How effective are fiscal incentives to attract FDI to sub-saharan Africa?

Abstract

Given the role of foreign direct investment (FDI) in the development process, one of the most important challenges facing Africa is how to attract FDI. A number of attempts which have been made have been unsuccessful because of various factors that work against the business environment for FDI. Africa’s image as a high-risk investment region has to be dispelled, as the flow of FDI is highly sensitive to economic and political risks. Fiscal incentives, the most popular instrument for attracting FDI in Africa, have failed to deliver the expected increase in FDI inflows. What is needed is political and macroeconomic stability at the national and regional levels, property rights protection and other investment-supporting regulations and improvements in infrastructure and service support systems.