FDI in Sub-Saharan Africa:

This study explores the role of trade openness in the attraction of Foreign Direct Investment (FDI) in Sub-Saharan Africa (SSA). FDI in this region is important because it provides the required capital for investment. In addition, FDI is believed to benefit developing countries in terms of employment, transfer of knowledge and technology, productivity, and managerial skills. The presence of trade barriers as well as policy restrictions complicates the establishment of FDI in this African region. This study answers two questions. Firstly, to what extent are structural reforms with respect to trade openness conducive in the search for increased FDI flows in SSA? Secondly, under which conditions in the host country does trade openness promote FDI in SSA? The study applied the Fixed Effects estimation method to test the time series data in the period 2001-2012. The database provides information on 36 Sub-Saharan African countries. The results indicate that increased trade openness, measured by trade intensity and specific policies, has shown to be a key determinant in the attraction of FDI in this region. Besides, countries should also improve infrastructural developemnt, as this strengthens the effect of trade openness in promoting FDI.