nep-afr New Economics Papers
on Africa
Issue of 2007‒11‒17
34 papers chosen by
Suzanne McCoskey
George Washington University

  1. Determinants of South Africa’s Exports of Leather Products By André C. Jordaan; Joel Hinaunye Eita
  2. Measuring the Determinants of Educational Spending in Africa By Olusegun A. Akanbi; Niek J. Schoeman
  3. Micro-level analysis of farmers' adaptation to climate change in Southern Africa: By Nhemachena, Charles; Hassan, Rashid
  4. South Africa’s Wood Export Potential Using a Gravity Model Approach By Joel Hinaunye Eita; André C. Jordaan
  5. South Africa Trade Liberalization and Poverty in a Dynamic Microsimulation CGE Model By Ramos Mabugu; Margaret Chitiga
  6. Growth Theory and Application: The Case of South Africa By Dave Liu
  7. Welfare Shifts in the Post-Apartheid South Africa: A Comprehensive Measurement of Changes By Haroon Bhorat; Sumayya Goga; Carlene van der Westhuizen
  8. Is Increased Agricultural Protection Beneficial for South Africa? By Margaret Chitiga; Ramos Mabugu
  9. Gambling with Liberalization: Smallholder Livelihoods in Contemporary Rural Malawi By Takane, Tsutomu
  10. Bayesian Methods of Forecasting Inventory Investment in South Africa By Rangan Gupta
  11. Comparative analysis of the national biosafety regulatory systems in East Africa: By Jaffe, Gregory
  12. Temporal Causality between Taxes and Public Expenditures: The Case of South Africa By Kasai Ndahiriwe; Rangan Gupta
  14. The economic impact and the distribution of benefits and risk from the adoption of insect resistant (Bt) cotton in West Africa: By Falck-Zepeda, Jose; Horna, Daniela; Smale, Melinda
  15. The Transformation of Rural Labour Systems in Colonial and Post-Colonial Northern Nigeria By Kohnert, Dirk
  16. Generating plausible crop distribution and performance maps for Sub-Saharan Africa using a spatially disaggregated data fusion and optimization approach: By You, Liangzhi; Wood, Stanley; Wood-Sichra, Ulrike
  17. Testing the Export-Led Growth Hypothesis for Botswana: A Causality Analysis By André C. Jordaan; Joel Hinaunye Eita
  18. Development domains for Ethiopia: capturing the geographical context of smallholder development options By Chamberlin, Jordan; Pender, John; Yu, Bingxin
  19. Assessing the impact of the National Agricultural Advisory Services (NAADS) in the Uganda rural livelihoods: By Benin, Samuel; Nkonya, Ephraim; Okecho, Geresom; Pender, John; Nahdy, Silim; Mugarura, Samuel; Kayobyo, Godfrey
  20. Rural investment to accelerate growth and poverty reduction in Kenya: By Thurlow, James; Kiringai, Jane; Gautam, Madhur
  21. Forecasting the South African Economy with Gibbs Sampled BVECMs By Samuel Zita; Rangan Gupta
  22. A Computable General Equilibrium Micro-Simulation Analysis of the Impact of Trade Policies on Poverty in Zimbabwe By Margaret Chitiga; Ramos Mabugu; Tonia Kandiero
  23. Linking Global Economic Dynamics to a South African Specific Credit Portfolio By Albert H. De Wet; Reneé Van Eyden
  24. Hurdle Models of Alcohol and Tobacco Expenditure in South African Households By Marc Ground; Steven F. Koch
  25. Smallholders' commercialization through cooperatives: a diagnostic for Ethiopia By Bernard, Tanguy; Gabre-Madhin, Eleni; Taffesse, Alemayehu Seyoum
  26. Risk aversion in low income countries: experimental evidence from Ethiopia By Yesuf, Mahmud; Bluffstone, Randy
  27. The food retail revolution in poor countries: is it coming or is it over? evidence from Madagascar By Minten, Bart
  28. Estimating multidimensional poverty in a developing country. The case of the “Observatoire de Guinée Maritime » Project (In French) By Alexandre BERTIN (GREThA); David LEYLE (ADES)
  29. A Causality Analysis between Financial Development and Economic Growth for Botswana By Joel Hinaunye Eita; André C. Jordaan
  30. A Dynamic Enquiry into the Causes of Hyperinflation in Zimbabwe By Albert Makochekanwa
  31. An Empirical Investigation of Capital Flight from Zimbabwe By Albert Makochekanwa
  32. Sectoral patterns of innovation in a developing country: The Tunisian case By Murat YILDIZOGLU (GREThA); Mohamed AYADI (UAQUAP, Université de Tunis); Mohieddine RAHMOUNI (UAQUAP et GREThA)
  33. Zimbabwe’s Hyperinflation Money Demand Model By Albert Makochekanwa
  34. Zimbabwe’s Black Market for Foreign Exchange By Albert Makochekanwa

  1. By: André C. Jordaan (Investment and Trade Policy Centre, University of Pretoria); Joel Hinaunye Eita (Investment and Trade Policy Centre, University of Pretoria)
    Abstract: This paper analysed the determinants of South African exports of raw hides and skins (other than fur skins) and leather (H41) using annual data covering the period 1997 to 2004 for 32 main trading partners. The results show that importer’s GDP, South Africa’s GDP, importer’s population, South Africa’s population, infrastructure of South Africa and importing country and some regional trade agreements are the main determinants of raw hides and skins (other than fur skins) and leather exports. The paper then investigated if there is unexploited trade potential. The investigation revealed that among others, South Korea, United Kingdom, USA, Zambia and Zimbabwe have unexploited export potential. It is important to focus efforts on the unexploited trade potential to accelerate growth and alleviate poverty in South Africa.
