nep-afr New Economics Papers
on Africa
Issue of 2012‒11‒03
eighteen papers chosen by
Quentin Wodon
World Bank

  1. Competitor, Colonizer or Developer? The Many Faces of China in Africa By Terence McNamee
  2. Africa and Global Economic Trends Quarterly Review - Third Quarter 2012 By AfDB
  3. Monetary policy and inflation in South Africa: A VECM augmented with foreign variables By Annari de Waal and Reneé van Eyden
  4. China’s Ambiguous Impacts on Commodity-Dependent Countries: the Example of Sub-Saharan Africa (with a Focus on Zambia) By Lee Robinson; Alice Nicole Sindzingre
  5. Do natural resources condition the aidgovernance relationship? Evidence from Africa. By Audrey Menard
  6. The Index of the Financial Safety (IFS) of South Africa and Bayesian Estimates for IFS Vector-Autoregressive Model By Matkovskyy, Roman
  7. What is the SARB's inflation targeting policy, and is it appropriate? By Ellyne, Mark; Veller, Carl
  8. Forecasting the Index of Financial Safety (IFS) of South Africa using neural networks By Matkovskyy, Roman
  9. Women’s Empowerment and HIV Prevention in Rural Malawi By Gerritzen, Berit C.
  10. The African Growth Miracle By Alwyn Young
  11. Economic and social up(down)grading in tourism global production networks: findings from Kenya and Uganda By Michelle Christian
  12. Why foreign aid does (not) improve democracy? By Audrey Menard
  13. Fighting corruption when existing corruption-control levels count : what do wealth-effects tell us in Africa? By Simplice A , Asongu
  15. Heterogeneity in subjective wellbeing : an application to occupational allocation in Africa By Falco, Paolo; Maloney, William F.; Rijkers, Bob; Sarrias, Mauricio
  16. Performances de l'éducation primaire au Burkina Faso : une analyse multi-outputs By Élisé Wendlassida Miningou
  17. How traceability is restructuring Malawi’s tobacco industry By Moyer-Lee, Jason; Prowse, Martin
  18. Taxation and public service provision: Taxes on road transport and fuel in Congo By Kambale Mirembe, Omer

  1. By: Terence McNamee (BRENTHURST FOUNDATION)
    Abstract: This paper analyses the evolving China-Africa relationship with particular reference to the competing perspectives on the impact of Chinese investment on the continent’s development. In doing so, it draws on two recent studies by the Brenthurst Foundation, one on China’s natural resource demand and the other on Chinese traders and small businesses in southern Africa. The paper also highlights potential flashpoints in future Chinese-African relations and the dangers inherent in Africa’s heavy reliance on Chinese resource demand. Ultimately, the paper concludes that China’s investment in Africa has for too long been assessed in binary terms, good or bad. Notwithstanding some troubling aspects to China’s role in Africa, that the continent has not derived a more substantial development ‘dividend’ from its burgeoning ties with China is largely down to its own failings, especially its leaders’ short-sightedness and lack of vision. In order to better exploit the growth of Chinese demand for its commodities, Africa needs to be more proactive in defining its own interests.
    Keywords: Chinese ODI in Africa, Forum on China–Africa Cooperation (FOCAC), China-Africa trade, China-Africa economic relation, FDI and Colonialist, FDI and Aid, Chinese presense in Africa
    Date: 2012–10
  2. By: AfDB
    Date: 2012–10–18
  3. By: Annari de Waal and Reneé van Eyden
    Abstract: We develop a structural cointegrated vector autoregressive (VAR) model with weakly exogenous foreign variables, suitable for a small open economy like South Africa. This type of model is known as an augmented vector error correction model (VECM), referred to by VECX*. We compile the foreign variables with trade-weighted three-year moving average data for 32 countries, to account for the significant change in trade shares over time. This model is novel for South Africa, in two ways: it is the first VECX* developed to analyse monetary policy in the country and the first model that uses time-varying trade weights for the creation of the foreign series. We find three significant long-run economic relations: the augmented purchasing power parity, the uncovered interest parity and the Fisher parity. These long-run relations are imposed on the VECX* to investigate the effect of a monetary policy shock on inflation. The results suggest the effective functioning of the monetary transmission mechanism in South Africa.
