industrial revolution will see the automation of many previously manually done operations requiring an upskilling of human capital. Further to this, they should ensure that their investment and macroeconomic policies are suitable to ensure capital accumulation, which will spur productivity and increase employment. As such, we can confirm that indeed human capital development matters for African economies.
ISSN:1582-8859
1582-8859