nep-afr New Economics Papers
on Africa
Issue of 2010‒01‒23
seven papers chosen by
Quentin Wodon
World Bank

  1. Africa and the global economic crisis: A Risk assessment and action guide By Naudé, Wim
  2. Seed Business Management in Africa By MacRobert, John F.
  3. Agricultural Export Subsidies and Domestic Support reform under the WTO System:What does it mean for Welfare in West Africa? By J.Alexander Nuetah; Ting Zuo; Xian Xin
  4. Are Managers’ Perceptions of Constraints to Growth Reliable? Evidence from a Natural Experiment in South Africa By Clarke, George
  5. National drought insurance for Malawi By Syroka, Joanna; Nucifora, Antonio
  6. Potential benefits and risks of increased aid flows to Burundi By Nielsen, Hannah; Madani, Dorsati
  7. Capital-Skill Complimentarity: Evidence from Manufacturing Industries in Ghana By Akay, Gokhan H.; Yuksel, Mutlu

  1. By: Naudé, Wim
    Abstract: It is increasingly apparent that, despite earlier hopes, the global economic crisis will have a significant impact on the economies of Sub-Saharan Africa. In order to co-ordinate and craft the most appropriate responses for African economies to withstand and recover from the crisis, it is necessary to identify the degree to which the continent, as well as the individual African countries, is at risk of being negatively impacted. This depends on both vulnerability to trade and financial shocks, as well as the resilience of countries to cope with these shocks. Accordingly, vulnerability and resilience indices are constructed for the continent and individual countries. It is shown that, of all developing regions, Africa is the most at risk from the crisis: it has higher vulnerability to trade and financial shocks, and it has the least resilience of all regions. Based upon a vulnerability-resilience matrix, the African countries most at risk are the Democratic Republic of the Congo, Burundi, Côte D’Ivoire, Liberia, Angola, the Sudan, Chad, Guinea-Bissau, Guinea, Zimbabwe, Somalia, Kenya, Mali, Nigeria, Ghana, Cape Verde and Mauritania. With a few notable exceptions, such as Kenya and Ghana, these are all ‘fragile states’. Based upon the distinction between vulnerability and resilience, an action guide is proposed. This makes a distinction between short-term and longer-term actions, in particular between actions aimed at mitigating the impact of the external shocks, assisting countries to cope, and actions aimed at reducing risk.
    Keywords: Africa;Global Economic Crisis; Vulnerability
    JEL: O11 O55
    Date: 2010–01–08
  2. By: MacRobert, John F.
    Keywords: Seed industry, Seed production, Trade, Commodity markets, Marketing, Agribusiness, Crop Production/Industries, E10, E20, E21, E70, E73, F03,
    Date: 2009
  3. By: J.Alexander Nuetah; Ting Zuo; Xian Xin (College of Economics and Management, China Agricultural University Center for Rural Development Policy, China Agricultural University)
    Abstract: This article focuses on analyzing the potential welfare impacts the West African region will experience from reforming agricultural export subsidies and domestic support in developed and developing countries under the Doha Development Agenda. Results indicate that consumers of nearly all of the commodities analyzed will encounter welfare losses, while almost all producers of these commodities will experience welfare gains. However, the gains by producers are insufficient to compensate consumers¡¯ losses, and so all fourteen West African nations analyzed will end up with net welfare losses from these reforms. This finding validates other research results indicating that net food importing countries will become losers of agricultural trade reform, while net food exporters will experience more welfare gains. The implications for the region will be more poverty and heightened food insecurity as three of the countries in the region¡ªNiger, Sierra Leone and Liberia were already listed in the 2008 Global Hunger Index report as nations hardest hit by hunger.
    Keywords: Agriculture, Trade, Export Subsidies, Domestic Support, Welfare
    JEL: F13 F15 F17
    Date: 2010–01
  4. By: Clarke, George
    Abstract: Can surveys of what managers see as the biggest problems that their firm faces provide useful information on the main constraints to private sector and economic development and be used to prioritize reforms in these areas? One of many concerns about doing this is that managers’ responses to questions about specific areas of the investment climate might reflect their assessment of overall investment climate or their overall business confidence rather than their views on that specific area of the investment climate. This paper uses a natural experiment in South Africa to assess whether this is the case. When the World Bank’s 2007-2008 Enterprise Survey was being carried out, a major electricity crisis hit South Africa. The crisis resulted in many more managers saying that power was a serious constraint on enterprise operations—the share rose from about 10 percent of managers before the crisis to close to 50 percent after the crisis. But it also resulted in greater concern about most other areas of the investment climate—including areas such as taxation, regulation, and other areas of infrastructure that were unrelated to the crisis. This suggests that managers do not fully compartmentalize their responses. Moreover, the changes were large enough to suggest that cross-time and cross-country comparisons of perception data will be difficult.
