nep-afr New Economics Papers
on Africa
Issue of 2015‒06‒05
nine papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Rational Asymmetric Development: Transfer Pricing and Sub-Saharan Africa’s Extreme Poverty Tragedy By Simplice Asongu
  2. International aid to Tanzania - with some comparisons from Ghana and Uganda By Michael Tribe
  3. Impacts of Rural Electrification Revisited – The African Context By Jörg Peters; Maximiliane Sievert
  4. State Extraction and Anti-Colonial Rebellion – Quantitative Evidence from the Former German East Africa By Alexander De Juan
  5. Does Large Scale Infrastructure Investment Alleviate Poverty? Impacts of Rwanda’s Electricity Access Roll-Out Program By Luciane Lenz; Anicet Munyehirwe; Jörg Peters; Maximiliane Sievert
  6. Electoral Rentierism? The Cross-National and Subnational Effect of Oil on Electoral Competitiveness in Multiparty Autocracies By Michael Wahman; Matthias Basedau
  7. Tribalism and Financial Development By Simplice Asongu; Oasis Kodila-Tedika
  8. A First Step Up the Energy Ladder? Low Cost Solar Kits and Household’s Welfare in Rural Rwanda By Michael Grimm; Anicet Munyehirwe; Jörg Peters; Maximiliane Sievert
  9. An empirical study on the nature of corruption amongst Nigerian firms: causes, channels and detection By Malomo, Omofolamihan Olaboye

  1. By: Simplice Asongu (Yaoundé/Cameroun)
    Abstract: A recent publication by the World Bank on Millennium Development Goals (MDGs) has established that extreme poverty has been decreasing in all regions of the world with the exception of sub-Saharan Africa (SSA), in spite of over two decades of growth resurgence. This chapter explores the role of transfer pricing in SSA’s extreme poverty tragedy. The analytical structure entails: (i) emphasis of rational asymmetric development as the dark side of transfer pricing, (ii) evidence that the recent growth resurgence in African countries has been driven substantially by resource-rich countries which are experiencing high levels of exclusive growth and extreme poverty, (iii) the practice of transfer pricing by multinationals operating in resource-rich countries of SSA and (iv) a Zambian case study of extreme poverty and transfer pricing schemes by Glencore in the copper industry. While transfer pricing is contributing to diminishing African growth, available evidence shows that the component growth that is not captured by transfer pricing does not trickle down to the poor because the African elite is also captured by practices of rational asymmetric development. Policy implications for the fight against extreme poverty are discussed.
    Keywords: Transfer pricing, Asymmetric development; Extreme poverty: SSA
    JEL: F20 F50 H20 O11 O55
    Date: 2015–03
  2. By: Michael Tribe (Department of Economics, University of Strathclyde)
    Abstract: This paper has three principal objectives. First, to review the level of Official Development Assistance (ODA) to Tanzania over the last two to three decades, and to place this into an economic context. This review includes some comparisons with the experience of Ghana and Uganda. Second, to discuss three major issues for the Tanzanian aid: the position of ODA as budget support, corruption, and alignment with the principles of the Paris Declaration on Aid Effectiveness. Third, to review the literature on the Tanzanian aid experience, including a range of official evaluation reports produced by the Tanzanian government and by the donor community. The conclusions, broadly, are that ODA has been at a sustained high level for most of the period reviewed, funding a significant amount of government development expenditure, and that economic growth has been strong, with poverty reduction ‘flat-lining’ in Tanzania but being significant in Ghana and Uganda. Experience with budget support in Tanzania has been mixed, corruption continues as a major concern, and improvements to public finance management have been difficult to achieve. In this context governance adjustments come slowly, requiring patience on the part of both recipient governments and the ODA donor community.
    Keywords: Economic development, foreign aid, development planning and policy; institutions and growth; Sub-Saharan Africa
    Date: 2015–05
  3. By: Jörg Peters; Maximiliane Sievert
    Abstract: The investment requirements to achieve the United Nations’ universal electricity access goal by 2030 are estimated at 640 billion US Dollars. The assumption underlying this goal is that electrification contributes to poverty alleviation in many regards. In recent years, a body of literature has emerged that widely confirms this positive poverty impact assumption. Most of these studies, however, are based on data from Asia and Latin America. This paper challenges the transferability of impact findings in the literature to the African context. Using a unique data set that we collected in various African countries we show that impact expectations on income, education, and health should be discounted considerably for Africa, at least in the shorter run. In many cases, the low levels of electricity consumption can also be served by low-cost solar alternatives. To ensure cost-efficient usage of public investments into rural electrification, we call for careful cost-benefit comparisons of on-grid and off-grid solutions.
    Keywords: Energy access; on-grid electrification; off-grid electrification; Africa
    JEL: O33 P46 Q41
    Date: 2015–04
  4. By: Alexander De Juan (GIGA German Institute of Global and Area Studies)
    Abstract: Does extraction increase the likelihood of antistate violence in the early phases of state-building processes? While much research has focused on the impacts of war on state-building, the potential “war-making effects” of extraction have largely been neglected. The paper provides the first quantitative analysis of these effects in the context of colonial state-building. It focuses on the Maji Maji rebellion against the German colonial state (1905–1907), the most substantial rebellion in colonial Eastern Africa. Analyses based on a newly collected historical data set confirm the correlation between extraction and re-sistance. More importantly, they reveal that distinct strategies of extraction produced dis-tinct outcomes. While the intensification of extraction in state-held areas created substan-tial grievances among the population, it did not drive the rebellion. Rather, the empirical results indicate that the expansion of extractive authority threatened the political and economic interests of local elites and thus provoked effective resistance. This finding provides additional insights into the mechanisms driving the “extraction–coercion cycle” of state-building.
