nep-afr New Economics Papers
on Africa
Issue of 2014‒11‒17
nineteen papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Analysing the Effects of Crop Shocks on Child Work: the Case of the Morondava District in Madagascar By Augendra BHUKUTH; Jérôme BALLET; Bako Nirina RABEVOHITRA; Patrick RASOLOFO
  2. Contrasting the Perception and Response of Domestic Manufacturing Firms to FDI in Sub-Saharan Africa By Penelope Pacheco-Lopez
  3. Boosting scientific publications in Africa: which IPRs protection channels matter? By Asongu, Simplice A
  4. Determinants of natural gas demand in Ghana By Ackah, Ishmael
  5. The Evolving Debate on the Effect of Foreign Aid on Corruption and Institutions in Africa By Asongu, Simplice A
  6. The Nexus between Inflation and Inflation Uncertainty via Wavelet Approach: Some Lessons from Egyptian Case By Bouoiyour, Jamal; Selmi, Refk
  7. Low participation in national health insurance scheme in Central Region OF Ghana: underlying reasons and health seeking behaviour of both insured and uninsured. By Adu, Kofi Osei
  8. Sierra Leone: Ad Hoc Review Under the Extended Credit Facility Arrangement and Request for Augmentation of Access and Modification of Performance Criteria and Financing Assurances Review-Staff Report; Press Release; and Statement by the Executive Director for Sierra Leone By International Monetary Fund. African Dept.
  9. Central African Economic and Monetary Community (CEMAC) Selected Issues By International Monetary Fund. African Dept.
  10. To What Extent Does the Adoption of Modern Variety Increase Productivity and Income? A Case Study of the Rice Sector in Tanzania By Nakano, Yuko; Kajisa, Kei
  11. A Panel Ordered Response Model for Sovereign Credit ratings in Africa By Marinda Pretorius and Ilse Botha
  12. Art in Africa: Market Structure and Pricing Behavior in the South African Fine Art Auction Market, 2009 - 2013 By Johannes W. Fedderke, Kaini Li
  13. Financial Development and the Diffusion of Technologies under Uncertainty in Africa By Zivanemoyo Chinzara
  14. Exploring Unbalanced Growth in South Africa: Understanding the Sectoral Structure of the South African Economy By Johannes W. Fedderke
  15. Maintaining Local Public Goods: Evidence from Rural Kenya By Sheely, Ryan
  16. How Should Uganda Grow? By Hausmann, Ricardo; Cunningham, Brad; Matovu, John; Osire, Rosie; Wyett, Kelly
  17. The Relationship between Oil and Agricultural Commodity Prices: A Quantile Causality Approach By Mehmet Balcilar; Shinhye Chang; Rangan Gupta; Vanessa Kasongo; Clement Kyei
  18. The Nonparametric Relationship between Oil and South African Agricultural Prices By Ahdi N. Ajmi; Rangan Gupta; Monique Kruger; Nicola Schoeman; Leoné Walters
  19. Situation Analysis of Child Poverty and Deprivation in Uganda By John Cockburn; Ibrahim Kasirye; Jane Kabubo-Mariara; Luca Tiberti; Gemma Ahaibwe

  1. By: Augendra BHUKUTH; Jérôme BALLET; Bako Nirina RABEVOHITRA; Patrick RASOLOFO
    Abstract: In a context where credit is squeezed, the shocks to which household are exposed impact on child work. This article analyses the impact of a drought on the Morondava rural district in Madagascar in 2006. This is a rice growing area. We used data from the surveys conducted by the Réseau des Observatoires Ruraux (ROR) to test the validity of the effect of the shock on child labour, and to explore the impact of the credit squeeze and the relevance of buffer-stock hypothesis.
    Keywords: Child work, Buffer stocks, credit constraints, consumption smoothing.
    JEL: J82 J22 G20 O16
    Date: 2014
  2. By: Penelope Pacheco-Lopez
    Abstract: This paper uses the data set from the fourth survey by UNIDO of manufacturing firms in Sub-Saharan Africa to identify whether foreign direct investment affects the behaviour of local firms with respect to investment, product innovation and process innovation. We look at the perception and response of 1,140 manufacturing firms in 9 sectors in 19 countries. Using Probit models the results suggest that, once controlling for firm's characteristics, there is a marked difference between perception and reality. The presence of foreign investment has not affected the behaviour of the vast majority of domestic firms in terms of their investment, production of similar products to foreign firms, production of different products to avoid competition or adopt similar production technologies.
