Regional Perspective on Aid and Fdi in Southern Africa

Regional Perspective on Aid and Fdi in Southern Africa

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Int Adv Econ Res (2009) 15:310–321 DOI 10.1007/s11294-009-9232-9

A Regional Perspective on Aid and FDI in Southern Africa
Henri Bezuidenhout

Published online: 2 August 2009 # International Atlantic Economic Society 2009

Abstract During the last decade international aid flows diminished while Africa’s relative share of global foreign direct investment (FDI) declined. This went together with lacklustre growth and low human development levels. In 2005, the G8 countries announced that they would increase aid to Africa by some $25 billion per annum. The pledge for increasing aid seems to have triggered an extensive debate about the role of aid and other international capital flows in the development of poorer countries. This study contributes to this debate. Specifically it addresses the role of foreign direct investment and aid to growth and human development. Panel estimations are used to determine the relationships between aid, FDI and growth in the Southern Africa region from 1990 to 2005. Negative relationships are found between FDI and growth while aid and growth turned out to be unrelated. Keywords Foreign direct investment (FDI) . Aid . SACU . SADC . South Africa . Growth . Human capital development . Regional integration JEL F15 . F21 . F35 . O15 . O19

We have agreed to double aid for Africa by 2010. Aid for all developing countries will increase, according to the OECD, by around $50bn per year by 2010, of which at least $25bn extra per year for Africa (Excerpts from Chair’s summary, Gleneagles G8 Summit July 8, 2005)

H. Bezuidenhout (*) North-West University, Potchefstroom, South Africa e-mail:

A Regional Perspective on Aid and FDI in Southern Africa


Introduction The debate regarding the contribution of aid to development and growth in Africa is highly emotive with many opposing views and diverging empirical results. Extending the debate to cover foreign direct investment raises more questions as to...

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