Locational Determinants of US Outward FDI into Sub-Saharan Africa

This paper uses panel data techniques to investigate the locational determinants of US outward foreign direct investment (FDI) into 23 countries of Sub-Saharan Africa (SSA) for 1996–2010. The findings revealed that US outward FDI into SSA is influenced by the availability of crude oil and natural gas, infrastructure development, market size and completion rates in primary education. Conversely, labor force (of those aged 15+) and inflation deter US FDI, while political instability, corruption, and the exchange rate have an insignificant negative relationship with US FDI. These findings suggest that US investors investing in SSA are significantly influenced by resource and market seeking factors but not by efficiency seeking factors. The study therefore suggests that credible policies for attracting US investors into SSA countries should be relentlessly pursued through education, training and skills acquisition, inflation targets, trade openness (especially in the natural resource sector), corruption control and political stability.