nep-afr New Economics Papers
on Africa
Issue of 2007‒08‒27
seventeen papers chosen by
Suzanne McCoskey
George Washington University

  1. The Political Economy of China's Aid Policy in Africa By Gernot Pehnelt
  2. The Impact of Tourism on Economic Growth and Development in Africa. By Bichaka Fayissa; Christian Nsiah; Badassa Tadasse
  3. The cyclicality of monetary and fiscal policy in South Africa since 1994 By Stan du Plessis; Ben Smit; Federico Sturzenegger
  4. South Africa’s Growth Paradox By Mdu Biyase; Lumengo Bonga-Bonga
  5. Do overlapping property rights reduce agricultural investment ? evidence from Uganda By Deininger, Klaus; Ali, Daniel Ayalew
  6. Securing Medical Personnel: Case Studies of Two Source Countries and Two Destination Countries By Yamagata, Tatsufumi
  7. Customary land tenure, inheritance rules, and smallholder farmers in Malawi By Takane, Tsutomu
  8. Emerging Middle Powers’ Soft Balancing Strategy: State and Perspectives of the IBSA Dialogue Forum By Daniel Flemes
  9. Performance-Based Incentives for Health: A Way to Improve Tuberculosis Detection and Treatment Completion? By Alexandra Beith, Rena Eichler and Diana Weil; Rena Eichler
  10. State of Corporate Governance in Arab Countries: An Overview By Harabi, Najib
  11. Strengthening the governance and performance of state-owned financial institutions By Scott, David H.
  12. Regional Differences in Food Consumption in Urban Mozambique: A Censored Demand System Approach By Mikkel Barslund
  13. Fiscal Policy By John Weeks; Shruti Patel
  14. Income, Aging, Health and Wellbeing Around the World: Evidence from the Gallup World Poll By Angus Deaton
  15. Cost-Effective Prevention of Diarrheal Diseases: A Critical Review By Michael Kremer and Alix Peterson Zwane; Alix Peterson Zwane
  16. A Development Curse: Formal vs. Informal Activities in Resource-Dependent Economies By Elissaios Papyrakis
  17. Municipal Bonds for Financing Development of infrastructure: A way forward for KCC and Local Governments in Uganda By Mayanja, Abubaker; Mayengo, Israel

  1. By: Gernot Pehnelt (School of Busniess and Economics, Friedrich-Schiller-University Jena, Germany.)
    Abstract: In recent years, China has become a major power on the African continent, not only with respect to trade and investment, but also as a donor of development aid. Although there is no accurate measure of the exact size of China’s aid program, since China rather underestimates the volume in official statistics, estimates on the basis of press releases, official announcements and assessments of major projects in Africa suggest that China has already overtaken the World Bank in lending to Africa. In this article, we analyze China’s aid policy in Africa from a political economy perspective. We show that China is using (tied) aid and loans in order to reach specific economic and political goals and that Beijing has been quite successful in doing so. The impressing success of China in getting access to African countries can be explained by comparative advantages of the People’s Republic, especially in unstable nations and "rough" states. China’s engagement in Africa causes some serious problems with traditional donors. We discuss these conflicts and provide a critical assessment of China’s role in Africa. Finally, we discuss the policy implications for the donor community.
    Keywords: China, Africa, development aid, political economy
    JEL: O16 O19 F35 F50
    Date: 2007–08–22
  2. By: Bichaka Fayissa; Christian Nsiah; Badassa Tadasse
    Abstract: Over the decade of the 1990s, Africa has experienced a rise in tourist arrivals from 8.4 million to 10.6 million and receipts growth from $2.3 billion to $3.7 billion, respectively. According to the World Tourism Organization (WTO, 2006), the tourism industry in Sub-Saharan Africa enjoyed a robust annual market share growth rate of 10 percent in 2006. In spite of this, there are only few empirical studies that investigate the contributions of tourism to economic growth and development for African economies. Using a panel data of 42 African countries for the years that span from 1995 to 2004, this study explores the potential contribution of tourism to economic growth and development within the conventional neoclassical framework. The results show that receipts from the tourism industry significantly contribute both to the current level of gross domestic product and the economic growth of Sub-Saharan African countries as do investments in physical and human capital. Our findings imply that African economies could enhance their short-run economic growth by strategically strengthening their tourism industries.