    Keywords: gravity model, fixed effects, export potential
    JEL: C01 C23 F10 F17 F47
    Date: 2007–10
  2. By: Olusegun A. Akanbi (Department of Economics, University of Pretoria); Niek J. Schoeman (Bureau for Economic Policy and Analysis (BEPA))
    Abstract: This paper reports on research aimed at measuring the determinants of education spending in Africa and secondly, investigates whether expenditure on education in Africa optimizes social welfare. The empirical estimations are carried out using a public choice model on a panel of 29 selected African countries over the period 1995-2004. The results show that government expenditure on education is not resilient to shocks and the education sector is not seriously affected by allocative changes that favour corruption. However, expenditure on education in Africa does not comply with the rules outlined by the IMF in terms of their fiscal adjustment program.
    Date: 2007–04
  3. By: Nhemachena, Charles; Hassan, Rashid
    Abstract: "Adaptation to climate change involves changes in agricultural management practices in response to changes in climate conditions. It often involves a combination of various individual responses at the farm-level and assumes that farmers have access to alternative practices and technologies available in the region. This study examines farmer adaptation strategies to climate change in Southern Africa based on a cross-section database of three countries (South Africa, Zambia and Zimbabwe) collected as part of the Global Environment Facility/World Bank (GEF/WB) Climate Change and African Agriculture Project. The study describes farmer perceptions to changes in long-term temperature and precipitation as well as various farm-level adaptation measures and barriers to adaptation at the farm household level. A multivariate discrete choice model is used to identify the determinants of farm-level adaptation strategies. Results confirm that access to credit and extension and awareness of climate change are some of the important determinants of farm-level adaptation. An important policy message from these results is that enhanced access to credit, information (climatic and agronomic) as well as to markets (input and output) can significantly increase farm-level adaptation. Government policies should support research and development on appropriate technologies to help farmers adapt to changes in climatic conditions. Examples of such policy measures include crop development, improving climate information forecasting, and promoting appropriate farm-level adaptation measures such as use of irrigation technologies." from Authors' Abstract
    Keywords: Climate change, Adaptation,
    Date: 2007
  4. By: Joel Hinaunye Eita (Investment and Trade Policy Centre, University of Pretoria); André C. Jordaan (Investment and Trade Policy Centre, University of Pretoria)
    Abstract: Under the Accelerated Shared Growth Initiative for South Africa (ASGISA), the South African government identified priority sectors that need to be promoted and developed in order to accelerate growth and reduce unemployment and poverty by the year 2014. Among these, the wood sector was identified as a priority sector that needs to be developed for this purpose. The development of this sector may contribute towards achieving this objective by higher levels of economic participation and income generation. This paper analyses the determinants of exports of wood and articles of wood using a gravity model approach. It further investigates whether there is unexploited trade potential between South Africa and its trading partners within this sector. The analysis has shown that there is unexploited trade potential among some of South Africa’s trading partners which could stimulate growth to alleviate unemployment and poverty.
    JEL: C01 C23 F10 F17 F47
    Date: 2007–10
  5. By: Ramos Mabugu (Financial and Fiscal Commission); Margaret Chitiga (Department of Economics, University of Pretoria)
    Abstract: South Africa has undergone significant trade liberalization since the end of apartheid. Average protection has fallen while openness has increased. However, economic growth has been insufficient to make inroads into the high unemployment levels. Poverty levels have also risen. The country’s experience presents an interesting challenge for many economists that argue that trade liberalization is pro-poor and pro-growth. This study investigates the short and long term effects of trade liberalization using a dynamic microsimulation computable general equilibrium approach. Trade liberalization has been simulated by a complete removal of all tariffs on imported goods and services, and by a combination of tariff removal and an increase of total factor productivity. The main findings are that a complete tariff removal on imports has negative welfare and poverty reduction impacts in the short run which turns positive in the long term due to the accumulation effects. When the tariff removal simulation is combined with an increase of total factor productivity, the short and long run effects are both positive in terms of welfare and poverty reduction. The mining sector (highest export orientation) is the biggest winner from the reforms while the textiles sector (highest initial tariff rate) is the biggest loser. African and Colored households gain the most in terms of welfare and numbers being pulled out of absolute poverty by trade liberalization.
    Keywords: Sequential dynamic CGE, microsimulation, trade liberalization, total factor productivity, poverty, welfare, growth, South Africa
    JEL: D58 E27 F17 I32 O15 O55
    Date: 2007–09
  6. By: Dave Liu (Department of Economics, University of Pretoria)
    Abstract: This essay is a comparison study of traditional Neoclassical growth theory and new growth theory. It also discusses growth theory in the real world by investigating the so called “growth miracles” and “growth disasters” scenarios in the developing world. Finally, the essay performs a standard growth accounting exercise on South African economy mainly focuses on the importance of human capital in growth process. Growth accounting exercise shows that South Africa experiences a capital-accumulated growth in the 1970s and 80s, while sharply shifts to technology-accumulated growth in the 1990s and early 2000s.
