ABSTRACT
The regional integration process in Africa is increasingly becoming fundamental in the promotion of intra-African foreign direct investment (FDI). Intra-Africa foreign direct investment has been on the rise in the past five years (Ernst and Young 2012). South Africa is expanding investment beyond its borders to other African nations but its recent muted growth limits this expansion (Kedir 2013). Regional economic integration can expand Africa’s market access, attract intra-regional FDI flows, enhance private sector activities and increase potential economies of scale for investing firms. It is believed that harmonization of regional policies and infrastructures projects will hasten regional integration by increasing market openness and capital flows, which in turn could stimulate trade and investment among African states, the movement of productive resources and the interaction of people. Given the fact that Africa is endowed with natural resources (both renewable and non-renewable) coupled with recent discoveries in different countries, if it continues to pursue appropriate economic policy reforms backed by effective policy implementation, political goodwill, sustained investment in infrastructure, maintain peace and security, there is a huge potential to attract increased regional FDI. This call will elucidate the potential of regionalism and regional economic communities (RECs) in fostering intra-African FDI. The chapter will discuss the conditions necessary for Africa to boost intra-regional FDI and explore the effect of regionalism on investment strategies by the private sector from within but also outside Africa. Building on previous work, 1 we will highlight the current state of African inward FDI using dynamic panel models for selected African countries and examine the trends and issues surrounding intra-Africa FDI. In recent years, the encouraging development within Africa and the presence of growing emerging economic partners outside Africa (e.g. China, India, Brazil, Turkey) is diversifying the sources of capital inflows (UNCTAD 2013; AfDB 2011; McKinsey Global 2010).
