nep-afr New Economics Papers
on Africa
Issue of 2013‒08‒23
seventeen papers chosen by
Quentin Wodon
World Bank

  1. What are the Effects of Input Subsidies on Maize Prices? Evidence from Malawi and Zambia By Ricker-Gilbert, Jacob; Mason, Nicole M.; Darko, Francis; Jayne, T. S.; Tembo, Solomon
  2. An assessment of IFPRI’S work in Ethiopia 1995–2010: Ideology, influence, and idiosyncrasy By Renkow, Mitch; Slade, Roger
  3. Is small better ? a comparison of the effect of large and small dams on cropland productivity in South Africa By Blanc, Elodie; Strobl, Eric
  4. Importing, Exporting and Performance in Sub-Saharan African Manufacturing Firms By Neil Foster-McGregor; Anders Isaksson; Florian Kaulich
  5. Ethnicity, Marriage and Family Income By Matz, Julia Anna
  6. Household enterprises in Mozambique : key to poverty reduction but not on the development agenda ? By Fox, Louise; Sohnesen, Thomas Pave
  7. Public Debt Sustainability in Africa: Building Resilience and Challenges Ahead By Mthuli Ncube; Zuzana Brixiová
  8. Outward Foreign Direct Investment, Exporting and Firm-Level Performance in Sub-Saharan Africa By Neil Foster-McGregor; Anders Isaksson; Florian Kaulich
  9. Aflatoxin Contamination of Maize in Kenya: Observability and Mitigation Behavior By Hoffmann, Vivian; Mutiga, Samuel; Harvey, Jagger; Nelson, Rebecca; Milgroom, Michael
  11. Institutional Models for Accelerating Agricultural Commercialization: Evidence from Maize, Cotton and Horticulture By Chapoto, Antony; Haggblade, Steven; Hichaambwa, Munguzwe; Kabwe, Stephen; Longabaugh, Steven; Sitko, Nicholas; Tschirley, David
  12. Analysis of the Soya Bean Value Chain in Zambia’s Eastern Province By Lubungu, Mary; Burke, William J.; Sitko, Nicholas J.
  13. Improving the Use of Agricultural Technologies in Uganda By Ibrahim, Kasirye
  14. Kenya after the 2007 "post-election violence" : constitutional reform and the National Accord and Reconciliation Act By Tsuda, Miwa
  15. Information and Communication Technology and Bank Performance in Nigeria: A Panel Data Analysis By Sani Ibrahim, Mr. Saifullahi; Muhammad, Mr. Abubakar
  16. Does Rural Financial Development Spur Economic Growth? Evidence from Nigeria By Mr Sani Ibrahim, Saifullahi
  17. Investment Behavior of Ugandan Smallholder Farmers: An Experimental Analysis By Ihli, Hanna Julia; Mußhoff, Oliver

  1. By: Ricker-Gilbert, Jacob; Mason, Nicole M.; Darko, Francis; Jayne, T. S.; Tembo, Solomon
    Abstract: Millions of smallholder farm households in Sub-Saharan Africa (SSA) are net consumers of staple crops, and millions of poor urban households spend a significant share of their income purchasing staple foods. Recent research has underscored the major effects of changes in food prices on poverty, with the weight of the evidence indicating that rising food prices exacerbate poverty and food insecurity. Large-scale input subsidy programs, particularly for maize, have grown in popularity in SSA over the last decade. An important hypothesized but heretofore empirically untested benefit of these programs is that by raising maize production, the subsidies should put downward pressure on retail maize prices to the benefit of urban consumers and the rural poor, who tend to be net buyers of maize. To inform debates related to this rationale for input subsidies, this study estimates the effects of fertilizer subsidies on retail maize prices in Malawi and Zambia using market or districtlevel panel data covering the 2000/01 to 2011/12 maize marketing years. Malawi and Zambia are ideal case studies because both countries have well-known, large-scale fertilizer subsidy programs where the quantities distributed vary spatially and over time. In addition, the scale of the subsidy programs was large enough in both countries to have substantially affected national maize production, and hence have potentially discernible effects on domestic food prices. The effects of fertilizer subsidies on equilibrium retail maize prices in Malawi and Zambia are estimated via country-specific reduced form panel data econometric models of retail maize prices as a function of subsidized fertilizer and other factors. The models are estimated via first-differencing or the Arellano-Bond (AB) dynamic panel data method. Both estimators control for time constant unobserved effects. The major advantage of the AB approach is that it allows for lagged retail maize prices to affect current retail maize prices. The findings from our study are similar between Malawi and Zambia. They indicate that fertilizer subsidies have either no statistically