    Keywords: Economic growth, Solow growth model, Growth accounting
    JEL: O32 O40 O47 O49 O55
    Date: 2007–09
  7. By: Haroon Bhorat; Sumayya Goga; Carlene van der Westhuizen (Development Policy Research Unit,University of Cape Town)
    Abstract: Abstract: The objective of this study is to provide a comprehensive measure of shifts in welfare in post-apartheid South Africa by examining changes in both income and non-income welfare between 1993 and 2005. Previous research using expenditure or consumption-based measures of income has shown that, depending on the data sources, household income poverty in South Africa either remained static or increased slightly between 1995 and 2000 or between 1996 and 2001. Research considering the changes in non-income welfare in the post-apartheid South Africa has found significant increases in the levels of non-income welfare, driven to a large extend by the increased delivery of basic services by government since 1994. Using factor analysis, we construct a comprehensive household welfare index that includes public assets (government provided services), private assets (including education) and wage and grant income. In addition, a public asset index and a private asset index are constructed that allow us to analyse welfare as captured by access to government provided services and privately owned assets respectively. Given the availability of data for 1999 we are able to provide mid-period estimates for all three indices. When standard poverty measures are applied to our derived indices, we find that total household welfare increased between 1993 and 2005. We also find that total welfare increased at a faster pace between 1993 and 1999 than between 1999 and 2005. The evidence suggests that in the first period the increase was driven largely by increased government service delivery, while in the second period it was driven by the growth in private asset ownership.
    Keywords: South Africa: welfare shifts, public assets, private assets
    JEL: A1
    Date: 2007–10
  8. By: Margaret Chitiga (Department of Economics, University of Pretoria); Ramos Mabugu (Financial and Fiscal Commission)
    Abstract: This paper focuses on the effects that a higher tariff on agriculture and food imports could have on poverty and the macroeconomy using a top down computable general equilibrium microsimulation model. This question is of broader relevance to developing countries that may be contemplating the use of World Trade Organisation permissible trade barriers so as to achieve a domestic policy objective. Generally speaking, the results suggest that doubling protection of agriculture and food would lead to a reallocation of labour toward the sectors with high initial protection and those with high domestic orientation. Agriculture and food sectors are harmed by increased protection if the government chooses to use indirect tax rates to compensate for revenue changes because of induced demand contraction by the indirect tax adjustment. Exports and imports in general decline. The analysis also shows that increasing food and agricultural protection has very negligible but negative effects on welfare and poverty.
    Keywords: CGE model; microsimulation, trade policy, special and differential treatment, poverty, welfare, South Africa
    JEL: D33 D58 E27 F17 I32 O15 O55
    Date: 2007–09
  9. By: Takane, Tsutomu
    Abstract: This paper examines the livelihoods of smallholder households in Malawi based on information derived from six villages in various parts of the country. Through detailed analysis of own-farm production and off-farm economic activities, the study explores similarities, diversities, and disparities in rural livelihoods. Liberalization policies and the high risk of crop failure have produced large disparities between those who achieve high income from own-farm production and those who do not. Off-farm income can help to reduce the risk of own-farm production, but is also a source of income disparity and provides little opportunity for upward economic mobility to escape poverty.
    Keywords: Livelihoods, Rural development, Agriculture, Nonfarm income, Malawi, Africa, Household, Income
    JEL: Q12
    Date: 2007–08
  10. By: Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: This paper develops a Bayesian Vector Error Correction Model (BVECM) for forecasting inventory investment in South Africa. The model is estimated using quarterly data on actual sales, production, unfilled orders, price levels and interest rates, for the period of 1978 to 2000. The out-of-sample-forecast accuracy obtained from the BVECM, over the forecasting horizon of 2001:1 to 2003:4, is compared with those generated from the Classical variant of the VAR and the VECM, the Bayesian VAR, and the ECM of inventory investment developed by Smith et al. (2006) for the South African economy. The BVECM with the most tight prior outperforms all the other models, except for a relatively tight BVAR. This BVAR model also correctly predicts the direction of change of inventory investment over the period of 2004:1 to 2006:3.
    Keywords: VECM and BVECM, VAR and BVAR Model, Forecast Accuracy, BVECM Forecasts, VECM Forecasts, BVAR Forecasts, ECM Forecasts, VAR Forecasts
    JEL: E17 E27 E37 E47
    Date: 2007–02
  11. By: Jaffe, Gregory
    Abstract: "This paper analyzes the current and proposed biosafety systems in Kenya, Tanzania, and Uganda using a set of components and characteristics common to functional and protective biosafety regulatory systems. It also assesses how those systems take into account the major international legal obligations that relate to biosafety, such the Cartagena Biosafety Protocol. The paper identifies certain areas in each country's biosafety regulatory systems where further development and clarification would improve the biosafety system, making it more functional and protective. Those areas include: (1) the addition of procedures to ensure the food safety of genetically engineered organisms; (2) the inclusion of the standard and criteria for making an approval decision; (3) the differentiation of regulatory procedures based on the relative risk of the organism; and (4) an explanation of how socio-economic considerations will be defined and assessed. Finally, the paper discusses possible ways the three countries can coordinate and harmonize their national biosafety regulatory systems so they are efficient, effective and make the best use of limited scientific and legal capacity." Author's Abstract
    Keywords: Biosafety, Food safety, Genetically modified organisms, Genetic engineering,
    Date: 2006
  12. By: Kasai Ndahiriwe (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: This paper investigates the direction of causal relationship between taxes and expenditure in South Africa, using quarterly data for the period 1960:1-2006:2, and annual data for 1960 to 2005. For both frequencies, gross domestic product and government debt are included in the VAR system as control variables. For quarterly data the Johansen’s (1991, 1995) methodology suggest two cointegrating equations among the four variables. Our findings support the fiscal synchronisation hypothesis, since Granger causality tests in a Vector Error Correction framework suggests bi-directional causality between taxes and expenditure for the period under study. In contrast to the VECM for quarterly data, the VECM for annual data disprove any option of Granger causality between taxes and expenditure. The apparent ambiguity is indication of the fact that causality, among other factors, depends on the frequency of data.
