An analysis of statistics on foreign direct investment (FDI) inflows reveals that some
countries in sub-Saharan Africa (SSA), which are heavily endowed with natural
resources and have internal conflicts, have managed to attract significant FDI. This
study sought to determine whether it is possible that, for the same countries with
weak institutions, some foreign investors can be attracted to invest in them while
others are systematically repelled. We found that weak institutions are favourable
to FDI inflows into the extractive sector, while they crowd out FDI into other sectors.
Thus, resource-rich countries do not need institutional reforms to attract FDI.