Energy consumption and inclusive growth in Sub-Saharan Africa: Does foreign direct investment make a difference?

Abstract

In line with the quest to achieve inclusive and sustainable growth, this paper examines the potential impact of energy consumption and foreign direct investment (FDI) and their interactive effect on inclusive growth for 32 Sub-Saharan Africa (SSA) countries from 2000 to 2019. The results of the two-stage system generalised method of moment (2SGMM) show that energy consumption induces inclusive growth. However, there is evidence of a non-linear relationship between FDI and inclusive growth, where FDI dampens inclusive growth to a certain point and begins to induce it after that point. Notably, the results reveal that FDI can effectively form synergies with both renewable and non-renewable energy consumption to promote inclusive growth in SSA. Also, our empirical results from the GMM is robust to Diskroll and Kraay methodology, which caters for cross-sectional dependence. We recommend that African leaders focus on attracting FDI to finance their energy needs, particularly in the area of low-carbon or renewable energy sources, by leveraging private sector capital investments to achieve inclusive growth and also promote sustainable development.