Foreign direct investment and transfer of environmentally sound technologies : case studies in the energy sectors of Angola and South Africa

Abstract

Foreign direct investment (FDI) has been found a very important channel through which international technology transfer takes place, especially in the context of developed and emerging countries. But very little is known on transfer of environmentally sound technologies (ESTs) through FDI in the context of Africa. This policy-science study that brings empirical evidence, conceptual clarity and interdisciplinary approaches to African policymakers and practitioners deals with this crucial issue. The main aim of this study is to explore whether FDI can be used to transfer ESTs. It examines the inflow of FDI into Angola s energy sector and the outflow of direct investments from South Africa s energy sector. It employs a conceptual framework that links government-imposed regulations and agencies, as well as international regimes, to govern the flow of FDI. It specifically analyses how two African countries use national regulations, agencies and international relations to influence FDI for the purposes of the transfer of ESTs. In the case of Angola, it looks at FDI inflows and the transfer of ESTs into the energy sector; while in the case of South Africa, the focus is on the transfer of ESTs out of the sector to other African countries, in particular Uganda. The study produces two main findings. First, Angola uses its national legal and policy framework and institutions to regulate FDI flows for the purposes of acquiring ESTs in the energy sector. It specifically does so through employing structural power to invoke sovereignty principles and implementing these through particular institutions, as well as effectively interacting with international regimes. Second, South African does not purposely promote transfer of ESTs through outward FDI to other African countries, such as Uganda. One of the key conclusions of the study is that host countries (recipients) of FDI can invoke sovereignty principles enshrined in various national policy and legal frameworks, and deploy international relations to attract FDI-carrying ESTs. The two key recommendations from this study are as follows. First, African policymakers and practitioners should shun a reductionist approach to FDI and start viewing FDI as a multidimensional bundle of resources that can contribute in a multifaceted manner to sustainable development. Second, further policy-science researches that generate empirical evidence for African policymakers and practitioners engaged in international negotiations and programmes on FDI and technology transfer as well as sustainable development should be encouraged.