The Influence of Economic Reforms and Private Sector Development Initiatives on Financial Foreign Direct Investment Inflows into Sub-Saharan Africa: Insights from Ghana

Abstract

African governments have undertaken several economic reforms in order to liberalise their financial sector. Our main purpose is to investigate how financial sector reforms and private sector development initiatives have influenced financial FDI inflows into sub-Saharan Africa and present strategic ingenuities to address these issues. A case study method was adopted to examine the reasons that caused financial MNCs to choose Ghana as an investment destination and to measure which factors affect their current operations. The study employed in-depth interviews to identify how the environmental factors are affecting or supporting their business operations in Africa. The focus of the study has an inevitable bias towards respondents in various regulatory agencies, government institutions and managers of financial MNCs who are directly involved in making investment decisions that affect financial FDI inflows into Ghana. Despite the far reaching reforms, the study finds that there are several structural constraints and deficiencies placed on financial MNCs which affect the size of business they can conduct and their future investment decisions. The findings of these studies have ranged from organisational to environmental factors. Overall, the financial sector reforms in Africa did not deal sufficiently with the structural and institutional problems confronting the financial system as they focused primarily on policy matters. One of the major issues prior to the reforms was fragmentation of the system and the reform was not designed to remedy that; hence the low financial FDI inflows to Ghana in particular and Africa in general.

Keywords: Foreign direct investment (FDI), reforms, multinational Corporations (MNCs), environmental factors, institutional factors,