significant effect on retail maize prices or, more commonly, a statistically significant but very small negative effect on those prices. The results suggest that roughly doubling the size of Malawi’s subsidy program (i.e., increasing the amount of subsidized fertilizer distributed to each district by 4,000 metric tons (MT) per year) only reduces real maize prices by 1.2% to 1.6% on average. In Zambia, roughly doubling the scale of the country’s subsidy program (i.e., by increasing the amount of subsidized fertilizer distributed to each district by 1,000 MT per year) only reduces real maize prices by 1.8% and 2.4% on average. The results are statistically significant at the 10% level or lower for most of the models estimated. It should be noted that even small decreases in maize prices would benefit the many poor rural and urban households that are net buyers of maize. However, empirical evidence presented here does not support the often-asserted claim that large public expenditures on input subsidies have major poverty reducing effects because the programs produce large spillover benefits in the form of substantially lower maize prices. The empirical evidence to date suggests that even the large-scale fertilizer subsidy programs in Sub-Saharan Africa may result in very small, if any, reductions in retail food prices in semi-open economies.
    Keywords: Agricultural and Food Policy, Demand and Price Analysis,
    Date: 2013–06
  2. By: Renkow, Mitch; Slade, Roger
    Abstract: This study provides an independent external assessment of the impact of IFPRI’s work in Ethiopia during 1995–2010. From 1995 to 2004, nearly all of IFPRI’s Ethiopia work was undertaken by Washington-based research teams working on specific themes under various “global research programsâ€. In each case, Ethiopia represented one of several case studies in a larger multicountry study. The international public goods generated in this way included peer-reviewed publications; collaborative research with both domestic and international researchers; and the building of national capacity for policy research. IFPRI entered into a different kind of relationship with Ethiopia in 2004 with the establishment of the Ethiopia Strategy Support Program (ESSP). The ESSP was set up to provide direct support to the Government of Ethiopia in the design and implementation of its national agricultural development strategy and to provide well-researched advice on other agricultural and rural development policy matters.
    Keywords: Ethiopia; East Africa; Africa south of Sahara; Africa; Impact assessment; Agricultural development; Development strategies; Agricultural policies; Agricultural research; Poverty; food security; Markets; Public investment; Sustainable land management
    Date: 2013
  3. By: Blanc, Elodie; Strobl, Eric
    Abstract: This study estimates and compares the effects of small and large irrigation dams on cropland productivity in South Africa. To this end, a panel data set of South African river basins is constructed. The econometric analysis reveals that although large dams increase cropland productivity downstream, they have a negative effect on cropland within the vicinity. However, their existence can enhance the relatively small positive impact of local small dams. Although a cost-benefit analysis of irrigation benefits shows that small dams may be more viable than large ones, large dams can play a potentially important role within a system of both types of dams.
    Keywords: River Basin Management,Dams and Reservoirs,Hydro Power,Water and Energy,Water Supply and Systems
    Date: 2013–08–01
  4. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Anders Isaksson; Florian Kaulich
    Abstract: This paper examines productivity differences between internationally trading and non-trading firms using data on a sample of firms from 19 sub-Saharan African countries. The paper provides the first evidence of whether exporters, importers and two-way traders perform better than non-traders, and whether there are differences in performance between different types of trading firms in sub-Saharan Africa. Our results indicate that exporters, importers and two-way traders perform better than non-exporters, non-importers and non two-way traders. We further find that two-way traders perform better than importers only or exporters only, results largely consistent with recent results for other countries and regions. Considering information on export starters, continuers and exiters we also present some evidence consistent with both self-selection and learning-by-exporting.
