Impact of Gross Capital Formation, Foreign Direct Investment, and Energy Infrastructure on Economic Growth in Selected Southern African Development Community Countries

Abstract

This study examines the impact of gross capital formation, foreign direct investment (FDI), and energy infrastructure on economic growth in eight selected Southern African Development Community (SADC) countries from 1994 to 2023. Recognising the crucial role of investment and infrastructure in sustainable development, the study provides an integrated empirical analysis of these growth drivers within a region where economic performance remains uneven. Using a quantitative panel data approach, the analysis applies econometric techniques that address cross-sectional dependence and heterogeneity, including the Feasible Generalised Least Squares (FGLS) and Cross-Sectional Autoregressive Distributed Lag (CS-ARDL) models. Data were obtained from the World Bank’s World Development Indicators, covering GDP per capita, gross capital formation, FDI inflows, and electricity access as a proxy for energy infrastructure. The results show that gross capital formation significantly and positively influences growth in both the short and long run, while FDI has a weak and statistically insignificant effect, possibly due to institutional and absorptive capacity constraints. Energy infrastructure exhibits mixed effects, with inefficiencies limiting its contribution. The study recommends strengthening domestic investment mechanisms, improving governance to enhance FDI effectiveness, and upgrading energy infrastructure to support sustained and inclusive growth across the SADC region.