Trade-offs in FDI Effects on SDGs in Sub-Saharan Africa Countries

Integration between the different components of development is a major aspiration of the 2030 Agenda, but the efforts of firms that intend to contribute simultaneously to multiple development trajectories may be hindered by trade-offs that occur between the different Sustainable Development Goals and targets. At the same time synergies may also materialize and reinforce firm’s contribution. This chapter analyses the effects of multinational enterprises (MNEs) and other foreign investors on two different targets of Sustainable Development Goal 7, namely access of population to modern energy systems, chiefly electricity, and the use of carbon-free and renewable energy sources in a sample of 15 sub-Saharan Africa countries, and we investigate whether foreign investors experience trade-offs and synergies in their contributions. A two-equation growth model of households’ access to electricity and carbon factor is estimated by employing a panel dataset that covers 15 sub-Saharan African countries and foreign direct investment (FDI) from 82 origin countries over the 2005 - 2011 period. Our findings reveal that foreign investors are subject to a trade-off in their effects, because when they foster access to electricity they are also likely to spur carbon factor increases, and vice versa, depending on the economic development of host and home countries. Nevertheless, electrification and carbon factor reduction are shown to be linked by a system-level synergy. The results have implications for the design of MNEs attraction measures and energy policy in recipient countries.