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Evidence From Planned Investments in Africa

There is an increasing attention to the food and beverage sector in Africa and the significance of foreign direct investment (FDI) in it. Though agriculture and agri-business have been recognized to have the highest potential for FDI, the actual FDI in the sector remains low in comparison to other regions. This article explores the factors that determine FDI in the food and beverage sector in Africa and the extent to which policymakers can enhance their country’s attractiveness to foreign investors. The study finds that a well-performing and well-capitalized agricultural sector in the host country is a key factor associated with foreign direct investment (FDI) location choice, especially for investors from the Global North. Capital investment in agriculture, public investment in agriculture, and official development assistance are also associated with higher FDI. However, these factors are not significant in the least developed countries where market potential is the most important factor for foreign investors. The study suggests that policymakers should prioritize agricultural sector development to attract FDI in the food and beverage sector.