Impact of FDI on GDP: A Comparative Study of Mozambique and South Africa

Abstract

Foreign Direct Investment (FDI) is regarded as vital injections incentive to the Mozambique and South Africa countries to improve and accelerate the economic growth. A few studies have been made in these two countries.  This paper used yearly secondary data of Mozambique and South Africa covering the period1996-2014 to examine the effects of FDI on Gross Domestic Product (GDP). The variables used in this analysis are GDP is used as a dependent variable while Total Labour Force, human capital and Gross Fixed Capital Formation variable were regarded as independent variable.  By using ordinary Least Square method of regression, the results from regression shown FDI is not significant but have positive relationship with economic growth for Mozambique. While for South Africa, FDI and total labour force is significant at the 10% level but have negative and positive relationship respectively with economic growth. It is important for both countries to improve its sectors of electricity supply and logistics and its business climate as well as to improve the governance in order to maintain a long run economic development and growth.

Keywords: Foreign direct Investment, GDP, Least Square method, Mozambique, South Africa.