    Keywords: South Africa, monetary policy, structural cointegrated vector autoregressive model, augmented VECM, VECX*
    JEL: C50 E52
    Date: 2012
  4. By: Lee Robinson; Alice Nicole Sindzingre
    Abstract: The spectacular growth of China has induced major changes for developing countries, in particular low-income Sub-Saharan African economies. Most of these economies heavily depend on primary commodities for their exports, and China’s demand for these commodities, especially oil and metals, has contributed to a long cycle of increase in commodity prices (the ‘supercycle’ of the 2000s), but also to increased price volatility. China has also become a significant trade partner of Sub-Saharan African economies, and invested significantly in Sub-Saharan Africa. A theoretical question is therefore whether these changes may generate structural transformation and trigger sustained growth paths in Sub-Saharan countries. The paper shows that the transmission channels of China’s impact on growth prospects in Sub-Saharan African economies are multiple, both direct and indirect, and underscores the ambivalence of these impacts: i) high commodity prices have the potential to improve fiscal space, creating opportunities to catalyse diversification and structural transformation. Moreover, Chinese investments occur not only in the commodity sectors but also in industrial sectors and infrastructure; ii) however, higher and more volatile commodity prices, driven by China, can result in negative effects (e.g., Dutch disease). Furthermore, China’s demand may lock African economies into their century-old pattern of dependence on primary commodities. Large Chinese investments (especially in infrastructures) may also have lock-in effects, as they are organised by original contracts that exchange investments for commodities; iii) it is particular commodity and industry factors that affect an individual country’s ability to harness opportunities created by high commodity prices, which is demonstrated via the case study of Zambia.
    Keywords: China; Sub-Saharan Africa; commodities; trade; foreign direct investment
    JEL: F14
    Date: 2012
  5. By: Audrey Menard
    Abstract: This paper offers some evidence on why the governance effect of foreign aid is shadowy in African countries. The evidence suggests that the aid-governance linkages can be robust if the type of aid is differentiated between bilateral and multilateral aid and if the governance effect of aid is conditioned on the size of natural resources rents. A dynamic panel data analysis over the period 1997 – 2008 reveals that (i) foreign aid improves governance if and only if aid is allocated by multilateral agencies; and (ii) the effect of multilateral aid is the stronger the less the recipient country is dependent on natural resources, in particular on oil resources. The combination of multilateral aid and oil rents independence favour the development of good governance in Africa.
    Keywords: Governance, Natural resources, Oil, Multilateral aid.
    JEL: F35 D73 Q30 O11 C33
    Date: 2012
  6. By: Matkovskyy, Roman
    Abstract: This paper proposes an approach to explore the strength of the financial system of a country against the possibility of financial perturbations appearing based on the construction of the Index of Financial Safety (IFS) of a country. The Markov Chain Monte Carlo (MCMC) and Gibbs sampler technique is used to estimate a Bayesian Vector Autoregressive Model of the IFS of South Africa for the period 1990Q1-2011Q1 and to forecast its value over the period 2011Q2-2017Q1. It is shown that the IFS could capture the disturbances in the financial system and the BVAR models with the non-informative and Minnesota priors could predict the future dynamics of IFS with sufficient accuracy.
    Keywords: Financial safety; index of financial safety (IFS); Bayesian Vector Autoregressive (BVAR) model; MCMC; Gibbs sampler; South Africa
    JEL: C15 E47 C11 C01 G01
    Date: 2012–04
  7. By: Ellyne, Mark; Veller, Carl
    Abstract: Since its adoption of inflation targeting in 2000, the South African Reserve Bank has been accused of placing too great an emphasis on meeting its inflation target, and too small an emphasis on the high rate of unemployment in the country. On the other hand, the SARB has regularly missed its inflation target. We attempt to characterise the SARB's inflation targeting policy by analysing the Bank's interest rate setting behaviour before and after the adoption of inflation targeting, making use of Taylor-like rules to determine whether the SARB has emphasised inflation, the output gap, the real exchange rate, and asset price deviations in its monetary policy. We find that the SARB has significantly changed its behaviour with the adoption of inflation targeting, and show that the SARB runs a very flexible inflation targeting regime, with strong emphasis on the output gap. Indeed, we find evidence that the emphasis on inflation is too low, and potentially conducive to instability in the inflation process.
    Keywords: South Africa; monetary policy; inflation targeting
    JEL: E58 E52
    Date: 2011–08–30
  8. By: Matkovskyy, Roman
    Abstract: This paper investigates neural network tools, especially the nonlinear autoregressive model with exogenous input (NARX), to forecast the future conditions of the Index of Financial Safety (IFS) of South Africa. Based on the time series that was used to construct the IFS for South Africa (Matkovskyy, 2012), the NARX model was built to forecast the future values of this index and the results are benchmarked against that of Bayesian Vector-Autoregressive Models. The results show that the NARX model applied to IFS of South Africa and trained by the Levenberg-Marquardt algorithm may ensure a forecast of adequate quality with less computation expanses, compared to BVAR models with different priors.
