Stateness as a Determinant of FDI Inflows in Sub-Saharan African Countries

This paper argues that stateness, as defined by “the capacity of the state to exercise its fundamental functions” and maintaining a monopoly on the use of force, is a major determinant of FDI inflows in SSA countries. Through using the independent variable of stateness, which will be qualified and measured using various indicators, and the dependent variable of foreign direct investment, net inflows (BoP, current US$), this paper will use data from five SSA countries (South Africa, Ghana, Tanzania, the Central African Republic, and Somalia) to demonstrate a correlation and causation from state capacity to FDI inflows. The years examined for data purposes are 2008 (sometimes earlier when necessary) until the most current year available in order to align with the 2008-2017 timeframe provided by the Mo Ibrahim Index of African Governance. This paper will investigate five causal mechanisms of stateness, explain how they are functions of stateness and affect FDI inflows, and then correlate the data and statistics of the mechanisms with the respective countries’ data and statistics regarding FDI inflows. These results show that states with stronger state capacity receive higher FDI inflows, ultimately confirming the hypothesis that high levels of stateness correlate with high levels of FDI inflows (and the converse of low to low).

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