nep-afr New Economics Papers
on Africa
Issue of 2010‒11‒20
thirteen papers chosen by
Quentin Wodon
World Bank

  1. China in Africa: A Macroeconomic Perspective By Benedicte Vibe Christensen
  2. Mobilising Tax Revenue to Finance Development: The Case for Property Taxation in Francophone Africa By Nara Monkam
  3. Foreign Direct Investment and the Internationalisation of South African Mining Companies into Africa By John Luiz; Meshal Ruplal
  4. Why a diversified portfolio should include African assets By Paul Alagidede; Theodore Panagiotidis; Xu Zhang
  5. Fiscal Policy Design in Low-Income Countries By Christopher S. Adam; David L. Bevan
  6. Southern Engines of Global Growth: Very Long Cycles or Short Spurts? By Meghnad Desai
  7. Analysing Alternative Policy Response to High Oil Prices, Using an Energy Integrated CGE Microsimulation Approach for South Africa By Margaret Chitiga; Ismail Fofana; Ramos Mabugu
  8. Intrinsic motivations and the non-profit health sector: Evidence from Ethiopia.. By Serra, Danila; Serneels, Pieter; Barr, Abigail
  9. Who Benefits from Promoting Small Enterprises? Some Empirical Evidence from Ethiopia.. By Rijkers, Bob; Ruggeri Laderchi, Caterina; Teal, Francis
  10. Addressing the Plight of Poor Households by Zero-Rating Value Added Tax on Basic Commodities In Namibia By Ojijo Odhiambo; John E. Odada
  11. Local Water Governance: Negotiating Water Access and Resolving Resource Conflicts in Tanzanian Irrigation Schemes By Johanna Kramm; Lars Wirkus
  12. When the remedy is worse than the disease: Adjusting survey income data for price differentials, with special reference to Mozambique By Carlos Maia; Servaas van der Berg
  13. Addressing the Plight of Poor Households by Zero-Rating VAT on Basic Commodities in Namibia By Ojijo Odhiambo; John E. Odada

  1. By: Benedicte Vibe Christensen
    Abstract: In recent years, China has dramatically expanded its financing and foreign direct investment to Africa. This expansion has served the political and economic interests of China while providing Africa with much-needed technology and financial resources. This paper looks at China’s role in Africa from the Chinese perspective. [Working Paper No. 230].
    Keywords: china, chinese, africa, political, economic, technology, financial resources, macroeconoic, african, global environment, trade,
    Date: 2010
  2. By: Nara Monkam
    Abstract: In the context of a widespread focus on decentralisation in Africa, there has been an imperative to find suitable ways to maximise potential own revenue sources at all sub-national government levels. This need in particular and the need for greater domestic resource mobilisation by African states in general have been exacerbated by the current global financial crisis that has led many countries into recession and left developed and developing countries alike scrambling to find solutions at home. Indeed, greater domestic resource mobilisation will go a long way toward providing African countries with the means to finance their development agenda without relying excessively on external assistance.
    Date: 2010
  3. By: John Luiz; Meshal Ruplal
    Abstract: The paper investigates the factors influencing the internationalisation of mining firms into Africa and the strategies employed. We focus on the FDI of South African mining firms because of the dominance of this country in the extractive resources industry for over a century. A semi-structured interview survey process consisting of written questionnaires and one-on-one interviews that incorporated both structured as well as open-ended questions was used. The structured questionnaire attempted to identify the entry-mode characteristics of the mining firms as well as the importance of the factors influencing the internationalisation of mining firms. The open-ended questionnaire was designed to be probing in nature, in order to identify how mining companies manage the factors deemed present in an operational context. More than 80% of South African mining firms by market capitalisation provided responses to the survey. The research revealed that security of tenure, political stability and the availability of infrastructure were the three most important factors influencing the internationalisation of South African mining firms out of the nine factors tested in the survey. The most widespread strategies used to manage these factors were political lobbying, bargaining and negotiation.
    Keywords: Theory of FDI and the MNE (Ownership-Location-Internalization), Mining, Africa, Factor Analysis, Incorporating Country Variables
    JEL: F23 L72 O55
    Date: 2010
  4. By: Paul Alagidede (Department of Economics, University of Stirling); Theodore Panagiotidis (Department of Economics, University of Macedonia); Xu Zhang (Guosen Research Institute)
    Abstract: We employ parametric and non-parametric cointegration to investigate the extent of integration between African stock markets and the rest of the world. Long-run correlation estimates imply very low association between the two. The two distinct cointegration approaches confirm the latter through recursive estimation. The implication is that global market movements may have little impact on Africa. However, we argue that including African assets in a mean variance portfolio could be beneficial to international investors.
    Keywords: Correlation, Long-run correlation, Cointegration, Non-parametric cointegration, African Stock Markets.