    Keywords: Index of Financial Safety (IFS); neural networks; nonlinear dynamic network (NDN); nonlinear autoregressive model with exogenous input (NARX); forecast
    JEL: C45 E44 G01
    Date: 2012–08
  9. By: Gerritzen, Berit C.
    Abstract: Condom use and communication among sexual partners are important strategies for HIV prevention. Using a panel data set of more than 1,200 married women in rural Malawi from 1998-2008, this paper shows that adequate HIV prevention strategies, i.e. condom use within marriage and HIV-related spousal communication, are more widely used as women's bargaining power increases. I focus on different dimensions of women’s empowerment, namely personal and interpersonal empowerment. Among the proxies used for women's empowerment, own income, knowledge of other local languages and awareness of exit options from marriage are found to play a particularly important role in promoting adequate preventive behaviors. The main findings continue to hold after individual-specific fixed effects and time dummies are included in order to account for unobserved hetereogeneity and time trends.
    Keywords: HIV/AIDS, Sub-Saharan Africa, gender, development, spousal communication, condom use within marriage
    JEL: I14 O15 J16
    Date: 2012–10
  10. By: Alwyn Young
    Abstract: Measures of real consumption based upon the ownership of durable goods, the quality of housing, the health and mortality of children, the education of youth and the allocation of female time in the household indicate that sub-Saharan living standards have, for the past two decades, been growing about 3.4 to 3.7 percent per annum, i.e. three and a half to four times the rate indicated in international data sets.
    JEL: O47
    Date: 2012–10
  11. By: Michelle Christian
    Abstract: Abstract This paper presents preliminary field research findings on tourism global production networks (GPNs) in Kenya and Uganda. It addresses the questions of whether economic upgrading in the tourism global production network leads to social upgrading for workers, small producers and community members in tourism localities, and what conditions support it. It further examines whether the relationship is different in mass vs. community-based tourism. The paper finds that: social upgrading outcomes can follow economic upgrading, but typically only for certain groups of workers; practically all firms use multi-labour strategies and make independent decisions on strengthening labour protection and standards; ‘mass’ tourism subsectors are more likely to lead to social upgrading than small-scale, community ethnic tourism; and there are acute racial, ethnic and gender divisions between firm ownership, job placement, and sub-segments in the GPN.
    Date: 2012
  12. By: Audrey Menard
    Abstract: Foreign aid has become closely connected to the development of democracy since the nineties. This paper analyses the democracy effects of aid accounting for this change in donors’ criteria. This approach contributes to the literature by analysing how the kind of donor allocating aid flows influences the effect of aid on democ- racy. I estimate a dynamic panel data model using data from 52 African countries between 1997 and 2008. I find that aid favours democracy. However when consider- ing the kind of donor, I observe that while bilateral aid does not foster democracy, multilateral aid favours democracy. Robustness tests confirm these findings.
    Keywords: Democracy; Bilateral aid; Panel data; Endogeneity.
    JEL: F35 O11 D70 C23
    Date: 2012
  13. By: Simplice A , Asongu
    Abstract: Why are some nations more effective at battling corruption than others? Are there different determinants in the fight against corruption across developing nations? How do wealth effects play-out when existing corruption-control levels matter in the corruption battle? To investigate these concerns we examine the determinants of corruption-control throughout the conditional distribution of the fight against corruption. The following broad findings are established. (1) Population growth is a (an) tool (impediment) in (to) the fight against corruption in Low (Middle) income countries. (2) Democracy increases (decreases) corruption-control in Middle (Low) income countries. As a policy implication, blanket corruption-control strategies are unlikely to succeed equally across countries with different income-levels and political wills in the fight against corruption. Thus to be effective, corruption policies should be contingent on the prevailing levels of corruption-control and income-bracket.
