COVID-19, capital flows and sustainable development in Sub-Saharan Africa
The Sub-Saharan Africa (SSA) region suffered severe economic impacts from COVID-19, despite experiencing some of the lowest numbers of cases and deaths from the pandemic. The attainment of sustainable development in the region was significantly affected partly because of the region’s huge reliance on industrialised economies who were most hit by the pandemic. The SSA countries covered 33 of the 45 countries listed by the United Nations Conference on Trade and Development (UNCTAD) as least developed countries (LDCs) requiring significant assistance. Moreover, the countries in the region experience some of the lowest inflows of foreign direct investment (FDI), both in comparison to other regions and to the flow of other foreign capitals into SSA. Again, as these countries were more vulnerable to economic shocks because of their lower resilience capacities, the attainment of sustainable development was significantly threatened when COVID-19 resulted in reduced economic activity, foreign investment and deteriorating socio-economic inequalities. Although earlier studies have concentrated on the impact of various cross-border capital flows on economic growth and some development indicators, those studies have not empirically evaluated how this global shock has impacted the inflows of foreign capital and their effects on sustainable development. In view of these, this thesis provides three empirical studies, using data from SSA countries over the period 2000 – 2022. The first paper evaluated the impact of COVID-19 on the nexus between remittances and sustainable development. Relying on both static and dynamic estimation techniques, the study found that remittance is positively associated with sustainable development, both before and after the threshold, subject to the absorptive capacity of the SSA economies. In effect, there is a minimum level of institutional quality and financial development, below which their effects on sustainable development would be negative; at which the stimulating effect of remittances may be reversed. In addition, COVID-19 was observed to reduce the progress towards sustainable development, directly and when interacted with remittances. In the second paper, the impact of the pandemic was estimated in the nexus between FDI and sustainable development. The empirical estimates showed that FDI does not exert a significant impact on sustainable development. When the effect of FDI was further analysed on economic growth, the environment, and human development, the estimates remained consistent. While COVID-19 was found to reduce the levels of economic growth, the environment, human development, and sustainable development, the interaction effect showed that FDI reduces the negative effect of COVID-19 on economic growth and sustainable development. The third paper measured the impact of COVID-19 on the aid – sustainable development nexus. The findings revealed that foreign aid facilitates the attainment of sustainable development and many of its goals. Even though the pandemic was found to exert a diminishing effect, foreign aid was not only found to reduce the negative effect of the pandemic but to also enhance the complementary roles of financial and institutional infrastructures on the attainment of sustainable development.
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