THE GEOGRAPHICAL DETERMINANTS OF FOREIGN DIRECT INVESTMENT INFLOWS TO THE SOUTHERN AFRICAN DEVELOPMENT COMMUNITY (SADC) REGION

Abstract

The present study explores whether geographical factors play a significant role in the determination of foreign direct investment (FDI) inflows in Southern Africa Development Community (SADC) countries. The study uses panel data of 15 SADC countries during the period of 2000-2011. To explore the determining factors, the study uses a one-step System GMM in the estimation process. The results of the study show that geography, particularly geographical variables such as agglomeration, land area (size of the country), urban population and being resource rich play a significant role in determining FDI inflow. The study has also shown that there is a significant difference between FDI inflow going to land-locked countries and coastal-based countries in the SADC region. These results have a number of policy implications for the SADC region.