The linkage between foreign direct investment and economic growth : a comparative case study of Kenya and South Africa

M.A.All countries compete to attract a larger share of FDI inflows. Developing countries, especially in Africa, receive a relatively small share of FDI inflow. Furthermore, the FDI inflows that Africa receives are concentrated in a small number of countries. While FDI is regarded as the engine for growth, some studies have even shown a weak and unstable relationship between FDI and growth in Africa, with wide variations between African countries. Against this backdrop, this study aims to determine why developing countries benefit differently from FDI. To achieve this aim, a comparative case study between South Africa and Kenya was conducted. This study focused on the institutions responsible for providing linkage support to both new and existing foreign direct investors in South Africa and Kenya. It argues that institutions assist countries to adopt and absorb technologies introduced in domestic economies by foreign investors. In this light, the research attempted to compare the best practice to actual practice of the institutions in South Africa and Kenya. At the end of the research process, it was discovered that even though South African institutions have challenges, they perform better than their Kenyan counterparts because they are well-funded and receive strong support from the South African government