    Keywords: firm-level performance, importers, exporters
    JEL: D24 F10 M20 L10
    Date: 2013–03
  5. By: Matz, Julia Anna
    Abstract: This study adds a microeconomic perspective to the discussion on ethnic diversity and economic performance in developing countries by investigating the motivation for intra-ethnicity marriage in rural Sub-Saharan Africa. Specifically, the paper proposes that ethnic similarity between spouses enhances economic outcomes through a shared agricultural production technology. Furthermore, the framework suggests that the probability of marriage within the same ethnic group is positively related to the size of the group due to frictions in the marriage market: Search costs for co-ethnic spouses are larger the smaller the group. The theoretical propositions are supported using Ethiopian rural household data by demonstrating that inter-ethnicity marriage of the household head has adverse implications for family income. The negative effect is robust to controlling for lagged income and initial conditions, present when investigating the link with changes in family wealth, and persists in additional sensitivity checks.
    Keywords: Ethnic Diversity, Heterogamy, Marriage, Family Income, Community/Rural/Urban Development, Consumer/Household Economics, Crop Production/Industries, Institutional and Behavioral Economics, Productivity Analysis, D10, J12, O12,
    Date: 2013–07
  6. By: Fox, Louise; Sohnesen, Thomas Pave
    Abstract: Household enterprises -- usually one-person-operated tiny informal enterprises -- are a rapidly growing source of employment in Sub-Saharan Africa, especially in lower-income countries. Household enterprises tend to operate with limited interest or support from governments. This is the case in Mozambique, where neither the poverty reduction strategy nor small and medium enterprise development policies include household enterprises. Using multiple household surveys, including a recent panel data set, this paper identifies the characteristics of the sector and its development during the period in which Mozambique experienced rapid economic growth. The analysis finds that household enterprises in Mozambique are associated with higher household consumption, lower rural poverty, as well as upward mobility, particularly for rural and poorly educated households. But if the Mozambican government wants to tap this potential, it will need a different strategy than one designed to support small and medium enterprises, because creation and survival in this sector seems to depend on a set of factors related to the human capital in the household and development in the location, not the soft business environment constraints, such as licensing and permitting and corruption, which are cited by larger business.
    Keywords: Access to Finance,Rural Poverty Reduction,Housing&Human Habitats,Regional Economic Development
    Date: 2013–08–01
  7. By: Mthuli Ncube; Zuzana Brixiová
    Abstract: The heightened interest of African countries to access international capital markets has put public debt sustainability once again high on the continent’s policy agenda. Applying the ‘stabilizing primary balance approach’ to sustainability shows that the primary balances exceeded those required to keep public debt at the 2007 level in about half of the countries studied. In several cases with higher debt burdens, the balances were also above those needed to reduce public debt-to-GDP to sustainable thresholds. However, in most countries the main driver of sustainability has been the interest rate – growth differential (IRGD), underscoring the importance of maintaining and even accelerating growth as well as utilizing the borrowing space for growth-enhancing outlays. Fiscal policies will need to play a greater role in maintaining debt sustainability in the future, especially since the IRGDs are likely to narrow over the longer term.
    Keywords: public debt, sovereign bonds, interest-growth differential, primary balance, Africa
    JEL: H6 E6 O23
    Date: 2013–07–15
  8. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Anders Isaksson; Florian Kaulich
    Abstract: This paper adds to the small but growing literature that considers a relationship between the way a firm serves foreign markets and its subsequent performance. The current paper is the first to consider this issue for a sample of sub-Saharan African countries and includes data on both manufacturing and services firms. Results from a number of parametric and non-parametric tests for manufacturing industries indicate that there is a clear productivity ordering with firms undertaking outward FDI performing best, followed by exporters with domestically oriented firms performing least well. The results for services firms are more nuanced and indicate that while exporters and firms undertaking outward FDI are more productive than domestically oriented firms, there is no significant difference in productivity between these two types of firms. Despite this, average productivity and point estimates from the regression analysis on services firms suggest that the productivity of exporting firms is larger than that for firms undertaking outward FDI.
