GHANA'S ECONOMIC CANVAS: A DEEP DIVE INTO SECTORAL EMPLOYMENT AND THE INFLUX OF FOREIGN DIRECT INVESTMENTS

Abstract

In the context of increasing foreign direct investment (FDI) inflows to the African continent, this study delves into the distribution and impact of FDI-registered projects across sectors in Ghana. While these investments have been anticipated to catalyze economic growth, the disparate contributions of sectors to the country's total Gross Domestic Product (GDP) raise questions about the effectiveness of FDI in driving sector-specific development. This paper seeks to comprehensively investigate the influence of FDI and local investments on key sectors in the Ghanaian economy. The study concentrates on the agriculture, building & construction, manufacturing, and service sectors, meticulously analyzing the role of FDI in fostering job creation within these domains. Drawing on data spanning from 2001 to 2018, sourced from the Ghana Investment Promotion Centre, the research employs a battery of tests including multivariate, multicollinearity, unit-root, correlation, and auto-correlation analyses to unveil both short and long-term relationships among the variables. Ordinary least squares (OLS) regression provides a foundational basis for simple linear regression. Findings illuminate a positive and significant impact of FDI on the service sector, contrasted by its relatively muted influence on agriculture and manufacturing industries, where its significance wanes at the 5% confidence level. Intriguingly, the study also reveals that employment generation, stemming from FDI-registered projects, does not significantly affect the manufacturing sector. As an actionable recommendation, the paper suggests governmental provision of incentives to attract investment into underperforming sectors, thereby stimulating employment opportunities and fostering economic expansion. This study contributes substantively to the existing literature by shedding light on the nuances of FDI's contribution to the economy, offering insights into sector-specific responses to FDI, and deciphering the multifaceted factors that shape investment inflows. Ultimately, the findings underscore the importance of targeted policies for reinvigorating sectors and driving holistic economic advancement.