    Keywords: Tourism, Economic Growth, Sub-Sahara Africa, Dynamic Panel Data, Fixed Effects, Random Effects, and Arellano-Bond Models
    JEL: C33 F14 L83 O40 O54
    Date: 2007–08
  3. By: Stan du Plessis (Department of Economics, Stellenbosch University); Ben Smit (Bureau of Economic Research, Stellenbosch University); Federico Sturzenegger (Kennedy School of Government, Harvard University)
    Abstract: This paper uses an SVAR approach to discuss the cyclicality of fiscal and monetary policy in South Africa since 1994. There is substantial South African literature on this topic, but much disagreement remains. Though not undisputed, there is growing consensus that monetary policy has contributed to the remarkable stabilisation of the South African economy over this period. The evaluation of the role of fiscal policy in stabilisation has been less favourable and there is little evidence that a countercyclical fiscal stance was a priority over this period. This paper considers these issues in an empirical framework that addresses some of the shortcomings in the literature. Specifically, it constructs a structural model in contrast with the reduced form models typically used in the South African literature, incorporates the dynamic interaction between monetary and fiscal shocks on the demand side and supply shocks on the other, and avoids controversy over ‘neutral’ base years and the size of fiscal elasticities. The model confirms the consensus on monetary policy, finding it to have been largely countercyclical since 1994. On fiscal policy, this paper finds evidence of pro-cyclicality, especially in the more recent period, though the policy simulations suggest that the pro-cyclicality of fiscal policy has had little destabilising impact on real output.
    Keywords: Stabilisation policy, Monetary policy, Inflation targeting, Fiscal policy, Pro-cyclical policy
    JEL: E32 E63
    Date: 2007
  4. By: Mdu Biyase; Lumengo Bonga-Bonga
    Abstract: South Africa has achieved a lot since 1994, when ANC-led government took office. The Performance of the economy since 1994, as measured by the growth rate, has been encouraging with an average growth rate of approximately 2.8% per annum. The inflation rate has been recently under control at between 3% and 6% per annum, the inflation target set by the South African Reserve Bank (SARB). Despite this success problems of unemployment and poverty are still very much with us and have not yet begun to diminish unambiguously. Poverty is around 45% to 50% while broad unemployment rate is somewhere around 26% to 40%. This paper attempts to reexamine the debate on whether SA is experiencing jobless or job creating growth in the context of Okun’s law. Making use of the Structural Vector Autoregressive (SVAR) technique to characterize the dynamics of employment in response to output shocks, this study concludes that while an increase in output increases total employment in general; nevertheless there are some sectors (such as primary and secondary sectors) where the impact of output shocks has been negligible.
    Date: 2007–06
  5. By: Deininger, Klaus; Ali, Daniel Ayalew
    Abstract: The need for land-related investment to ensure sustainable land management and increase productivity of land use is widely recognized. However, th ere is little rigorous evidence on the effects of property rights for increasing agricultural productivity and contributing toward poverty reduction in Africa. Whether and by how much overlapping property rights reduce investment incentives, and the scope for policies to counter such disincentives, are thus important policy issues. Using information on parcels under ownership and usufruct by the same household from a nationally representative survey in Uganda, the authors find significant disincentives associated with overlapping property rights on short and long-term investments. The paper combines this result with information on crop productivity to obtain a rough estimate of the magnitudes involved. The authors make suggestions on ways to eliminate such inefficiencies.
    Keywords: Wetlands,Labor Policies,Common Property Resource Development,,Municipal Housing and Land
    Date: 2007–08–01
  6. By: Yamagata, Tatsufumi
    Abstract: A shortage of medical personnel has become a critical problem for developing countries attempting to expand the provision of medical services for the poor. In order to highlight the driving forces determining the international allocation of medical personnel, the cases of four countries, namely the Philippines and South Africa as source countries and Saudi Arabia and the United Kingdom as destination countries, are examined. The paper concludes that changes in demand generated in major destination countries determine the international allocation of medical personnel at least in the short run. Major destination countries often alter their policies on how many medical staff they can accept, and from where, while source countries are required to make appropriate responses to the changes in demand.