    Keywords: exports, foreign direct investment, productivity, services firms
    JEL: F14 F21
    Date: 2013–03
  9. By: Hoffmann, Vivian; Mutiga, Samuel; Harvey, Jagger; Nelson, Rebecca; Milgroom, Michael
    Abstract: Using a unique dataset of maize samples and consumer interviews form Eastern Kenya, we find that the presence of the fungal contaminant aflatoxin is negatively associated with the use of maize flour for food. While food remains the most common use of maize regardless of the presence of the toxin, contaminated maize is relatively more likely to be used for the production of alcoholic beverages, livestock feed, or sale. Retail maize prices are strongly correlated with an easily observable quality attribute, discoloration, but the correlation between price and aflatoxin contamination is not statistically distinguishable from zero. This suggests that consumers observe attributes that are correlated with aflatoxin upon careful inspection, or perhaps consumption of a portion of maize from a particular batch, and that their use of flour is based on this information. The apparently limited observability of attributes associated with aflatoxin contamination implies that problems associated with asymmetric information may affect this market. A comparison of maize quality by source provides evidence of such problems: purchased maize is more likely to be contaminated with aflatoxin than maize households have grown themselves, despite the fact that maize from larger producers is less likely to be contaminated.
    Keywords: food safety, asymmetric information, Kenya, maize, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, International Development, O12, O13, O15,
    Date: 2013
  10. By: Zuzana Brixiová; Thierry Kangoye
    Abstract: Drawing on the 2007 and 2010 Swaziland Labor Force Surveys, this paper provides first systematic evidence on recent youth employment challenges in Swaziland, a small, land-locked, middle-income country with one of the highest youth unemployment rates in Africa. The paper first documents the various labor market disadvantages faced by the Swazi youth, such as high unemployment and discouragement, and how they changed from 2007 to 2010. A multinomial logit regression analysis is then carried out to analyze the socio-economic drivers of the unfavorable youth labor market outcomes on the supply side. Since many of the factors that can unlock the employment potential of the Swazi youth are on the demand side of the labor market, the paper examines the barriers to job creation and youth entrepreneurship. It concludes with experiences of other countries that could inform design of more effective interventions for youth employment in Swaziland.
    Keywords: youth employment and entrepreneurship, multivariate analysis, policies, Africa
    JEL: J11 J08 L26 O11
    Date: 2013–06–15
  11. By: Chapoto, Antony; Haggblade, Steven; Hichaambwa, Munguzwe; Kabwe, Stephen; Longabaugh, Steven; Sitko, Nicholas; Tschirley, David
    Abstract: Although a majority of Zambians work in agriculture, only a small minority of smallholders succeed in transitioning to high-productivity, high-value commercial agriculture. Only 20% of cotton farmers and less than 5% of maize and horticulture farmers succeed as top-tier commercial growers (Table 1). By tracing the long-term agricultural trajectories of successful commercial cotton, maize and horticulture farmers, this study identifies two broad agricultural pathways out of poverty. The low road, exemplified by cotton production, involves a two-generation transition via low-value but with well-structured markets. The more restrictive high road, epitomized by horticulture production, offers a steeper ascent, enabling prosperity within a single generation, but requires commensurately higher levels of financing, management and risk. Personal characteristics that define successful commercial smallholders include: • strict discipline; • treatment of farming as a business; • good management of crop production, labor and finances; • a strong propensity to save; and • willingness to invest in their children’s education. Key institutions affecting smallholder performance include: • management and marketing support provided by the cotton companies to their contract farmers; • land allocation systems, particularly those permitting land consolidation in communal areas and smallholder transitions to farm blocks in state lands; • savings systems (both financial and livestock-based) that permit successful smallholders to rebound from period shocks.