    JEL: C22 C52 G10
    Date: 2010–11
  5. By: Christopher S. Adam; David L. Bevan
    Abstract: For many low-income countries, there has been an extended period in which fiscal policy was not a choice, or was a choice made by authorities external to the country. For a number of them, this situation is now changing. Their own success in stabilising the economy, coupled with a shift in the stance of the international community (most notably the IMF), has placed fiscal choices back on the domestic agenda. However, the scope for choice maybe heavily circumscribed by the legacy of past fiscal laxity. [Discussion Paper No. 2001/67]
    Keywords: fiscal policy, macro-economic stabilization, sub-Saharan Africa
    Date: 2010
  6. By: Meghnad Desai
    Abstract: This article views the four economies of the South in a long run historical perspective of 1500-2000. It contrasts the history and the initial endowments of the two Northern hemisphere economies China and India which are land scarce and labour abundant with the two Southern hemisphere economies Brazil and South Africa which are land abundant and labour scarce. It argues for different strategies for future growth and discusses impediments which may come in the paths of these four economies in the near future. [Discussion Paper No. 2008/02]
    Keywords: China, India, Brazil, South Africa, development, history
    Date: 2010
  7. By: Margaret Chitiga; Ismail Fofana; Ramos Mabugu
    Abstract: An energy-focused integrated CGE microsimulation approach is used to assess the implications of differential government policy responses in South Africa, to increases in international oil prices. The first scenario assumes that increases in world oil and petroleum products are passed through to end users with no changes in government tax/subsidy instruments. The second scenario assumes that the world price increases are nullified by a full price subsidy by government in one scenario, while, in the third scenario, revenues generated from a 50 percent tax on the windfall profit of the synthetic petroleum industry, help to minimize the loss in government revenue. Overall output falls by between 2.2 and 2.5 percent, while the government deficit varies from a worsening of 12 to 22 percent under the three scenarios. Synthetic petroleum, coal, and electricity benefit under the floating price scenario, while none expands its output when a 50 percent tax is levied on the profit of the synthetic petroleum industry. Unemployment increases among medium and low-skilled workers, while skilled workers witness a substantial fall in their remuneration, particularly in rural areas. In both rural and urban areas, women are adversely affected relative to men. The poverty headcount ratio and inequality increase slightly more in the price-setting scenarios relative to the floating-price scenario. Thus, allowing the prices to be passed through to end users probably has a less adverse impact at a macroeconomic level, although there may be adverse distributional consequences.
    Date: 2010
  8. By: Serra, Danila; Serneels, Pieter; Barr, Abigail
    Abstract: Economists have traditionally assumed that individual behavior is motivated exclusively by extrinsic incentives. Social psychologists, in contrast, stress that intrinsic motivations are also important. In recent work, economic theorists have started to build psychological factors, like intrinsic motivations, into their models. Besley and Ghatak (2005) propose that individuals are differently motivated in that they have different “missions,” and their self-selection into sectors or organizations with matching missions enhances organizational efficiency. We test Besley and Ghatak’s model using data from a unique cohort study. We generate two proxies for intrinsic motivations: a survey-based measure of the health professionals philanthropic motivations and an experimental measure of their pro-social motivations. We find that both proxies predict health professionals’ decision to work in the non-profit sector. We also find that philanthropic health workers employed in the non-profit sector earn lower wages than their colleagues.
    JEL: I11 J24 C93
    Date: 2010
  9. By: Rijkers, Bob; Ruggeri Laderchi, Caterina; Teal, Francis
    Abstract: The Addis Ababa Integrated Housing Development Program (AAIHDP) aims to tackle the housing shortage and unemployment that prevail in Addis Ababa by deploying and supporting small enterprises to construct low-cost housing using technologies novel for Ethiopia. The motivation for such support is predicated on the view that small firms create more jobs per unit of investment by virtue of being more labor intensive and that the jobs so created are concentrated among the low-skilled and hence the poor. To assess whether the program has succeeded in biasing technology adoption in favor of labor and thereby contributed to poverty reduction, the impact of the program on technology usage, labor intensity, and earnings is investigated using a unique matched workers-firms dataset, the Addis Ababa Construction Enterprise Survey (AACES), collected specifically for the purpose of analyzing the impact of the program. We find that program firms do not adopt different technologies and are not more labor intensive than nonprogram firms. There is an earnings premium for program participants, who tend to be relatively well educated, which is heterogeneous and highest for those at the bottom of the earnings distribution.