    Keywords: Medical personnel, Brain drain, Philippines, South Africa, Saudi Arabia, United Kingdom, Medical care
    JEL: F22 I19 J61 O52 O53 O55
    Date: 2007–05
  7. By: Takane, Tsutomu
    Abstract: Based on information derived from six villages in various parts of rural Malawi, this paper examines the interrelationship between smallholder strategies to obtain land on the one hand, and customary land tenure and inheritance rules on the other. The paper revealed that although the majority of land transactions followed customary land tenure systems and inheritance rules, in a good number of cases land transactions deviated from the basic rules. One factor behind such deviation was the unique personal relationships that were developed between original landholders and heirs. Another factor was the seemingly increasing cases of returning wives in patrilineal villages. Still another factor was the intensifying land scarcity that encouraged villagers to adopt strategies to obtain land from any source by any means. On the other hand, there were also some cases in which the same land-scarcity problem induced villagers to countercheck the practice of flexible land transfer to prevent their lineage land from being alienated to non-kin members. These facts suggest that, in a land scarce situation, an individual strategy to obtain land rights from any possible sources by deviating from customary rules may occasionally be in conflict with a lineage strategy to countercheck such tendency.
    Keywords: Land, Smallholder, Customary Tenure, Malawi, Africa, Land tenure, Farmers
    Date: 2007–05
  8. By: Daniel Flemes (GIGA Institute of Latin American Studies)
    Abstract: How can weaker states influence stronger ones? This article offers a case study of one recent exercise in coalition building among Southern middle powers, the ‘India, Brazil, South Africa (IBSA) Dialogue Forum’. The analysis outlines five major points: first, it argues that the three emerging players can be defined as middle powers in order to frame their foreign policy behavior and options at the global level. Second, soft balancing is a suitable concept to explain IBSA’s strategy in global institutions. Third, institutional foreign policy instruments are of pivotal significance in IBSA’s soft balancing strategy. Fourth, the potential gains of IBSA’s sector cooperation, particularly in trade, are limited due to a lack of complementarity of the three economies. And fifth, IBSA’s perspectives and impact on the international system will depend on four variables: IBSA’s ability to focus on distinct areas of cooperation, the consolidation of its common strategy of soft balancing, the institutionalization of IBSA, and its enlargement in order to obtain more weight in global bargains.
    Keywords: India, Brazil, South Africa, IBSA Dialogue Forum, middle power, foreign policy, international relations, South-South relations
    Date: 2007–08
  9. By: Alexandra Beith, Rena Eichler and Diana Weil; Rena Eichler
    Abstract: Tuberculosis is a public health emergency in Africa, Eastern Europe, and Central Asia. Of the estimated 1.7 million deaths from TB, 98 percent are in the developing world, the majority being among the poor. In order to reach the MDG and the Stop TB partnership targets for 2015, TB detection rates need to double, treatment success rates must increase to more than 7075 percent, and strategies to address HIV-associated TB and multi-drug resistant TB must be aggressively expanded. DOTS, the internationally-recommended TB control strategy is the foundation of TB control efforts worldwide. A standard recording and monitoring system built on routine service-based data allows nearly all countries in the world to track progress in case detection and treatment completion through routine monitoring. This provides a good base for measuring the impact of different strategies for improving TB control outcomes. Performance-based incentives in TB control programs include financial and material incentives directed to patients, individual health workers (in the public and private sectors), and entire health care facilities. Those directed toward patients encourage individuals to seek care (a diagnosis) and are conditional on completing steps in the treatment process to ensure adherence to the lengthy treatment schedule. Incentives directed at providers seek to improve the quality of diagnosis, expand access to treatment, improve teamwork, and encourage system changes to improve outcomes. Since multiple program strengthening interventions are implemented simultaneously, it is difficult to fully attribute performance changes to the incentives. However, evidence indicates that performance-based incentives for patients and providers directly contribute to increases in case detection and treatment completion rates. Experience in a number of countries points to the importance of careful design and implementation, particularly where it concerns the distribution of money and/or food. While more evidence is needed on the direct correlation between the incentives and performance, existing evidence suggests that incentives should be an integral element of a TB control strategy.