    Keywords: FDI; investment; technology; Sub-Saharan African countries
    JEL: O14 O55
    Date: 2014–10
  3. By: Asongu, Simplice A
    Abstract: This paper examines how Africa’s share in the contribution to global scientific knowledge can be boosted with existing Intellectual Property Rights (IPRs) mechanisms. The findings which broadly indicate that tight IPRs are correlated with knowledge contribution can be summarized in two main points. First, the enshrinement of IPRs laws in a country’s Constitution is a good condition for knowledge economy. Secondly, while Main IP laws, WIPO treaties and Bilateral treaties are positively correlated with scientific publications, the IPRs law channel have a negative correlation. Whereas the study remains expositional, it does however offer interesting insights into the need for IPRs in the promotion of knowledge contribution within sampled countries of the continent. Other policy implications are discussed.
    Keywords: Publications; Intellectual property rights; Governance; Africa
    JEL: A20 F42 O34 O38 O55
    Date: 2014–06–15
  4. By: Ackah, Ishmael
    Abstract: The study investigates the effect of economic and non-economic factors on natural gas demand in Ghana at the aggregate and disaggregates levels. The structural time series model is employed as it has the ability of capturing exogenous non-economic factors. The ï¬ndings suggest that both economic and non-economic factors influence natural gas demand. It further reveal that different sectors respond differently to these factors. The study recommends that policies such as natural gas price subsidies should be customised for different sectors to obtain optimal results
    Keywords: Natural Gas Demand, Natural Gas, Natural Gas Economics
    JEL: Q4 Q41 Q43
    Date: 2014–09–26
  5. By: Asongu, Simplice A
    Abstract: This policy chapter summarises an evolving debate on the effect of foreign aid on corruption and institutions. It entails a series of publications that have been successively motivated by feedbacks from academic and policy making circles. The plethora of papers explores debates sustaining the direct, conditional and indirect effects of foreign aid on institutions. Moreover, another debate on the incidence of foreign aid distortions on corruption is also assessed in light of a recently celebrated literature on development assistance. Overall, the findings show that the effects of foreign aid on corruption and institutions are: directly positive; conditionally positive with a magnitude dependent on initial institutional capacity levels; contingent on fundamental characteristics of development due to heterogeneity and; indirectly positive or negative depending on the transmission mechanism. While the impact of foreign aid uncertainty on corruption is also positive, the sign on governance could change in light of governments’ commitment to increase its dependence on local tax revenues.
    Keywords: Foreign Aid; Corruption; Development; Africa
    JEL: B20 F35 F50 O10 O55
    Date: 2014–07–15
  6. By: Bouoiyour, Jamal; Selmi, Refk
    Abstract: The nexus between inflation and its uncertainty has been a topic of wide dispute. Using wavelet decomposition and with special reference to Egypt for the period 1960-2013, we find that the focal relationship varies substantially among the different frequencies involved. In the short-run, inflation expands inflation uncertainty and vice versa. In the medium term, higher inflation leads to greater volatility, while there is no evidence of significant link in the long-run. The main causes of these mixed outcomes have been organized into demand pull factors, cost push ones and the possible reflect of the conflicting underlying objectives pursued to avoid political pitfalls and the great instability that unfolded since 25th January 2011.
    Keywords: Inflation; inflation uncertainty; wavelet approach; Egypt.
    JEL: C1 C6 E3
    Date: 2014–10
  7. By: Adu, Kofi Osei
    Abstract: This study investigated the reasons for low participation in national health insurance scheme and health seeking behaviour of both insured and uninsured in central Twifo hemang Lower Denkyira district in Central Region of Ghana. Data were collected from both household heads who are enrolled in NHIS and those who have not been enrolled in the district for the purpose of analysis. The researcher employed interview schedule as data collection instrument used for the collection of the data from the respondents. In total, 400 household heads were interviewed. The study found that the major barrier to national health insurance scheme enrollment is affordability of the premiums. If the annual premium is paid in a lump sum, household heads find it more difficult to pay. Therefore this study recommends that national health insurance scheme annul premium could be paid on installment basis rather than lump sum. Thus the payment of annual premium could be spread out over the year. Also, government should strengthen policies to enhance income level.
