Structural Industrial Transformation, Foreign Investment, and Environmental Sustainability in Africa: Pathways to Sustainable Development

ABSTRACT Balancing structural transformation with environmental sustainability remains a pressing challenge for African economies undergoing rapid industrial expansion and increasing foreign direct investment (FDI) inflows. While industrialization is central to economic development, its environmental implications remain contested, particularly, within emerging institutional contexts. Moreover, empirical evidence for Africa remains limited and fragmented, especially regarding the multidimensional nature of environmental degradation. This study examines the relationship between industrialization, FDI, and environmental degradation across 48 African countries using cross‐sectional data for 2022. Industrialization is conceptualized as structural transformation reflected in manufacturing value added, industrial production capacity, and labor reallocation toward industry. FDI captures both inward and outward capital movements and long‐term investment commitments. Environmental degradation is modeled as a multidimensional construct incorporating carbon emissions intensity, total greenhouse gas emissions, ecological footprint, and fossil fuel energy dependence. Partial least squares structural equation modeling (PLS‐SEM) is employed to estimate the structural relationships among these constructs. The findings indicate that industrialization significantly intensifies environmental degradation, highlighting the ecological costs associated with energy‐intensive structural transformation. In contrast, FDI exerts a mitigating effect, suggesting that investment flows may facilitate technology transfer, cleaner production processes, and improved environmental performance. The results underscore the importance of embedding sustainability principles within industrial and investment policies. Aligning industrial growth with green investment strategies is critical for advancing climate action, supporting low‐carbon transitions, and achieving long‐term sustainable development in Africa.