    Keywords: Agricultural and Food Policy,
    Date: 2013–05
  12. By: Lubungu, Mary; Burke, William J.; Sitko, Nicholas J.
    Abstract: The Feed the Future (FtF) program being implemented in Zambia’s Eastern Province by United States Agency for International Development’s (USAID) has its goal of lifting more than a quarter of a million rural people (mostly farmers) out of poverty by 2015 (USAID 2011). The attainment of this objective will be achieved, in part, through sustained investments in several key value chains in the agricultural sector, including soya bean value chain. Despite the clear benefits of soya production for smallholders, soya production remains low. In part, this may be linked to the pervasive belief among farmers that soya markets are unreliable. However, interviews with downstream market actors suggest that there is in fact significant unmet demand for soya in Zambia. The purpose of this value chain analysis is to identify the factors limiting smallholder linkages to the growing markets for soya in Zambia, and to provide concrete strategies to overcome them. The primary data used in this study stem from qualitative research conducted in Eastern Province of Zambia. The data were collected through guided interviews with key actors at each node of the soya bean value chain. In addition to qualitative research, data from different national representative surveys were used to inform our discussion. The study highlights the following challenges: First, there is limited availability of high yielding soya seed and limited incentive for private investment in smallholder soya seed multiplication. This is partly because smallholder farmers prefer open pollinated varieties (OPVs), which can be recycled for up to five years with minimal yield loss. However, supplying recyclable seed is less profitable, so corporate suppliers tend not to promote them heavily. Another challenge concerns lack of inoculum as Zambia Agriculture Research Institute (ZARI) is the sole producer within Zambia. Second, yield improving input usage in soya bean production is low. Smallholder farmers rarely use inoculum in soya bean production due to a lack of knowledge about the benefits of using inoculums, coupled with problems associated with acquisition. In Zambia, ZARI is the sole producer of inoculum. Low production is also related to poor agronomic practices, such as late planting and poor disease management Third, due to low production, farmers tend to have small quantities to sell and the earliest opportunity farmers have to turn their crop into cash is when the prices are the lowest of the marketing season during harvest time. Limited quantities of production do not justify transporting soya to potentially more remunerative markets in the district capital where buyers are willing to pay a premium on bulk purchases. Lastly, there is a large amount of trade distrust between farmers and traders, and it flows in both directions. Farmers complain of rigged scales whereas traders complain that sacks are frequently loaded with sand or stones to increase their weights. Based on the highlighted challenges, we suggest the following intervention strategies to overcome them: i. The project should work with seed suppliers and agro-dealers on forecasting demand based on project interventions. In addition, there is need for more public investment in the smallholder soya seed production and multiplication. ii. Awareness campaign on the benefits of using inoculum and how to apply it in soya bean production as well as improve accessibility. iii. Improve the extension service with regard to crop management practices. vi iv. Work with farmers on local bulking for onward sale. Need to focus efforts on improving farmers’ capacity to engage with the already existing market. v. Strategies for improving farmers’ capacity include market training on negotiation, market identification, and capacity to store.
    Keywords: Agribusiness, Agricultural and Food Policy, Crop Production/Industries, Food Security and Poverty,
    Date: 2013–05
  13. By: Ibrahim, Kasirye
    Keywords: Agribusiness, Farm Management, Land Economics/Use, Production Economics, Research and Development/Tech Change/Emerging Technologies,
    Date: 2013–06
  14. By: Tsuda, Miwa
    Abstract: Immediately after the announcement of the re-election of President Kibaki on the evening of 30 December 2007, Kenya was thrust into the worst civil unrest experienced by the country since independence – a development that became known as the "Post-Election Violence" (PEV). However, after a subsequent process of reconciliation, the PEV came to an end within a relatively short period. The present-day politics of Kenya are being conducted within the framework of a provisional Constitution that took shape through peaceful mediation. How did Kenya manage to put a lid on a period of turmoil that placed the country in unprecedented danger? This paper traces the sequence of events that led to mediation, explains the emergency measures that were needed to maintain law and order, and indicates the remaining problems that still need to be solved.