    Keywords: national health insurance, household heads, premium
    JEL: I13
    Date: 2014–09–10
  8. By: International Monetary Fund. African Dept.
    Abstract: KEY ISSUES Background. The Ebola outbreak that started in one district in late May has spread to the entire country, overwhelming already weak institutions and ill-equipped medical facilities. At end-August, over 1000 people were infected and more than a third had died from the disease. The country’s social and economic fabric is also adversely affected by the epidemic. Economic growth has slowed, inflationary pressures have intensified, and new balance of payments and fiscal financing needs have emerged. The epidemic has heightened food insecurity and impacted livelihoods for a large portion of the population, generating additional distress for vulnerable groups. The program. In October 21, 2013, the Executive Board approved a three-year arrangement under the Extended Credit Facility (ECF) for Sierra Leone totaling SDR 62.2 million (60 percent of quota). The first review under the program was completed on June 19, 2014. Preliminary indications are that performance under the program is on track, in spite of weaknesses in budget execution at end-June. The authorities’ requests. In the attached letter of intent, the Sierra Leone authorities are requesting an Ad Hoc review under the ECF arrangement, and an augmentation of access in an amount equivalent to 25 percent of quota (SDR 25.925 million), in a single disbursement. These resources, together with contributions from other donors will help cover balance of payments and budgetary financing needs generated by the Ebola epidemic. The authorities are also requesting a modification of end-December 2014 performance criteria on net domestic bank credit to the central government, and on net domestic assets of the central bank. Safeguard assessment. A safeguards assessment of the Bank of Sierra Leone (BoSL) was completed in March 2014. The BoSL is taking steps to strengthen its safeguards framework and staff is monitoring implementation of the recommendations from the assessment. Staff views. Staff supports the completion of the Ad Hoc review, and the authorities’ requests.
    Keywords: Extended Credit Facility;Economic conditions;Current account deficits;Balance of payments need;Economic indicators;Debt sustainability analysis;Staff Reports;Letters of Intent;Press releases;Performance criteria modifications;Sierra Leone;
    Date: 2014–09–29
  9. By: International Monetary Fund. African Dept.
    Keywords: Liquidity management;Banks;Monetary policy;Public investment;Infrastructure;Economic growth;Global competitiveness;Financial sector;Access to capital markets;Staff Reports;Selected Issues Papers;Central African Economic and Monetary Community;
    Date: 2014–10–06
  10. By: Nakano, Yuko; Kajisa, Kei
    Abstract: Although high-yielding modern rice varieties (MVs) have been gradually disseminating over Sub-Saharan Africa, little is known about how their adoption influences agriculture productivity and household income. To fill this research gap, we analyzed two kinds of data sets in Tanzania: a national representative cross-sectional data and a two-year panel data of irrigated farmers in one district. The most important finding is a strong complementary relationship between MVs and water control; high yield is achieved when MVs are grown with improved bunds in paddy fields of irrigated areas. We also find that the use of chemical fertilizer and the practice of transplanting in rows increase yield and income of both the adopters and nonadopters of MVs in the irrigated areas. In rain-fed areas, we observe a limited impact of MVs. These findings suggest that introducing MVs as a package of technologies with agronomic practices is effective to fully achieve their potential. In the long run, development of irrigation would be important to realize a rice Green Revolution in Sub-Saharan Africa.
    Keywords: Modern Variety , Technology Adoption , Green Revolution , Sub-Saharan Africa , Tanzania
    Date: 2014–03–20
  11. By: Marinda Pretorius and Ilse Botha
    Abstract: In recent times there has been an increased focus on the myriad investment opportunites in Africa. According to Pricewater Coopers (2011:1) “the continent is home to some of the world’s fastest-growing economies and offer the highest risk-adjusted returns on foreign direct investment among emerging economies.†Sovereign credit ratings plays an imperative role in the decision-making process of where and when to invest and determine the interest that is paid to investors for sovereign debt borrowings. Sovereign credit ratings are used by investors to improve the effectiveness of investment decisions for bonds and other fixed-income instruments (Standard and Poor’s, 2014).
    Date: 2014
  12. By: Johannes W. Fedderke, Kaini Li
    Abstract: In contrast to the international market in major centers such as New York and London, the South African market is distinguished by the presence of a clear market leader, and market follower amongst two auction houses that together virtually exhaust the domestic art market. A central concern of the present paper is how this market structure affects behavior in the market. We develop a theoretical framework to consider the interaction between market leader and follower in the context of a fine art market. Core implications are that the market follower is forced to issue excessive price estimates on art work that it attempts to attract for auction, at the cost of a higher buyin rate in auction. We test the implications of the theory against a data set of 7554 auction lots. A direct and an indirect test of the theory on our data robustly and strongly confirms the prediction of our model.