    Keywords: Granger causality, Cointegration, Error correction, Vector error correction model, Vector autoregressive model
    JEL: C01 C32 H20 H50
    Date: 2007–07
  13. By: Josine Uwilingiye (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: This paper investigates the direction of temporal causality between budget deficit and interest rate in South Africa using quarterly data for the period of 1961:02 to 2005:04, and also for annual data covering 1961 to 2005. Based on a multivariate Vector Error Correction Model (VECM), estimated using Johansen’s (1991, 1995) Maximum Likelihood Approach, we find that budget deficit Granger causes interest rate in the quarterly data. However, for the annual data, no causal relationship could be detected between the budget deficit and the Treasury bill rate. The two variables of interest are, however, positively cointegrated for both data frequency. Interestingly though, exactly the same results were obtained from the simple Granger causality tests based on a bivariate framework, comprising merely of budget deficit and interest rate.
    Keywords: Cointegration Test, Granger Causality Test, Vector Autoregressive Model, Vector Error Correction Model
    JEL: C01 C32 H20 H50
    Date: 2007–06
  14. By: Falck-Zepeda, Jose; Horna, Daniela; Smale, Melinda
    Abstract: "Cotton is the largest source of export receipts of several West African countries. Statistics however show a decreasing tendency in cotton yields and an increasing tendency in pesticide use. Under this circumstances there appear to be potential payoffs from the use of biotechnology products in the farming systems of the region. In this study we estimate different scenarios for the potential deployment of insect resistant cotton in selected countries in West Africa (WA). We use an economic surplus model augmented with a more rigorous sensitivity analysis of model parameters. Hypothetical scenarios of Bt cotton adoption in WA are simulated and single point values of model parameters are substituted with probability distributions. The scenarios include: no adoption in WA; adoption of existing varieties; adoption of WA varieties backcrossed with private sector lines; and fluctuating adoption patterns. According to the simulations, the total net benefits of adopting Bt seem to be small even after including the innovator surplus who accrues a larger share of the benefits. In contrast the WA countries included in the evaluation are worse off if they decide no to adopt Bt cotton. These results are in part explained by the conservative assumptions taken. The adoption pattern and the length of the adoption period affect the share of benefits earned by producers as compared to innovators. This study provides tools and information that can be used to build greater confidence in the process of setting agricultural research investment priorities." from Authors' Abstract
    Keywords: Economic impacts, Bt-cotton, Economic surplus model, Economic surplus, Risk, Probability distributions, Impact assessment, Net benefits,
    Date: 2007
  15. By: Kohnert, Dirk
    Abstract: The study attempts to highlight the interrelation between three central points in the ongoing debate on the political economy of development: viability, surplus, and class-formation. A case study of the develop¬ment of rural labour systems in Northern Nigeria is meant to provide both a better qualitative and quantitative idea of this interrelation. After an analysis of the socio-economic effects of forced and bonded labour during colonial times, the articulation of different systems of family and non-family labour has been investigated. Class-specific effects of labour and capital input do even result in an increasing use of communal labour by rich and middle peasants after the Nigerian Civil War: its form remains, but its content changes fundamentally. The socio-economic and material base for small-scale peasant subsistence production has been gradually destroyed.
    Keywords: political economy of development; labour systems; rural areas; economic history; Africa; colonialism; Nigeria;
    JEL: J81 J71 N37 P48 Z13 K31 F54 P16 J2 J43 J61 J83 P52
    Date: 1986
  16. By: You, Liangzhi; Wood, Stanley; Wood-Sichra, Ulrike
    Abstract: "Agricultural production statistics reported at country or sub-national geopolitical scales are used in a wide range of economic analyses, and spatially explicit (geo-referenced) production data are increasingly needed to support improved approaches to the planning and implementation of agricultural development. However, it is extremely challenging to compile and maintain collections of sub-national crop production data, particularly for poorer regions of the world. Large gaps exist in our knowledge of the current geographic distribution and spatial patterns of crop performance, and these gaps are unlikely to be filled in the near future. Regardless, the spatial scale of many sub-national statistical reporting units remains too coarse to capture the patterns of spatial heterogeneity in crop production and performance that are likely to be important from a policy and investment planning perspective. To fill these spatial data gaps, we have developed and applied a meso-scale model for the spatial disaggregation of crop production. Using a cross-entropy approach, our model makes plausible pixel-scale assessment of the spatial distribution of crop production within geopolitical units (e.g. countries or sub-national provinces and districts). The pixel-scale allocations are performed through the compilation and judicious fusion of relevant spatially explicit data, including production statistics, land use data, satellite imagery, biophysical crop “suitability” assessments, population density, and distance to urban centers, as wells as any prior knowledge about the spatial distribution of individual crops. The development, application and validation of a prior version of the model using data from Brazil strongly suggested that our spatial allocation approach shows considerable promise. This paper describes efforts to generate crop distribution maps for Sub-Saharan Africa for the year 2000 using this approach. Apart from the empirical challenge of applying the approach across many countries, the application includes three significant model improvements, namely (1) the ability to cope with production data sources that provided different degrees of spatial disaggregation for different crops within a single country; (2) the inclusion of a digital map of irrigation intensity as a new input layer; and (3) increased disaggregation of rainfed production systems. Using the modified spatial allocation model, we generated 5-minute (approximately 10-km) resolution grid maps for 20 major crops across Sub-Saharan Africa, namely barley, dry beans, cassava, cocoa, coffee, cotton, cowpeas, groundnuts, maize, millet, oil palm, plantain, potato, rice, sorghum, soybeans, sugar cane, sweet potato, wheat, and yam. The approach provides plausible results but also highlights the need for much more reliable input data for the region, especially with regard to sub-national production statistics and satellite-based estimates of cropland extent and intensity." from Author's Abstract
    Keywords: Cross entropy, Spatial allocation, Agricultural production, crop suitability, Geographic information systems, Satellite image,
    Date: 2007
  17. By: André C. Jordaan (Investment and Trade Policy Centre, University of Pretoria); Joel Hinaunye Eita (Investment and Trade Policy Centre, University of Pretoria)
    Abstract: This paper investigates the causal relationship between export and economic growth for Botswana, using quarterly data for the period 1995.1-2005.4. It uses two measures of economic growth namely, GDP and GDP excluding export. When GDP is used as a proxy for economic growth, the investigation reveals that GDP causes export. However, when using GDP excluding export as a proxy for economic growth, the results show that there is bi-directional causality between export and economic growth. The results suggest that Botswana can promote its economic growth by exporting more products. The results also suggest that export in Botswana can be raised by increasing economic growth.
