**3. The macroeconomics of foreign direct investment and foreign direct divestment: theoretical analyisis**

The FDI trends discussed earlier in Section 2 have precisely shown the movement of foreign direct investment changing its direction heading to foreign direct divestment. This was due to the global financial crisis and the spillover effects of the US-China trade wars. That said, Maček [9] postulated that the dynamic economic progresses in the flow of economic and financial crisis have shown the likelihood of foreign direct investment changing its course resulting to FDD. This implies that FDI and FDD cannot occur simultaneously in a single economy, but each may occur in either South Africa, Nigeria, Egypt etc. The determinants of FDD are said to reciprocate those of FDI but with the opposite sign as suggested by Boddewyn [10]. This theory was developed from Dunning's theory of FDI. This implies that theoretical analysis of FDI concept also applies to FDD but in reverse. There are various studies that paid too much attention on FDI discussions but ignore the other side of the coin. This is like a detective who focuses on how to catch criminals but does not investigate the reasons for crime and how to prevent it. Here is what theory says concerning the rationale for both foreign direct investment and foreign direct divestment:

#### **3.1 Dunning's FDI theory**

There are three basic conditions that must be met for FDI to take place as postulated by Dunning [11]. (i) a firm has net competitive exclusive advantages in relation to other countries in serving specific markets. That said, these exclusive advantages are at least for a period notably to the firm or country owning them and mostly take form of the ownership of tangible assets. (ii) Assuming that the first condition is met, the firm owning these advantages must benefit when utilising them on its own relative to leasing or selling them to foreign firms. This implies that it must benefit through internalisation from its own activities in rather than externalising them through contracts and or licencing to foreign firms. (iii) If condition (i) and (ii) are assumed to have been satisfied, the firm must be profitable when utilising these advantages in alignment with a minimum of one factor input (natural resources included) outside its geographical borders. If not, Dunning stated that domestic markets would be served solely by domestic production and foreign markets by exports.

*Foreign Direct Divestment Phenomenon in Selected Sub-Saharan African Countries DOI: http://dx.doi.org/10.5772/intechopen.100304*

These three conditions explain the rationale for a firm to engage in FDI and international production activities if it has more ownership advantages, the better the incentive it holds to internalise them and the more it finds it more profitable to exploit them beyond its geographical boundaries [11]. This implies that these conditions are interrelated and must be satisfied simultaneously, and if not, FDI activities are more likely to change direction to divestment.

#### **3.2 Boddewyn's FDD theory**

Boddewyn's [10] used Dunning's theory of FDI to develop the foreign direct divestment concept. Boddewyn stated that violating at least one of Dunning's conditions of FDI would lead to foreign direct divestment. FDD occurs when: (i) a firm no longer has net competitive advantages over firms of other countries; (ii) or if it has the net competitive advantages, they are no longer beneficial for self-use rather than renting or selling them to foreign firms; (iii) or the firm no longer realise profits from using its internalised net competitive advantages beyond its national boundaries (i.e., the firm now finds it profitable to produce locally to domestic markets and export the surplus to foreign markets). This theory is quite simple and straightforward since it was adopted from Dunning's FDI theory. If one pays close attention, the differences between these theories is the opposite sign and the keywords "and" and "or" for the FDI and FDD theories, respectively. As mentioned earlier, Dunning's theory requires all the conditions to be met, hence the word "and" while Boddewyn's theory requires at least one condition [10]. Also, violating at least one of the Dunning's conditions to FDI leads to FDD. Therefore, these two theories extensively explain the rationale for both FDD and FDI to take place.