    Keywords: Health, Tuberculosis Detection
    Date: 2007–04
  10. By: Harabi, Najib
    Abstract: The purpose of this paper is to assess the state of corporate governance as a major factor affecting the growth performance of the private sector in MENA countries. For this purpose both country-specific assessments, carried out by World Bank-IMF teams (so-called ROSC’s assessments) and focus-group discussions that took place in four regional conferences have been synthesized. Strengths and weaknesses of corporate governance in selected Arab countries have been highlighted. One major key finding is that the legal and regulatory frameworks of the assessed Arab countries are largely compliant with the OECD Principles of corporate governance. However, practices are not. The difficulty of the assessments is to reflect properly the discrepancies between the letter of the law and compliance. It should be emphasized that the World Bank-IMF assessments focus on listed companies. No-listed firms, especially SME, family-owned firms and State-owned enterprises that make up to 98% of all firms, are not subject to assessments. Another key finding that emerged from our reviewing of the regional conferences on corporate governance is that corporate governance issues have not been ignored in public debates in the MENA region. Practitioners from capital markets, banks, public and private sector representatives and other civil society groups have accepted the need to address corporate governance reforms as one of the crucial topics affecting the economic growth and development of firms, industries and whole economies in their region. Several meetings and conferences at the national and regional level have taken place. Appropriate and up-to-date recommendations regarding corporate governance reform in the MENA region have been adopted in those events. It is now up to the decision makers at all levels to implement those recommendations
    Keywords: Corporate Governance; Governance; state and business; business regulations; corporate finance; economic development; Arab countries; Middle East and North Africa
    JEL: G3 O16 G38
    Date: 2007–02–15
  11. By: Scott, David H.
    Abstract: Corporate governance arrangements define the responsibilities, authorities and accountabilities of owners, boards of directors, and executive managers of a company. Good corporate governance is as important for state financial institutions as for private sector companies. Many of the problems that commonly afflict state financial institutions can be associated with, if not attributed directly to, weaknesses in corporate governance. This note draws on guidelines recently published by the OECD and the Basel Committee for Banking Supervision to compile a comprehensive corporate governance evaluation framework relevant to state-owned commercial and development finance institutions. It highlights aspects of this framework that are considered to be of particular importance to state financial institutions by citing innovative practices in a number of countries. Finally, it presents a detailed case study of the governance arrangements in place at the Development Bank of Southern Africa.
    Keywords: National Governance,Corporate Law,Emerging Markets,Debt Markets,Banks & Banking Reform
    Date: 2007–08–01
  12. By: Mikkel Barslund (Department of Economics, University of Copenhagen)
    Abstract: A nationwide household survey for Mozambique is used to estimate a large censored food demand system with 12 food groups for the sample of urban households. Using the translog indirect utility approach, the censored nature of the data is addressed by estimating a system of Tobit equations with a recently suggested quasi maximum likelihood estimator. Augmenting the system with demographic and geographical variables in a theoretically consistent way, I find that differences in elasticities between regions are significant. The results show that regional variation has to be taken into account when evaluating policies or employing CGE models. Further, the approach employed here can be applied to a number of developing countries with varying geographic conditions.
    Keywords: censored demand system; elasticities; Mozambique; food demand; regional differences
    JEL: D12 O12 O18
    Date: 2007–08
  13. By: John Weeks (Professor Emeritus, School of Oriental and African Studies, University of London); Shruti Patel (Centre for Development Policy & Research School of Oriental & African Studies, University of London)
    Abstract: .