    Keywords: Africa, Botswana, Exports, Granger Causality, Growth, Cointegration
    Date: 2007–10
  18. By: Chamberlin, Jordan; Pender, John; Yu, Bingxin
    Abstract: "The choices that smallholder farmers are able to make are strongly conditioned by the geographic conditions in which they live. The importance of this fact for rural development strategy is not lost on policy makers. For example, the government of Ethiopia frequently frames policy discussions by broadly different geographical conditions of moisture availability, recognizing moisture reliable, drought prone and pastoralist areas. These conditions are seen as important criteria for determining the nature, extent and priority of development interventions for different parts of the country. There is considerable evidence, however, that other geographical factors also have important implications for rural development options. This paper uses agroecology, access to markets, and population density to define development domains: geographical locations sharing broadly similar rural development constraints and opportunities. Unlike similar efforts conducted elsewhere, this work is unique in that it seeks to move away from a subjective mapping of factors of theorized importance to a more rigorous definition of development domains on the basis of quantitative data on smallholder livelihood strategies. After selecting variables for mapping, we calibrate our definition for domains in such a way that their explanatory power is maximized across a range of livelihood strategies that figure in the current Ethiopian rural development discourse (market engagement, dependence upon agriculture, etc.)." Authors' Abstract
    Keywords: Smallholders, Small farmers, Geographic conditions, rural development strategies, Development policy, Agro-ecology, Market access, Livelihoods, Population density,
    Date: 2006
  19. By: Benin, Samuel; Nkonya, Ephraim; Okecho, Geresom; Pender, John; Nahdy, Silim; Mugarura, Samuel; Kayobyo, Godfrey
    Abstract: "The National Agricultural Advisory Services (NAADS) program of Uganda is an innovative public-private extension service delivery approach, with the goal of increasing market oriented agricultural production by empowering farmers to demand and control agricultural advisory services. Although initial evaluations of NAADS have been quite favourable, these evaluations have been primary qualitative in nature. This study quantifies the initial impacts of NAADS in the districts and sub-counties where the program was operating by 2005. It is based on descriptive analyses of results of a survey of 116 farmer groups and 894 farmers in sixteen districts where the program was operating at the time and four districts where NAADS had not yet begun operating to control for factors that may have contributed to differing initial conditions among the communities. Based on observed differences across the NAADS and non-NAADS sub-counties, it appears that the NAADS program is having substantial positive impacts on the availability and quality of advisory services provided to farmers, promoting adoption of new crop and livestock enterprises as well improving adoption and use of modern agricultural production technologies and practices. NAADS also appears to have promoted greater use of post-harvest technologies and commercial marketing of commodities, consistent with its mission to promote more commercially-oriented agriculture. Despite positive effects of NAADS on adoption of improved production technologies and practices, no significant differences were found in yield growth between NAADS and non-NAADS sub-counties for most crops, reflecting the still low levels of adoption of these technologies even in NAADS sub-counties, as well as other factors affecting productivity. However, NAADS appears to have helped farmers to avoid the large declines in farm income that affected most farmers between 2000 and 2004, due more to encouraging farmers to diversify into profitable new farming enterprises such as groundnuts, maize and rice than to increases in productivity caused by NAADS. NAADS appears to be having more success in promoting adoption of improved varieties of crops and some other yield enhancing technologies than in promoting improved soil fertility management. This raises concern about the sustainability of productivity increases that may occur, since such increases may lead to more rapid soil nutrient mining unless comparable success in promoting improved soil fertility management is achieved. Continued emphasis on improving the market environment, promoting adoption of more remunerative crop enterprises, and applied agronomic research identifying more effective ways to profitably combine inorganic and organic soil fertility measures in different crop systems can help to address this problem. Shortage of capital and credit facilities was often cited by farmers as a critical constraint facing them, in addition to scarcity of agricultural inputs, lack of adequate farmland, unfavorable weather patterns and problems of pests and diseases. These emphasize that the quality of advisory services is not the only important factor influencing technology adoption and productivity, and the need for complementary progress in other areas, especially development of the rural financial system. Implications are drawn for enterprise targeting and ensuring sustainability of improvements in productivity, as well as for designing and implementing service provision programs in other parts of the Uganda and in other countries." from Author's Abstract
    Keywords: Impact assessment, Agricultural extension,
    Date: 2007
  20. By: Thurlow, James; Kiringai, Jane; Gautam, Madhur
    Abstract: "Kenya's economy is relatively diverse, with both agricultural and industrial potential. However, the economy has performed poorly over the last decade, and poverty and inequality have risen. This paper examines the impact of alternative growth paths and rural investments on poverty using an economy-wide model. It finds that if Kenya continues along its current growth path, its economy will have to grow by more than 10 percent per year over the coming decade to meet the Millennium Development Goal (MDG) of halving poverty by 2015. Therefore, Kenya must search for alternative sources of poverty-reducing growth. The results of the model indicate that poverty is unlikely to decline significantly without an acceleration of agricultural growth. Growth in agriculture is found to benefit both urban and rural households, whereas industry-led growth benefits a smaller segment of the urban population, thus exacerbating inequality. Kenya's current Economic Recovery Strategy, however, is not optimistic about agriculture's growth potential, focusing more heavily on industry-led growth. Therefore, as Kenya prepares its new national strategy, the country should place greater emphasis on and direct resources toward accelerating agricultural growth. In assessing the impact of rural investments on growth and poverty, the paper finds that increasing agricultural spending to meet the 10 percent target set by the Maputo Declaration would lift an additional 1.5 million people above the poverty line by 2015. Specific agricultural investments have higher returns in different parts of the country, however. Irrigation favors the lowlands and the poorest segment of the population, while research and extension (R&E) favors the midlands and highlands. Investment in R&E is also found to have the highest returns in both growth and poverty reduction. However, increasing agricultural spending to 10 percent of total spending is insufficient to meet either the MDG or the 6 percent agricultural growth target of the Comprehensive African Agriculture Development Program, which Kenya has recently adopted. . Achieving this target requires nonagricultural investments, such as in roads and market development. Building rural roads and reducing agricultural transaction costs significantly reduces poverty and encourages growth beyond rural areas. While it is necessary to increase spending on agriculture, the fiscal burden of an agricultural strategy can be greatly reduced by improving investment efficiency." from Author's Abstract
