Enhancing intra-regional trade in sub-saharan Africa: an exploration of threshold effects and the intermediation role of FDI and tourism

This study determined the Foreign Direct Investment (FDI) threshold level necessary for international tourism to significantly enhance intra-regional trade in Africa. The study employed the system Generalised Method of Moment (GMM) and dynamic threshold estimation technique on annual panel data from 48 countries in sub-Saharan Africa from 1990 to 2023. The study revealed that while international tourism negatively impacts intra-trade, FDI significantly enhances intra-regional trade in Sub-Saharan Africa. Moreover, the interaction between tourism development and FDI, with a significant coefficient of 0.0248%, suggests a complementary role of the two variables in improving intra-trade performance. Finally, the study identified a significant FDI threshold of 7.723%, which is necessary for tourism to positively influence intra-regional trade. The study recommends that policymakers implement targeted support programs for trade-related investments, create a favourable environment for attracting and retaining FDI, integrate tourism development with FDI strategies, and aim to surpass the FDI threshold to maximize the benefits of tourism on trade.