Examining Foreign Direct Investment effects on agricultural productivity in Sub-Saharan African economies

Spillover effects of Foreign Direct Investments (FDI) in developing countries have been theoretically linked to productivity enhancement through knowledge transfer. In Sub-Saharan Africa, where agricultural productivity remains persistently low, these potential spillovers could be critical for poverty alleviation and economic structural transformation. This study provides a novel empirical investigation of FDI inflows to agriculture in Sub-Saharan African countries, examining their impact on agricultural total factor productivity (TFP), as well as labor and land productivity. Leveraging a unique dataset compiled from official statistical sources, the research measures FDI in monetary terms—an approach that provides methodological advantages over traditional area-based investment measures. Employing a fixed effects framework and addressing potential endogeneity through a System Generalized Method of Moments (System GMM) approach, the analysis reveals complex findings. While the empirical results demonstrate statistically significant positive effects of FDI on total factor productivity, impacts on land and labor productivity remain insignificant. These findings suggest limited technology transfers and underscore the necessity for context-specific policy interventions, emphasizing that foreign investments are not universally beneficial and require careful, targeted evaluation.