    Keywords: Agriculture, Rural investment, Poverty, Inequality,
    Date: 2007
  21. By: Samuel Zita (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: The paper uses Gibbs sampling technique to estimate a heteroscedastic Bayesian Vector Error Correction Model (BVECM) of the South African economy for the period 1970:1-2000:4, and then forecast GDP, consumption, investment, short and long term interest rates, and the CPI over the period of 2001:1 to 2005:4. We find that a tight prior produces relatively more accurate forecasts than a loose one. The out-of-sample-forecast accuracy resulting from the Gibbs sampled BVECM is compared with those generated from a Classical VECM and a homoscedastic BVECM. The homoscedastic BVECM is found to produce the most accurate out of sample forecasts.
    Keywords: Forecast Accuracy, Metical-Rand Exchange Rate, Random Walk, Sticky-Price Model, VAR Forecasts, VECM Forecasts
    JEL: B23 C22 F31 E17 E27 E37 E47
    Date: 2007–02
  22. By: Margaret Chitiga (Department of Economics, University of Pretoria); Ramos Mabugu (Department of Economics, University of Pretoria); Tonia Kandiero (National Treasury)
    Abstract: The paper uses a micro-simulation computable general equilibrium (CGE) model to study the impact on poverty of a complete removal of tariffs in Zimbabwe. The model incorporates 14006 households derived from the 1995 Poverty Assessment Study Survey. This paper’s novelty is that it is one among a small group of papers that incorporates individual households in the CGE model as opposed to having representative households. Using individual households allows for a comprehensive analysis of poverty. The complete removal of tariffs favours exporting sectors. Poverty falls in the economy while inequality hardly changes. The results differ between rural and urban areas.
    Keywords: Computable General Equilibrium, Trade Liberalisation, Micro-simulation, Poverty, Inequality
    JEL: C68 D31 D58 I32
    Date: 2007–09
  23. By: Albert H. De Wet (First Rand Bank); Reneé Van Eyden (Department of Economics, University of Pretoria)
    Abstract: Driven by intense competition for market share banks across the globe have increasingly allowed credit portfolios to become less diversified (across all dimensions - country, industry, sector and size) and were willing to accept lesser quality assets on their books. As a result, even well capitalised banks could come under severe solvency pressure when global economic conditions turn. The banking industry have realised the need for more sophisticated loan origination, credit and capital management practices. To this end, the reforms introduced by the Bank of International Settlement through the New Basel Accord (Basel II) aim to include exposure specific credit risk characteristics within the regulatory capital requirement framework. The new regulatory capital framework still does not allow diversification and concentration risk to be fully recognised within the credit portfolio because it does not account for systematic and idiosyncratic risk in a multifactor framework. The core principle for addressing practical questions in credit portfolio management is enclosed in the ability to link the cyclical or systematic components of firm credit risk with the firm’s own idiosyncratic credit risk as well as the systematic credit risk component of every other exposure in the portfolio. Simple structural credit portfolio management approaches have opted to represent the general economy or systematic risk by a single risk factor. The systematic component of all exposures, the process generating asset values and therefore the default thresholds are homogeneous across all firms. Indeed, this Asymptotic Single Risk Factor (ASRF) model has been the foundation for Basel II. While the ASRF framework is appealing due to its analytical closed-form properties for regulatory and generally universal application in large portfolios, the single risk factor characteristic is also its major drawback. Essentially it does not allow for enough flexibility in answering real life questions. Commercially available credit portfolio models make an effort to address this by introducing more systematic factors in the asset value generating process but from a practitioner’s point of view, these models are often a “black-box” allowing little economic meaning or inference to be attributed to systematic factors. The methodology proposed by Pesaran, Schuermann, and Weiner (2004) and supplemented by Pesaran, Schuermann, Treutler and Weiner (2006) has made a significant advance in credit risk modelling in that it avoids the use of proprietary balance sheet and distance to default data, focussing on credit ratings which are more freely available. Linking an adjusted structural default model to a structural global econometric model (GVAR) credit risk analysis and portfolio management can be done through the use of a conditional loss distribution estimation and simulation process. The GVAR model used in Pesaran et al. (2004) comprises a total of 25 countries which is grouped into 11 regions and accounts for 80 per cent of world production. In the case of South Africa the GVAR model lacks applicability since it does not include an African component. In this paper we construct a country specific macro-econometric risk driver engine which is compatible with and could feed into the GVAR model and framework of PSW (2004) using vector error correcting (VECM) techniques. This will allow conditional loss estimation of a South African specific credit portfolio but also opens the door for credit portfolio modelling on a global scale as such a model can easily be linked into the GVAR model. We extend the set of domestic factors beyond those used in PSW (2004) in such a way that the risk driver model is applicable for both retail and corporate credit risk. As such, the model can be applied to a total bank balance sheet, incorporating the correlation and diversification between both retail and corporate credit exposures. Assuming statistical over-identification restrictions, our results indicate that it is possible to construct a South African component for the GVAR model and that such a component could easily be integrated into a global content. From a practical application perspective the framework and model is particularly appealing since it could be used as a theoretically consistent correlation model within a South African specific credit portfolio management tool.
