The effects of foreign direct investment (fdi) in Sub-Saharan Africa:a case study of China's direct investment to Kenya (2000-2006) direct investment to kenya (2000-2006)

Abstract

The purpose of this study is to investigate the effects of FOI from China on the Kenya economy. FOI, in recent years, has attracted a lot of attention as one of the economic growth drivers. Both developed and developing countries have as a central component the policy of attracting FOI. This form of investment is seen as essential for jump-starting economic growth through its bolstering of domestic capital, productivity, technological transfer and employment.

Well to do countries seek to invest in places where they are assured of maximum return. This phenomenon, which for a long time was a preserve of the developed countries, has now changed and even developing countries no longer remain at seeking to attract investment only, they are also venturing to invest abroad. Such developing countries that are known to want to invest elsewhere include China, India, Brazil among others.

Developing countries have come to the realization that FOI, could after all, hold the key to fast-tracking their economic growth. The key to attracting foreign investment is the return that an investor stands to get. An investor will go any length if the returns are good. FOI in sub-Saharan Africa (SAA) yields relatively high returns. In 2002, the rate of return on FOI was highest in Sub-Saharan Africa, compared with other regions in the world, perhaps because, given perceived higher risks in the region, investors chose only high-return projects."