    Date: 2014
  13. By: Zivanemoyo Chinzara
    Abstract: Using novel measures of technology diffusion and adoption developed by Comin and Hobijn (2012), we examine the role of finance in the timing of adoption and the diffusion of thirteen sectoral technologies in 44 Sub-Saharan Africa countries. These technologies cover sectors such as agriculture, communication and information technology, industry, and transport. The results show that financial development enhances the timing and diffusion of technologies both directly, and indirectly, through reducing the risk associated with new technologies. However, the results differ across technologies, with the information and communication technologies showing more responsiveness to changes in financial development. There is also evidence to suggest that, subject to the level of economic development, some technologies diffusion faster, while others diffuse slower. The latter result implies that some sector-specific technologies may diffuse quicker in less developed economies, and thus economic theory needs to be extended to account for this technology-specific feature
    Keywords: Financial Depth, Technology Diffusion, Timing of Adoption, Economic Development, Macroeconomic Volatility, institutions, Dynamic panels, GMM
    JEL: E44 G21 O30 O33
    Date: 2014
  14. By: Johannes W. Fedderke
    Abstract: This paper explores the reasons for the unbalanced growth structure of South Africa. While a number of emerging markets show a high proportion of value added and employment being generated by the service sector, South Africa is one of very few such economies that also show a strong decline in manufacturing. In this paper we begin by an extensive presentation of the evidence that details the structural changes in the economy that have led to this unusual economic structure. In what follows we provide an explanation of the observed changes that rests of four distinct structural forces in the economy. First, on the supply-side of the economy, we confirm the well-known fact of differential total factor productivity (TFP) growth across sectors. Combined with a price elasticity of demand that is below unity, this leads to a prediction of labour shedding in sectors that have high TFP growth, and labour absorption in sectors with low TFP growth. Second, on the demand-side of the economy, economic sectors also face a differential income elasticity of demand, with "old" sectors such as agriculture and mining falling below unity, "new" sectors particularly in services reporting elasticities above unity. With income growth, this leads to a restructuring of demand from primary and secondary sectors to the tertiary sectors of the economy. Finally, we also consider the structural implications of inefficiencies in the labour and output markets of the economy. Pricing of labour, the rate of return on employment, and the pricing power of producers in output markets are all considered. The combination of the supplyside, the demand-side, and the factor market forces allow for a successful four category typology of sectors. Type 1 sectors are high TFP growth, labour shedding, with output growth moderated by low income elasticity of demand. Examples are Manufacturing and Construction. Type 2 sectors are low TFP and output growth, but with labour absorption moderated by low rates of return on the cost of employing labour. Examples are Agriculture and Mining. Type 3 sectors are high TFP growth, labour shedding, and output growth accelerated by high income elasticity of demand. Examples are the Utilities, Trade and Communications sectors. Type 4 sectors are low TFP growth, labour absorbing, with output growth accelerated by high income elasticity of demand. Examples are provided by the Finance sectors.
    Keywords: unbalanced growth, South Africa, South African Economy
    Date: 2014
  15. By: Sheely, Ryan (Harvard University)
    Abstract: Political Scientists have produced a substantial body of theory and evidence that explains variation in the availability of local public goods in developing countries. Existing research cannot explain variation in how these goods are maintained over time. I develop a theory that explains how the interactions between government and community institutions shape public goods maintenance. I test the implications of this theory using a qualitative case study and a randomized field experiment that assigns communities participating in a waste management program in rural Kenya to three different institutional arrangements. I find that localities with no formal punishments for littering experienced sustained reductions in littering behavior and increases in the frequency of public clean-ups. In contrast, communities in which government administrators or traditional leaders could punish littering experienced short-term reductions in littering behavior that were not sustained over time.
