An investigation into the socio-economic impacts of foreign direct investment (fdi) in Africa : a case study of Botswana

Abstract

The main aim of this research was to investigate the socioeconomic impacts of Foreign Direct Investments in Africa: A case study of Botswana. Foreign Direct Investments (FDI) in very simplistic terms is defined as the flow of long-term investment resources from foreign residents or firms, into another country with the purpose of having management control. This research found out that Botswana stands out clearly as a very attractive destination for FDI in Africa due to its relative political stability, favourable tax and foreign exchange policies among others. Moreover, it was established that FDI inflows to Botswana are principally championed by the diamond mining industry and the financial sector. More importantly, the research found out that FDI has had a number of beneficial impacts in Botswana. These include an increase in commercial and trading opportunities throughout the country; innovations in cellular technology and significant benefits in the education, health care and housing sectors among others. However, the study also found out that in spite of some of the above outlined benefits of FDI, Botswana also bears significant costs resulting from FDI. Some of these include: retardation in

the growth of local economic activities, lack of integration of foreign enterprises into the local economy; inadequate participation of indigenes in the economy of the country among others. Based on these findings, a number of recommendations were made which include: targeting FDI to needy sectors specifically the manufacturing sector; effective regulatory mechanisms; and moves by the government to alleviate the infrastructure and skill in the country so as to effectively capture knowledge spill-overs from FDI.