The dimensions of FDI in the tourism sector in Africa

Abstract

The tourism sector in Africa has received an increasing focus as it is viewed to be a fast growing sector and a potentially substantial provider of employment. With increasing numbers of tourists from developing countries the sector is set to become a major contributor to the African growth story through higher standards of living and positive effects on the economy. Little is understood of the contribution of multinational tourism enterprises and whether their investments are affecting the much acclaimed story of increasing tourism to Africa. We aim to contribute to the discussion by investigating links between the tourism of African countries and inward FDI in tourism. Although datasets for African countries are mostly incomplete, at best, the changing dynamics of international data collection allows for the establishment of a baseline comparison between the tourism data of the United Nations Tourism Organisation and the FDI data of Financial Times FDI-Markets databases. We find that, not only, does FDI in tourism positively affect the various tourism categories' figures but also that the main investors are not the traditional African FDI partners. FDI in tourism is also focussed on a narrow band of highly specialized tourist destinations, which allows for highly specialized policy adaptations. These results help to focus FDI policy formulation by African governments and Investment Promotion Strategies, Investment Incentives and Bilateral Investment Agreements between home and host countries as well their respective Investment Promotion Agencies. The results may also help industry to understand the untapped potential for tourism FDI in Africa.