Assessing the impact of Foreign Direct Investment on Societal Development in Sub-Saharan African countries
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This research investigates the impact of Foreign Direct Investment (FDI) on societal development in a select group of Sub-Saharan African countries. Historically, FDI has played in important role in economic growth for developing countries and competitive advantages for companies. Recent trends have shown returns on FDI become diminishing once certain economic thresholds are met, leading to a shift in FDI targets. Therefore, this research aims to understand how FDI in Angola, Democratic Republic of Congo, Ethiopia, Ghana, Kenya, Nigeria, Rwanda, Tanzania, and Zimbabwe affects societal development, measured by the Human Development Index (HDI), between 1996 and 2021. Current literature indicates the importance of institutional quality on economic growth in the specified countries, and how this affects FDI inflows. Despite the varying, yet high yields from FDI, current research is inconclusive about the effects of FDI on HDI and what drives the two. Especially in the absence of high-quality institutions the effects are difficult to observe. To address the arising research gaps, this study employs panel data linear regression analysis to examine the relationship between FDI and HDI. The results indicate that there is a strong positive relationship between FDI and HDI, while increasing quality of institutions hinder the societal development from FDI. Additionally, the Cobalt mining activities in the DRC are found to have no significant effect as an economic driver on FDI. The findings provide information to policymakers and investors about effective FDI in Sub-Saharan Africa in the absence of strong institutions and how such investments can improve the quality of life for local society.