    Keywords: Corruption; Democracy; Government quality; Quantile regression; Africa
    JEL: H10 C10 O55 O10 K10
    Date: 2012–10–24
  14. By: Adenaeuer, Lucie
    Abstract: In the light of recent strong global increases of Foreign Direct Investments (FDI), Ethiopia is one of the developing countries having received high FDI inflows in its agribusiness sector especially since 2006. As the agribusiness sector is the base of the Ethiopian economy these increases may considerably influence the total economy. This study aims at giving a first insight of possible midterm impacts of the FDI inflows on the sustainable development of Ethiopia. By analysing former empirical studies, likely future trends of development are derived. It is estimated that the high FDI inflows currently have and in the future continue to have a positive impact on the economic growth and poverty reduction. However, scarcity of agricultural land and water and corresponding environmental problems are bound to increase if no new production technologies and sufficiently strong regulatory frameworks are implemented.
    Keywords: Foreign direct investment, Ethiopia, sustainable development, Agribusiness sector, Agribusiness, International Development,
    Date: 2012
  15. By: Falco, Paolo; Maloney, William F.; Rijkers, Bob; Sarrias, Mauricio
    Abstract: Using an extraordinarily rich panel dataset from Ghana, this paper explores the nature of self-employment and informality in developing countries through the analysis of self-reported happiness with work and life. Subjective job satisfaction measures allow assessment of the relative desirability of different jobs in ways that, conditional wage comparisons cannot. By exploiting recent advances in mixed (random parameter) ordered probit models, the distribution of subjective well-being across sectors of employment is quantified. There is little evidence for the overall inferiority of the small firm informal sector: there is not a robust average satisfaction premium for formal work vs. self-employment or informal salaried work, and owners of informal firms that employ others are on average significantly happier than workers in the formal private sector. Moreover, the estimated distribution of parameters predicting satisfaction reveal substantial heterogeneity in subjective well-being within sectors that conventional fixed parameter models, such as standard ordered probit models, cannot detect: Whatever the average satisfaction premium in a sector, all job categories contain both relatively happy and disgruntled workers. Specifically, roughly 67, 50, 40 and 59 percent prefer being a small-firm employer, sole proprietor, informal salaried, civic worker respectively, than formal work. Hence, there is a high degree of overlap in the distribution of satisfaction across sectors. The results are robust to the inclusion of fixed effects and alternate measures of satisfaction. Job characteristics, self-perceived autonomy and experimentally elicited measures of attitudes toward risk do not appear to explain these distributional patterns.
    Keywords: Labor Markets,Labor Policies,Labor Management and Relations,Work&Working Conditions,Educational Policy and Planning
    Date: 2012–10–01
  16. By: Élisé Wendlassida Miningou (Département d'économique, Université de Sherbrooke)
    Abstract: L'education primaire joue un rôle important dans le developpement du capital humain dans les pays en développement. Ainsi, le Burkina Faso a mis en place un certain nombre d'actions afin de favoriser l'accès et la qualité de l'éducation primaire. Cependant, lorsqu'on compare les différentes provinces burkinabé, on peut se rendre compte qu'il y a une plus forte disparité dans les indicateurs d'accès et de qualité de l'éducation que dans l'approvisionnement en ressources. De ce fait, la présente étude pose le problème de l'utilisation efficiente des ressources en éducation primaire au Burkina Faso. Ainsi, la méthode de la frontière stochastique (SFA) est utilisée afin d'estimer l'efficience des 45 provinces du Burkina Faso dans leur approvisionnement en éducation primaire. La modélisation proposée a permis non seulement d'inclure dans l'étude, deux outputs pour l'éducation primaire, mais aussi d'examiner les facteurs pouvant influencer l'efficience. Les résultats montrent que le système de l'éducation primaire au Burkina Faso a un niveau global d'efficience d'environ 58%. De plus, les conditions de vie des populations de même que certains facteurs internes au système éducatif semblent influencer l'efficience de l'éducation primaire dans les différentes provinces du Burkina Faso.
    Keywords: Éducation primaire, Efficience, SFA, Afrique
    JEL: I20 O55
    Date: 2012–10
  17. By: Moyer-Lee, Jason; Prowse, Martin
    Abstract: This article applies a global value chain framework to tobacco in Malawi. It illuminates how cigarette manufacturers govern the chain and control first-tier suppliers: the leaf merchants. Due to credence and litigation concerns, manufacturers have become obsessed with leaf integrity. Contract farming offers merchants the ability to meet manufacturers’ compliance and traceability requirements. It also offers an opportunity for process and product upgrading by smallholders, but threatens to exclude poorer growers. The article concludes by outlining current contractual practices and the possible role of third parties in this rapid institutional evolution.
    Keywords: Malawi
    Date: 2012–05
  18. By: Kambale Mirembe, Omer
    Keywords: Taxation, DRC, Congo
    Date: 2012–10

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