Determinants of floricultural FDI in Kenya and Uganda

Abstract

Many studies have been carried out about the importance of foreign direct investment (FDI) for national economies and the determinants of these investments. In the mainstream FDI literature macroeconomic factors as infrastructure, human capital and market size have received the attention. Also policy factors play a major role in the investment climates of countries. For these reasons Africa is an ignored continent by foreign investors. However, there are types of investments or sectors where the mainstream determinants do not dominate. This study is an example. It has been focused on a specific sector on this continent; the floricultural sector in East Africa. The most important outcome of this study is that the floricultural sector is a climate-based sector and that the unique climate circumstances in East-Africa is the leading factor of the constellation of determinants causing the locational advantage of East Africa. Other constraints, common in Africa, can be handled or by-passed. Also the increasing ease of transportation makes remote product locations possible, even in the ‘dark continent’ of Africa. This study is an eye-opener that firm/sector specific determinants can cause an unexpected synergies between sectors and countries; in this case the floricultural sector in East Africa.