Greenfield FDI and job creation in Africa

Abstract

Foreign direct investment (FDI) can potentially contribute to the structural trans- formation that will create jobs for Africa's young and underemployed workforce. Yet, surprisingly little is known about the direct and indirect employment effects of greenfield investment, the most common form of FDI on the continent. We address this knowledge gap by constructing a comprehensive, Africa-wide project-level da- taset on greenfield FDI for the period 2013 to 2020, combining information from the two leading commercial databases of project-level greenfield FDI, fDi Markets and Orbis Cross Border Investment. Based on this novel publicly available dataset, we show that there is little overlap in the projects covered by the two databases, implying that the total number of greenfield FDI projects in Africa is much larger than suggested, for example, by UNCTAD's flagship World Investment Report. Descriptive analyses based on our database and ILO employment data suggest that direct job creation in greenfield projects may be an important driver of formal em- ployment creation in services and manufacturing in selected countries. However, direct greenfield job creation is small relative to total job creation, and indicative correlation regressions even hint at potential crowding-out of formal employment in domestic firms.