The determinants of Indian FDI in Africa: A structural equation approach | Zendy

Henri Bezuidenhout | Zendy; Susanna Elizabeth Cloete | Zendy; Carike Claassen | Zendy

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The determinants of Indian FDI in Africa: A structural equation approach

Author(s) -

Henri Bezuidenhout,

Susanna Elizabeth Cloete,

Carike Claassen

Publication year - 2014

Publication title -

journal of economic and financial sciences

Language(s) - English

Resource type - Journals

eISSN - 2312-2803

pISSN - 1995-7076

DOI - 10.4102/jef.v7i3.237

Subject(s) - foreign direct investment , language change , china , corporate governance , government (linguistics) , economics , value (mathematics) , structural equation modeling , international economics , development economics , developing country , investment (military) , rule of law , international trade , business , economic growth , geography , political science , macroeconomics , politics , art , linguistics , philosophy , statistics , literature , mathematics , archaeology , finance , machine learning , computer science , law

Much has been written in economic circles about the rising investment of the BRICS countries in Africa, yet there is scant literature on the determinants of FDI from these countries to Africa, and no studies have reported on that from India. In 2012, Indian FDI surpassed that of China, making India the largest developing country that is a direct investor in Africa. This study focuses on understanding the determinants of Indian FDI in Africa using structural equation modelling (SEM), which includes factor analysis and regression estimations. The specific determinants that influence the number of Indian FDI deals in Africa include government effectiveness, control of corruption, crude oil price, school enrolment and exports. The value of the investments is influenced by government effectiveness and rule of law. We conclude that India’s increasing involvement in Africa is driven by trade and resources. It is, however, differentiated through a strong focus on good governance.

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