    Keywords: Training, Modules, Research Programme, Economic Policies, MDGs, Poverty
    Date: 2007–07
  14. By: Angus Deaton
    Abstract: During 2006, the Gallup Organization conducted a World Poll that used an identical questionnaire for national samples of adults from 132 countries. I analyze the data on life satisfaction (happiness) and on health satisfaction and look at their relationships with national income, age, and life-expectancy. Average happiness is strongly related to per capita national income; each doubling of income is associated with a near one point increase in life satisfaction on a scale from 0 to 10. Unlike most previous findings, the effect holds across the range of international incomes; if anything, it is slightly stronger among rich countries. Conditional on national income, recent economic growth makes people unhappier, improvements in life-expectancy make them happier, but life-expectancy itself has little effect. Age has an internationally inconsistent relationship with happiness. National income moderates the effects of aging on self-reported health, and the decline in health satisfaction and rise in disability with age are much stronger in poor countries than in rich countries. In line with earlier findings, people in much of Eastern Europe and in the countries of the former Soviet Union are particularly unhappy and particularly dissatisfied with their health, and older people in those countries are much less satisfied with their lives and with their health than are younger people. HIV prevalence in Africa has little effect on Africans' life or health satisfaction; the fraction of Kenyans who are satisfied with their personal health is the same as the fraction of Britons and higher than the fraction of Americans. The US ranks 81st out of 115 countries in the fraction of people who have confidence in their healthcare system, and has a lower score than countries such as India, Iran, Malawi, or Sierra Leone. While the strong relationship between life-satisfaction and income gives some credence to the measures, as do the low levels of life and health satisfaction in Eastern Europe and the countries of the former Soviet Union, the lack of correlations between life and health satisfaction and health measures shows that happiness (or self-reported health) measures cannot be regarded as useful summary indicators of human welfare in international comparisons.
    JEL: I1 I31 O1 O15 O57
    Date: 2007–08
  15. By: Michael Kremer and Alix Peterson Zwane; Alix Peterson Zwane
    Abstract: This paper critically reviews the existing research on the cost-effective prevention and treatment of diarrheal diseases, and identifies research priorities in this area aimed at finding ways to reduce the diarrheal disease burden. In contrast to the empirical knowledge base that exists for traditional child health programs to reduce diarrheal morbidity and mortality, evidence on the relative effectiveness and costeffectiveness of various environmental health interventions is limited and subject to significant methodological concerns. There is a limited understanding of the determinants of longterm water and sanitation technology adoption and behavior change at the individual level. Even less is known about how collective action problems in water and sanitation infrastructure maintenance can be overcome. An agenda for future research includes evaluating alternative transmission interruption mechanisms, improving understanding of the determinants of individual-level technology adoption in the water and sanitation sector, and assessing the quality of infrastructure maintenance under different management schemes.
    Keywords: Diarrheal Diseases, Global Health,
    Date: 2007–04
  16. By: Elissaios Papyrakis
    Abstract: In most resource-driven developing economies, a mineral-based formal sector and an informal resource sector (such as charcoal production) constitute the main economic activities, from which local dwellers derive their livelihoods. The paper examines the coexistence of formal and informal resource sectors in resource-dependent economies, whose production depend on an exhaustible (e.g. minerals) and a renewable resource stock (e.g. forest) respectively. We examine the implications of declining mineral stocks on public revenues, labour movements between sectors, and economic growth in an attempt to elucidate the poor economic performance of most mineral-dependent countries. Decreasing mineral stocks induce a relocation of labour towards informal production, and deprive local authorities from public revenues collected within the formal economy. This constrains the ability to improve infrastructure and welfare over time and simultaneously imposes pressure on the local environment through deforestation.
    Keywords: Mining, Growth, Environment
    JEL: O11 O13 Q32
    Date: 2007–06
  17. By: Mayanja, Abubaker; Mayengo, Israel
    Abstract: The world over municipalities and cities often rely on capital markets for their long term financing needs. It is envisaged that such debt issues accelerate the development of cities. The rationale is that since the projects are supposed to benefit the public over time, the issuance of debt to spread the payments between generations is optimal. Municipal bonds are still unexplored as a mechanism of financing capital projects of municipalities in Uganda. This study assesses the legality, the advantages and challenges as well as likely projects to initiate the Municipal bond market in Uganda. It is legally possible for local governments to issue bonds; they can borrow up to 25 percent of their revenue. However, the conditionality in the law that requires them to maintain a balanced budget may be a limiting factor. It is important to note that a yield curve exits for government bonds that can be used as a benchmark for pricing Municipal bond. It is our view that the size of the bond market is already encouraging enough to be confident that the market may receive such issues favourably
    Keywords: Sub-National Finance; Municipal bonds; Public infrastructure development
    JEL: H72 H76 H74
    Date: 2007–06–25

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