Relationship Between Foreign Aid, Investment and Economic Growth in Africa

Economic growth rate in Sub-Saharan African (SSA)¹ countries which stood at 2.17 percent on average over the period 1980-89 rose by 3 percent over the period 1990-06. On the one hand, investment over GDP which averaged 20 percent over the period 1980-89 declined to 18 percent over the period 1990-06.  Likewise, savings over GDP for all SSA countries declined from 18 percent to 15 percent over these two periods. There has been numerous works in the examination of foreign aid and economic growth.  Earlier research in the examination of aid and growth relationship has produced mixed results and has been criticized for methodological problems associated with cross-country studies.  Some empirical assessments have shown that there is no causal relationship between foreign aid and economic growth. However, works such as Levy (1988); Burnside and Dollar (2000) and Nyoni (1998) found aid to be positively and correlated with investment and economic growth in African countries.  
This paper is examining two issues. First, to what extent investment has led to economic growth in SSA countries? Second, is there any relationship between foreign aid and investment and therefore economic growth?