The European Business Council for Africa

Does ambient infrastructural quality affect foreign direct investment (FDI) in developing countries? This paper investigates how the arrival of high-speed internet in Africa triggered FDI into the banking and technology services sectors. It also explores the role of complementary infrastructure, such as access to reliable electricity, in amplifying the impact of internet connectivity on investment. The identification strategy exploits plausibly exogenous variations in access to high-speed internet induced by the staggered arrival of submarine fiber-optic internet cables and the subsequent rollout of terrestrial fiber cable networks across locations on the continent. Findings from the paper show that access to high-speed internet induces FDI into the banking and technology sectors. However, the impact pertains mainly to countries with access to reliable electricity, thus highlighting the role of complementarities in the impact of infrastructure.


Please read the full report here