This article uses a cross-country econometric approach to identify the determinants for foreign direct investment (FDI) in Africa. The contribution is 3-fold. Firstly, we recognize that the estimation techniques used elsewhere, such as ordinary least squares, may be flawed. We therefore use a dynamic one-step generalized method of moments (GMM) estimator due to Arellano and Bond (1991). The GMM-estimates identified a number of robust determinants of FDI, namely government consumption, inflation rate, investment, governance (political stability, accountability, regulatory burden, rule of law) and initial literacy. It is concluded that geography does not seem to have a direct influence on FDI flows to Africa. Neither market-seeking nor re-exporting motives of FDI seem to dominate, with different policy instruments being significant in the different specifications. This does not discount the importance of good policies, but probably indicates the importance of good policies made by good institutions. Institutions, in the form of political stability showed up as a significant determinant of FDI.

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Recent research has identified what determines local exports and what policies might make them grow. Regions with higher Gross Domestic Product per capita, faster population growth, higher levels of skills, greater export diversification and shorter distances to ports have experienced faster export growth. However, the results of regression models apply to a theoretical representative region and do not allow one to establish where policy interventions will be most effective. This article constructs an index to identify the regions in South Africa that can export manufactured goods. It draws on the literature of the determinants of exports for indicators of the capability (or potential) to export across 354 magisterial districts in 1996 and 2001. The results show a positive relationship between export capability and export performance. The article identifies a number of front-runner magisterial districts along with those of high capability but low performance that stand to benefit most from industrial policy interventions.Export capability, export performance, subnational regions, South Africa,