    Keywords: Credit portfolio management, multifactor model, vector error correction model (VECM), credit correlations
    JEL: C32 C51 E44
    Date: 2007–09
  24. By: Marc Ground (Department of Economics, University of Pretoria); Steven F. Koch (Department of Economics, University of Pretoria)
    Abstract: Estimates of participation or expenditure elasticities depend upon the assumptions made regarding the observation of zero expenditure at the household level. This research examines two single-hurdle models across two commodities for which nearly two-thirds of the observations are zero. The research shows that one hurdle model consistently outperforms the other, and does so for intuitively appealing reasons.
    JEL: C31 D12
    Date: 2007–02
  25. By: Bernard, Tanguy; Gabre-Madhin, Eleni; Taffesse, Alemayehu Seyoum
    Abstract: "This paper examines the impact of cooperatives on smallholder commercialization of cereals, using detailed household data from rural Ethiopia. We review the involvement of cooperatives, in terms of who participates and where they are located. We then use the strong government role in promoting the establishment of cooperatives to assume that the decision of where to establish a cooperative is largely driven by external considerations, and is thus exogenous to the members themselves justifying the use of propensity-score matching in order to compare households that are cooperative members to similar households in comparable areas without cooperatives. Four conclusions are derived from the analysis. First, despite the spread of cooperatives – they existed in less than 15 percent of districts in 1994 and nearly 35 percent in 2005 – there are important disparities across regions. Within regions, cooperatives tend to be located in areas that already have better access to markets and lower exposure to price and environmental risks. Second, at the household level participation is only 9 percent, with poorer households less likely to participate. Third, while cooperatives obtain higher prices for their members, they are not associated with a significant increase in the overall share of cereal production sold by their members. Fourth, these average results hide considerable heterogeneity in the impact across households. In particular, we find smaller farmers tend to reduce their marketable surplus as a result of higher prices, while the opposite is true for larger farmers." from Authors' Abstract
    Keywords: Smallholders, Marketing, Cooperatives, Commercialization, Cereal crops,
    Date: 2007
  26. By: Yesuf, Mahmud; Bluffstone, Randy
    Abstract: "Production systems in low-income developing countries are generally poorly diversified, focusing on rainfed staple crop production and raising livestock. These activities are inherently risky and investment and production decisions by farm households are therefore made within environments that are affected by risk. Because of poorly developed or absent credit and insurance markets it is difficult to pass any of these risks to a third party. As a result, it is often found that even when the expected net return is high, households are reluctant to adopt new agricultural technologies when they involve risk. Better understanding risk behavior will be essential for identifying appropriate farm-level strategies for adaptation to climate change by low-income farmers. Despite risk's potentially central role in farm investment decisions, there have been few attempts to estimate the magnitude and nature of risk aversion of farm households in low-income developing countries. To partially close this gap, this paper uses an experimental approach applied to 262 households in the Ethiopian highlands with real payoffs. By incorporating both small and large stakes and gains and losses into the experiment, we test for the presence of low stake risk aversion and loss aversion. We find that more than 50 percent of the households are severely or extremely risk averse. This contrasts with studies in Asia where most household decision-makers exhibit moderate to intermediate risk aversion. We find that households that stand to lose as well as gain something from participation in games are significantly more risk averse than households playing gains-only games. This strongly suggests that agricultural extension efforts involving losses as well as gains may face systematic resistance by farmers in low-income, high-risk environments. Promotion of technologies with downside risks – even if the upside potential is enormous – should therefore be combined with insurance or other support. We also find that even without the possibility of losses households are much more averse to risk when stakes are high. Results indicate that insurance or other support can likely be phased out. After initial successes have convinced farmers that technologies are viable, risk aversion declines. There are also significant differences in risk averting behavior between relatively poorer and wealthier farm households, which is consistent with decreasing absolute risk aversion. This suggests that as wealth is built up households are willing to take on more risk in exchange for higher returns. Both these findings suggest a strong path dependence. Efforts to develop poor rural areas through promotion of risky technologies should take this path dependence into account. Early successes are important, but households should also be allowed to build up wealth before they are challenged or tempted to take on more risky ventures. Furthermore, the finding that even without the possibility of losses households are much more risk averse when stakes are higher, suggests that agricultural extension should start modestly before asking households to take on larger gambles." from Authors' Abstract
    Keywords: experimental studies, loss aversion, risk aversion, econometric models, Farm households,
    Date: 2007
  27. By: Minten, Bart
    Abstract: "Global retail chains are becoming increasingly dominant in the global food trade and their rise leads to dramatic impacts on agricultural supply chains and on small producers. However, the prospects and impacts of a food retail revolution in poor countries are not yet well understood. Here, we examine this question in Madagascar, a poor but stable country where global retailers have been present for over a decade. Our survey and analysis finds that while global retail chains sell better quality food, their prices are 40 to 90% higher, ceteris paribus, than those seen in traditional retail markets. In poor settings, characterized by high food price elasticities, a lack of willingness to pay for quality, and small retail margins, supermarkets appear to set prices with an eye toward maximizing profits based on price-inelastic demands for quality products from a small middle class interested in one-stop shopping. It seems unlikely that global retail chains will further increase their food retail share in such poor settings." from Authors' Abstract
    Keywords: Food retail, Supermarkets, Food quality, Poor Developing countries,
    Date: 2007
  28. By: Alexandre BERTIN (GREThA); David LEYLE (ADES)
    Abstract: The aim of this contribution is to present the several steps needed in order to evaluate multidimensional poverty. Based on the capability approach and more precisely on its informational basis, a list of achieved functionings, one offers a measure of multidimensional well-being and evaluates the incidence of the multidimensional poverty, based on data collected within the “Observatoires de la Guinée Maritime” Project..
