Foreign direct investment (FDI) holds significant potential for unlocking value chain participation and driving economic transformation, particularly in low-income African countries. This study examines the impact of both inward and outward African greenfield investment on Africa’s regional and global value chain integration between 2003 and 2022 using a gravity-type framework. The analysis reveals a positive association between inward extra-African investment in North African manufacturing and host countries' forward GVC participation. Similarly, outward Sub-Saharan African investment in services correlates positively with GVC engagement. These findings highlight FDI's crucial role in fostering value chain linkages, suggesting policy actions like the AfCFTA to reduce investment barriers and promote economic growth and structural transformation across Africa.
STEG Project Policy Brief
• Research Theme 0: Data, Measurement, and Conceptual Framing,
Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy,
Research Theme 4: Trade and Spatial Frictions,
Cross-Cutting Issue 3: Inequality and Inclusion
Can FDI Lead to GVC Integration? Evidence from African Economies
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