    Date: 2013–12
  16. By: Hausmann, Ricardo (Harvard University); Cunningham, Brad (CID, Harvard University); Matovu, John (CID, Harvard University); Osire, Rosie (CID, Harvard University); Wyett, Kelly (CID, Harvard University)
    Abstract: Income per capita in Uganda has doubled in the last 20 years. This remarkable performance has been buoyed by significant aid flows and large external imbalances. Economic growth has been concentrated in non-tradable activities leading to growing external imbalances and a growing gap between rural and urban incomes. Future growth will depend on achieving sufficient export dynamism. In addition, growth faces a number of other challenges: low urbanization rate, rapid rural population growth and high dependency ratios. However, both the dependency ratio and fertility rates have begun to decline recently. Rural areas are also severely overcrowded with low-productivity subsistence agriculture as a pervasive form of production. Commercial agriculture has great possibilities to increase output, but as the sector improves its access to capital, inputs and technology it will shed jobs rather than create them. These challenges combined tell us that future growth in Uganda will require a rapid rate of export growth and economic diversification. The country faces the prospect of an oil boom of uncertain size and timing. It could represent an important stepping-stone to achieve external sustainability, expanded income and infrastructure and a greater internal market. However, as with all oil booms, the challenges include avoiding the Dutch disease, managing the inevitable volatility in oil incomes and avoiding inefficient specialization in oil. Policies that set targets for the non-oil deficit could help manage some of these effects, but a conscious strategy to diversify would still be needed. The best strategy is therefore to use the additional oil revenue and accompanying investments to promote a diversification strategy that is sustainable. To determine how to encourage such a transformation, we draw on a new line of research that demonstrates how development seldom implies producing more of the same. Instead, as countries grow, they tend to move into new industries, while they also increase productivity in existing sectors. In this report, we analyze what those new industries might be for Uganda. To do so, we first look to those products which balance the desire to increase the diversification and complexity of production, while not over-stretching existing capabilities. These include mostly agricultural inputs, such as agrochemicals and food processing. In addition, Uganda should concurrently develop more complex industries, such as construction materials, that are reasonably within reach of current capabilities and will be in great demand in the context of an oil boom. Here, the fact that Uganda is landlocked and faces high import costs will provide natural protection to the expanding demand in Uganda and neighboring countries. We conclude with a discussion of the government policies that will support Uganda in developing new tradable industries.
    Date: 2014–02
  17. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus , via Mersin 10,Turkey;Department of Economics, University of Pretoria, Pretoria, 0002, South Africa.); Shinhye Chang (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria); Vanessa Kasongo (Department of Economics, University of Pretoria); Clement Kyei (Department of Economics, University of Pretoria)
    Abstract: This paper investigates causality between oil prices and the prices of agricultural commodities in South Africa. We use daily data covering the period April 19, 2005 to July 31, 2014 for oil prices and the prices of soya beans, wheat, sunflower and corn. The test for Granger causality in conditional quantiles as proposed by Jeong et al., (2012) was employed. Our findings show that the effect of oil prices on agricultural commodity prices varies across the different quantiles of the conditional distribution. The impact on the tails is lower compared to the rest of the distribution. However, the highest impact is not necessarily at the mean. We show that due to nonlinear dependence between oil prices and agricultural commodity prices, regular Granger causality provides misleading results and also fails to characterize the relationship over the entire conditional joint distribution of the variables.
    Keywords: Granger causality, South Africa, Nonparametric test, Quantile causality, Commodity prices
    JEL: Q02 Q43
    Date: 2014–11
  18. By: Ahdi N. Ajmi (College of Science and Humanities in Slayel, Salman bin Abdulaziz University, Kingdom of Saudi Arabia); Rangan Gupta (Department of Economics, University of Pretoria); Monique Kruger (Department of Economics, University of Pretoria); Nicola Schoeman (Department of Economics, University of Pretoria); Leoné Walters (Department of Economics, University of Pretoria)
    Abstract: The aim of this paper is to investigate the causal relationship between agricultural prices in South Africa and global oil prices. A nonlinear Granger causality test based on moment conditions, introduced by Nishiyama et al (2011) is employed and we find that there is indeed a causal relationship between global oil prices and certain South African agricultural commodity prices. The mean price of wheat, sunflower and soya are Granger caused by OPEC basket oil price. OPEC basket oil prices also cause volatility of wheat, sunflower seed and sorghum prices.
    Keywords: Agricultural prices; Oil prices; Granger causality; Nonlinearity; South Africa
    JEL: C32 Q11 Q40
    Date: 2014–10
  19. By: John Cockburn; Ibrahim Kasirye; Jane Kabubo-Mariara; Luca Tiberti; Gemma Ahaibwe
    Abstract: Poverty is different for children than for adults. This becomes very clear when we listen to children themselves talking about their experiences of poverty, as they do in the companion piece to this report, “The Voices of Children.” In their own way, children have the ability to cut right to the very core of the crucial problems they face, from worrying how a lack of education will erode their futures, to seeing poor health taking their families livelihoods; of how the hunger they face can be devastating, or their how their experience of violence evaporates hope. Using traditional income poverty measures will not adequately capture these experiences of childhood. The importance of effectively measuring child poverty is underlined by the fact that its impacts are particularly devastating; for children, poverty can last a lifetime. The impacts of poor nutrition, a missed education or poor child health cannot be easily remedied and will change a child’s life chances forever. Further, where child poverty is widespread it can impact on all of society and the economy. As Uganda looks towards middle income status in Vision 2040, ensuring a strong start for Uganda’s children will lay an essential foundation....
    Date: 2014

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