    Keywords: poverty, capabilities, functionings, fuzzy sets theory, Maritime Guinea, observatories
    JEL: C81 I32
    Date: 2007
  29. By: Joel Hinaunye Eita (Investment and Trade Policy Centre, University of Pretoria); André C. Jordaan (Investment and Trade Policy Centre, University of Pretoria)
    Abstract: This paper analyses the causal relationship between financial development and economic growth in Botswana for the period 1977 to 2006, using Granger causality through cointegrated Vector Autoregression methods. The results show that there is a stable long- run relationship between financial development and economic growth. Financial development causes economic growth in Botswana. The causality runs from financial development to economic growth. The results suggest that the financial sector is important in the economic growth and development of Botswana. Financial intermediation and institutional financial reforms should be enhanced in order to promote Botswana’s economic growth.
    Date: 2007–10
  30. By: Albert Makochekanwa (Department of Economics, University of Pretoria)
    Abstract: The purpose of this study is to determine the causes of hyperinflation in Zimbabwe for the period February 1999 to December 2006 using appropriate econometric techniques. Results from long run and shot run econometric models shows money supply, black market for foreign exchange (US$) and lagged values of hyperinflation to be positively correlated with the country’s hyperinflation trend. This result accords well with the various theories of hyperinflation. Surprisingly, political rights index as a determinant is negatively associated with hyperinflation, suggesting that an increase in this variable reduces hyperinflation. This is against economic theory, which expects a positive sign for this, variable. Granger causality test is also conducted between money supply and hyperinflation to empirically test the direction of causality, while sensitivity tests are done to infer the effect of money supply shock on hyperinflation trend.
    Date: 2007–07
  31. By: Albert Makochekanwa (Department of Economics, University of Pretoria)
    Abstract: This paper investigates the causes of capital flight from Zimbabwe for the period 1980 to 2005. The results show external debt, foreign direct investment inflows, and foreign reserves to be the major causers of capital flight. Economic growth is negatively correlated with capital flight. The calculations estimate Zimbabwean capital flight at US $10.1 billion over the 1980 to 2005 period, with capital flight-to-GDP ratio roughly 5.4 per cent. In other words, for every US dollar of GDP accumulated by Zimbabwe annual from 1980 to 2005, private Zimbabwean residents accumulated (US) 5.4 cents of external assets annually during the same period.
    Keywords: Capital flight, external debt, foreign direct investment inflows, macroeconomic instability
    JEL: F39 O11
    Date: 2007–07
  32. By: Murat YILDIZOGLU (GREThA); Mohamed AYADI (UAQUAP, Université de Tunis); Mohieddine RAHMOUNI (UAQUAP et GREThA)
    Abstract: We analyze in this article main determinants of technology dynamics in Tunisian manufacturing sectors. The data from the industrial survey provided by Ministry of Scientific Research, Technology and Competency Development (MSRTCD) for the period 2002-2004 is explored using regression trees and Probit models in order to discover main factors that favor the innovative capacity of Tunisian firms. Our results show that we must distinguish process and product innovations because they are driven by different mechanisms. Moreover, we observe that sectoral heterogeneity should not be neglected and we study more in detail fours sectors that are particularly well represented in our sample. This analysis allows us to suggest some differentiated policy indications for fostering innovative capacity in these sectors.
    Keywords: Industry dynamics; Innovation systems; Development economics; Sectoral systems of innovation
    JEL: O12 O30
    Date: 2007
  33. By: Albert Makochekanwa (Department of Economics, University of Pretoria)
    Abstract: The research attempts to empirically study the demand for money, especially the magnitudes of the price expectation and real cash balance adjustment for Zimbabwe. Price expectation and real cash balance adjustment models are estimated. The results show that both the interest rate and the rate of change in prices are relevant variables for explaining the variations in the demand for real cash balances in Zimbabwe. Overall, the findings suggest that the Zimbabwean hyperinflation does not appear to have been a self- generating process independent of money supply.
    Keywords: Hyperinflation, Real Cash Balances, Price Expectation, Equilibrium, Error Correction Model
    JEL: E41 P24 E51
    Date: 2007–07
  34. By: Albert Makochekanwa (Department of Economics, University of Pretoria)
    Abstract: This paper looks into the changes of the black market premium for foreign exchange in Zimbabwe. Generally, the black market for foreign exchange arises as a direct consequence of the adoption of exchange rate controls in many developing economies facing substantial macroeconomic imbalances. Despite its negative impact on Zimbabwe’s economy, this market has not, so far, attracted the attention of researchers. The research attempts to describe the functioning of the black market and find out the determinants of the parallel premium based on a stock-flow model as well as to investigate whether inflation Granger causes the parallel exchange rate. Estimated results reveal that the determinants of the black market premium are international foreign reserves, real exchange rate, lagged values of the black market premium, expected rate of devaluation, money supply and inflation. On the other hand, inflation and black market are found to Granger-cause each other during the period under consideration.
    Keywords: Black Market Exchange Rate, Black Market Premium, Foreign Exchange Controls, Cointegration, Granger Causality
    JEL: F31 C23
    Date: 2007–07

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