    Date: 2010
  10. By: Ojijo Odhiambo (UNDP, Namibia); John E. Odada (University of Namibia)
    Abstract: Difficult economic times began for Namibia in 2008 as real economic growth suddenly dropped to 4.3 per cent from the 5.5 per cent recorded in 2007. There were also wide fluctuations in the general level of prices of goods and services, including food commodities. Cost-of-living inflation rose to a high of 10.4 per cent from a low of 2.3 per cent in 2003 and unemployment rates were high, well in excess of 50 per cent; thus many households faced an increasing cost of living without reliable sources of income. The unfavourable circumstances of these households were exacerbated by inauspicious climatic and soil conditions, which greatly limit the role of subsistence farming as a viable source of livelihood in many parts of the country. In order to mitigate the impact of rising food prices and address food security concerns, the government decided to increase from eight to fourteen the number of basic commodities (foodstuffs and services) that had zero-rated value added tax (VAT) in 2000, as a means of improving access to basic foodstuffs and services needed for daily survival, particularly for the poor. This paper offers an ex-ante analysis of how the zero-of rating VAT on these basic commodities affected the well-being of poor households. We use data from the 1993/94 and 2003/04 National Household Income and Expenditure Survey and a mini survey conducted in 2009 to determine the consumption patterns of these commodities. The VAT burden lifted is determined and disaggregated by income decile. The analysis reveals that, contrary to expectations, rich households are more likely to benefit from VAT zero-rating than poor households. The findings of the study make it plausible to conclude that the zero-rating of VAT on basic commodities in 2000 and 2008 did not adequately target the commodities that the poor consume in large quantities and that they acquire in formal markets; hence the measure is unlikely to bring additional benefits to the poor. The government might have to reconsider the choice of VAT zero-rated commodities and include those that are consumed mostly by the poor and acquired in formal markets, while simultaneously strengthening and expanding other schemes such as social transfers which would benefit the poor disproportionately. (...)
    Keywords: Addressing the Plight of Poor Households by Zero-Rating Value Added Tax on Basic Commodities In Namibia
    Date: 2010–10
  11. By: Johanna Kramm; Lars Wirkus
    Abstract: This paper explores conflictive negotiation processes over access to water. It focuses on the ability of farmers to access water in an irrigation scheme in Tanzania. In the case of irrigation, management and governance of water resources is a result of selforganization embedded in a matrix of institutional arrangements which derive from local formal and informal institutions. The governance system is characterized by conflictive negotiation processes over access of water. Conflicts occur over the direct extraction of water from the canal between single farmers, and about regulation patterns on the village level between the representatives of the different canals. Negotiation processes and the ability to access water are determined by the participants’ social position and power. The village’s social communities are highly heterogeneous and characterized by strong power differences (concerning capital, access to market, labour and authority). Even though conflicts about accessing water do arise, the existing institutional arrangements for the distribution are quite comprehensive and efficient. Nevertheless the exercising of these rules and the sanctioning differ according to the water availability.
    Date: 2010
  12. By: Carlos Maia (Department of Economics, University of Stellenbosch); Servaas van der Berg (Department of Economics, University of Stellenbosch)
    Abstract: In using survey data for money metric analysis of poverty and well-being, it is customary to adjust either the data or the poverty line for spatial prices differentials where data exist to make such adjustment. In developing countries where recorded price differentials between regions or provinces are large, using the remedy of adjusting for price differentials may sometimes lead to very wrong conclusions about the spatial distribution of poverty. This may have severe consequences for policy and may be detrimental to the poor. The paper deals with a specific situation, that of Mozambique, where large price differentials are said to exist between the capital (Maputo City) on the one hand, and the rest of the country. Official data that adjust for this may heavily over-estimate poverty in Maputo City, with consequences for the targeting of poverty. We use an asset index based on Multiple Correspondence Analysis (MCA) to show that the spatial poverty profile derived from the price-adjusted income data exaggerates poverty in Maputo City, and undertake further empirical analysis to show that not adjusting for the estimated spatial price differentials may have given more reliable estimates of well-being, judging by asset holdings.
    Keywords: Mozambique, poverty, prices differentials, multiple correspondence analysis
    JEL: I32
    Date: 2010
  13. By: Ojijo Odhiambo (UNDP, Namibia); John E. Odada (University of Namibia)
    Abstract: Though it is classified as an upper middle-income country and has an estimated annual gross national income (GNI) per capita of US$4,210, Namibia still faces the twin problems of relatively high levels of poverty and high income inequality. Difficult economic times began in 2008 as real economic growth dropped to 4.3 per cent from a high of 12 per cent in 2004, while cost-of-living inflation rose to a high of 10.4 per cent from a low of 2.3 per cent in 2003. The rate of unemployment (broad definition) grew to 51.2 per cent. Thus many poor households faced a rising cost of living without reliable sources of income. Their already dire situation was exacerbated by inauspicious climatic and soil conditions, which severely limit the role of subsistence farming as a viable source of livelihood in the country. (?)
    Keywords: Addressing the Plight of Poor Households by Zero-Rating VAT on Basic Commodities in Namibia
    Date: 2010–10

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