    Keywords: Subjective Data; Firm-level Data; Perceptions; South Africa
    JEL: O2 C42 O20 O12
    Date: 2010–01–17
  5. By: Syroka, Joanna; Nucifora, Antonio
    Abstract: Malawi has experienced several catastrophic droughts over the past few decades. The impact of these shocks has been far reaching, and the resulting macroeconomic instability has been a major constraint to growth and poverty reduction in Malawi. This paper describes a weather risk management tool that has been developed to help the government manage the financial impact of drought-related national maize production shortfalls. The instrument is an index-based weather derivative contract designed to transfer the financial risk of severe and catastrophic national drought that adversely impacts the government's budget to the international risk markets. Because rainfall and maize yields are highly correlated, changes in rainfall -- its timing, cumulative amount, and distribution -- can act as an accurate proxy for maize losses. An index has been constructed using rainfall data from 23 weather stations throughout Malawi and uses daily rainfall as an input to predict maize yields and therefore production throughout the country. The index picks up the well documented historical drought events in 2005, 1995, 1994, and 1992 and a weather derivative contract based on such an index would have triggered timely cash payouts to the government in those years. This innovative risk management instrument was pioneered in 2008/2009 by the Government of Malawi, with the assistance of the World Bank, and was a first for a sovereign entity in Africa. Several piloting seasons will be necessary to understand the scope and limitations of such contracts, and their role in the government's strategy, contingency planning, and operational drought response framework.
    Keywords: Debt Markets,Hazard Risk Management,Banks&Banking Reform,Labor Policies,Insurance&Risk Mitigation
    Date: 2010–01–01
  6. By: Nielsen, Hannah; Madani, Dorsati
    Abstract: Burundi has experienced a significant increase in aid flows in recent years. Currently, about half of the budget is funded by aid, mostly grants. The high external assistance has, however, not yet translated into high and sustainable growth rates. This paper analyzes (i) the policy response of the government to the aid surge and its impact on macroeconomic variables; and (ii) the allocation of external assistance and its implications for growth. Since not all aid affects economic development in the same way, aid disbursements are disaggregated by sector as well as by their lag in impacting growth. The analysis shows that Burundi has mostly spent and absorbed increased aid flows, but has until now not suffered significantly from the possible negative effects of an appreciating exchange rate and the related loss of competitiveness, but the possibility of a Dutch disease effect remains a risk. The country’s low growth performance, despite high aid inflows, is not necessarily a sign that aid is ineffective or exceeding Burundi’s absorptive capacity. It reflects that a large share of aid has been allocated to either humanitarian and emergency aid or long-run growth enhancing sectors. Therefore, the lagged impact of aid on economic growth is not yet visible. Furthermore, the composition of the domestically financed budget is biased toward recurrent spending, and therefore not directly growth enhancing. In addition, low and often unpredictable aid disbursement ratios aggravate the bias away from investment and toward government consumption. To boost short-term growth, the share of aid allocated to productive sectors, such as agriculture and the supporting infrastructure, needs to be increased. Firm commitments and timely disbursements of aid by donors are essential and the Government of Burundi needs to strengthen its capacity and mechanisms for donor coordination.
    Keywords: Debt Markets,Development Economics&Aid Effectiveness,Public Sector Expenditure Policy,Currencies and Exchange Rates,Economic Theory&Research
    Date: 2010–01–01
  7. By: Akay, Gokhan H. (Trinity University); Yuksel, Mutlu (IZA)
    Abstract: Using U.S. manufacturing data, Griliches (1969) found evidence suggesting that capital equipment was more substitutable for unskilled than skilled labor. Griliches formulated this finding as the capital-skill complementarity hypothesis. The purpose of this study is to determine whether the capital-skill complementarity framework holds for Ghana manufacturing plants in industry and aggregate level. We use an unbalanced panel of plant-level data for manufacturing firms in Ghana during the 1991 and 1997 in four industries (food-bakery, textiles-garments, wood-furniture and metal-machinery). Our findings suggest that capital-skill complimentarity holds in aggregate level and wood-furniture sector in Ghana. However, we reject the capital-skill complementarity hypothesis for food-bakery, textile-garment and metal-machinery sectors.
    Keywords: capital-skill complementarity, elasticity of substitution, translog cost function
    JEL: J30 O55
    Date: 2009–12

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