Mediating Role of Foreign Direct Investment in the Relationship between Selected Socio-political Factors and Economic Growth in Kenya, Uganda and Tanzania

Aim: The purpose of this study was to analyze the mediating role of foreign direct investment (FDI) in the relationship between the selected socio-political factors and economic growth in Kenya, Uganda and Tanzania. Methods: A descriptive research design was adopted. The secondary data for the three countries for 41 years from 1975 to 2015 collected from World Bank database was utilized and multi-group path analysis was applied. Results: The results suggest that human capital development is the main determinant of FDIs with 66% direct effects, 17% indirect effects through FDI and a total effect of 83% on economic growth in the East African region. While ease of doing business and corruption perception together, ceteris paribus, account for only 9.8% of the total changes in the economic growth in the region. Conclusion: Foreign direct investment was a significant mediator in the relationship between the three social-political factors and economic growth in the three east African countries. Recommendation: The study recommends that the three East African countries should adopt simpler and better regulations for businesses to make it easier for foreign as well local investors to enter business and trade locally and internationally.