    Keywords: Kenya, Internal conflicts, Ethnicity, Internal politics, Violence, 2007 election: power sharing, Constitutional reform
    Date: 2013–01
  15. By: Sani Ibrahim, Mr. Saifullahi; Muhammad, Mr. Abubakar
    Abstract: This study examines the impact of Information and Communication Technology (ICT) on banks performance in Nigeria using annual panel data set over 2001 to 2011 periods. The data was analysed using panel unit root, panel cointegration, Fully Modified Ordinary Least Square (FMOLS) and Generalised Method of Moments (GMM) to reveals a positive impact of ICT on banks performance in the country. Therefore, the study concludes that cautious application of ICT apparatus will continue to enhance commercial banks performance in the country unless otherwise disrupted by externalities. The implication of this finding exposes the potentiality of cashless economy in Nigeria for strengthening the efficacy of financial system. Accordingly, the Central Bank of Nigeria’ cashless policy is an initiative at the right direction since it will help in minimising the cost of issuing currency in the fairly performing Nigerian economy. We recommend that there is the need for orienting the populace about the benefit of ICT product on banking operation in particular and the economy in general. In order to promote more patronage of ICT equipments on the one hand and enhance banking culture on the other hand, concerted efforts must be made to translate the ICT device language into the major local languages so that client can find it user-friendly at the midst of prevailing high rate of illiteracy in the country .
    Keywords: Bank, financial system panel data, information and communication technology
    JEL: C23 G21
    Date: 2013–06–10
  16. By: Mr Sani Ibrahim, Saifullahi
    Abstract: Robust economic development is not possible without financial deepening more especially in rural community where vast majority of the populace of Less Developed Countries (LDCs) resides. This paper analyses the impact of rural financial development on economic growth of Nigeria. The study uses time series data covering 1980 to 2011 periods paving the way for the application of Johansen and Juselius model of cointegration to detect the long-run relation among the variables in question. Accordingly, Dynamic Ordinary Least Square (DOLS) method was applied to unveil relationship between rural financial development and economic growth. The cointegration test result reveals the presence of long run relation between rural financial development and economic growth of Nigeria. Moreover, the DOLS results found a significant positive relationship between rural financial development and the growth of Nigerian economy. It has been confirmed in this study that rural finance serves as an engine of growth in the country. It could therefore be concluded that enhancing productive credit especially in rural areas could free the disadvantaged entrepreneur and thus enable them to contribute immensely toward the growth of Nigerian economy. The study therefore recommends among other things, barriers to the productive credit allocation in rural community should be reduced to the barest minimum.
    Keywords: Rural development, credit allocation, financial development
    JEL: E44 O16 O55
    Date: 2013–03–01
  17. By: Ihli, Hanna Julia; Mußhoff, Oliver
    Abstract: In this study, we experimentally analyze the investment behavior of smallholder farmers in Uganda. We consider a problem of optimal stopping, stylizing an option to invest in a project. We ascertain whether, and to what extent, the real options approach and the classical investment theory can predict farmers’ investment behaviors. We also examine differences in the investment behavior with respect to the presence of a price floor, which is often used to stimulate investments. Furthermore, we look at learning effects. Our results show that both theories do not exactly explain the observed investment behavior. However, our results suggest that real options models better predict the decision behavior of farmers than the classical investment theory. The presence of a price floor and learning from personal experience during the experiment do not significantly affect the investment behavior. However, we find that specific socio-demographic and socio-economic characteristics affect the investment behavior of farmers.
    Keywords: experimental economics, investment, price floors, real options, Uganda, Farm Management, Institutional and Behavioral Economics, Political Economy, Risk and Uncertainty, C91, D03, D81, D92,
    Date: 2013–07

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