    Keywords: state-building, extraction, colonial, rebellion, Maji Maji, German East Africa
    Date: 2015–04
  5. By: Luciane Lenz; Anicet Munyehirwe; Jörg Peters; Maximiliane Sievert
    Abstract: The United Nations’ objective to provide electricity to the 1.3 billion people without access in developing countries comes at high costs. Little evidence exists on socioeconomic impacts of electrification. This paper rigorously investigates effects of a large grid extension program in Rwanda on all rural beneficiary groups: households, microenterprises, health centers, and schools. While the program has led to a tremendous increase of connections, appliance uptake and electricity consumption remain low. We find only weak evidence for impacts on classical poverty indicators. To inform future policy design, we call for thorough cost-benefit comparison between on-grid and off-grid solutions.
    Keywords: Energy access; difference-in-differences; electrification; mixed-methods; Sub-Saharan Africa
    JEL: O13 O18 Q41
    Date: 2015–04
  6. By: Michael Wahman (London School of Economics); Matthias Basedau (GIGA German Institute of Global and Area Studies)
    Abstract: Building on theoretical insights from research on the rentier state and the “resource curse,” several studies have supported the argument that oil hinders democracy. However, previous research on the rentier state has neglected the global surge of multiparty autocracies or “electoral authoritarian” regimes since the end of the Cold War. No systematic study has been carried out on the question of whether or not and how oil affects electoral contests in nondemocratic regimes. In this paper we contribute to filling this gap by combing the literature on multiparty autocracy and the political economy of the rentier state. As oil production creates substantial, nontransparent revenue streams to national and subnational governments, we hypothesize that oil production has a negative effect on electoral competitiveness, both cross- and subnationally, in multiparty autocracies. Consequently, the democratic “resource curse” emphasized in earlier work on the rentier state is likely to persist even after the introduction of multipartyism in cases where oil production predates democratic institutions. The paper tests the hypothesis cross-nationally, using data on all multiparty elections held in the world in the period 1975–2010, and subnationally, using a new data set on subnational election results and oil production in Nigeria. Our results confirm that oil impedes electoral competitiveness, both cross- and subnationally, in multiparty autocracies.
    Keywords: oil, authoritarianism, elections, Nigeria, competition, Africa
    Date: 2015–04
  7. By: Simplice Asongu (Yaoundé/Cameroun); Oasis Kodila-Tedika (Kinshasa, Democratic Republic of Congo)
    Abstract: We assess the correlations between tribalism and financial development in 123 countries using data averages from 2000-2010. The tribalism index is used to measure tribalism whereas financial development is measured from perspectives of financial intermediary and stock market developments. The long-term variable is stock market capitalisation while short-run indicators include: private and domestic credits. We find that tribalism is negatively correlated with financial development and the magnitude of negativity is higher for financial intermediary development relative to stock market development. The findings are particularly relevant to African and Middle Eastern countries where the scourge is most pronounced.
    Keywords: Tribalism; Financial Development
    JEL: E62 H11 H20 G20 O43
    Date: 2015–05
  8. By: Michael Grimm; Anicet Munyehirwe; Jörg Peters; Maximiliane Sievert
    Abstract: More than 1.3 billion people in developing countries are lacking access to electricity. Based on the assumption that electricity is a prerequisite for human development, the United Nations initiative Sustainable Energy for All (SE4All) has proclaimed the goal of providing modern energy to all by 2030. In recent years, Pico-Photovoltaic kits have become a lower-cost alternative to investment-intensive grid electrification. Using a randomized controlled trial we examine uptake and impacts of a simple Pico-Photovoltaic kit that barely exceeds the benchmark of what the UN considers as modern energy. We find significant effects on households’ budget, productivity and convenience. Despite these effects, the data shows that adoption will be impeded by affordability, suggesting that policy would have to consider more direct promotion strategies such as subsidies or financing schemes to reach the UN goal.
    Keywords: Energy access; household productivity; household technology adoption; Sub-Saharan Africa; Randomized Controlled Trial
    JEL: O13 O18 Q41 D13
    Date: 2015–04
  9. By: Malomo, Omofolamihan Olaboye
    Abstract: This dissertation discusses the economic issues surrounding corruption at the firm-level in Nigeria with a specific focus on bribery. This involves an analysis of the paying and reporting of bribes by firm managers in Nigeria. The first chapter uses data from two business surveys to explain the determinants of the incidence of bribery and the magnitude of bribes, respectively. A two-stage analysis is conducted to test for the independence of the processes determining the incidence and the magnitude of bribery. The results show that the propensity to bribe is determined by required meetings with public officials while the size of bribe is driven by firm profitability indicators. The second chapter tests the reliability of methods used to ask individuals sensitive questions on different forms of business malpractice. Indirect methods are tested against the randomised response method. The indirect method protects the managers from stigmatisation by asking them about the behaviour of an agent representative of themselves; the randomised response method asks the interviewee to base their response on the result of a private coin-toss. The results show that the indirect method produces higher and more plausible estimates of wrongdoing than the andomised response method. The third chapter investigates why the randomised response method sometimes fails in eliciting honest responses from sensitive questions despite assuring the managers of anonymity. The roles of trust in the interviewer and the probability of detection are considered along with other potential explanations. Results indicate that lack of trust and the fear of detection are associated with underreporting of sensitive acts. The final chapter examines the relationship between bribery and ethnic networks. The ethnicities of the managers and their local political representatives are used to measure ethnic networks. Results show that co-ethnic firm managers are less likely to pay a bribe than non co-ethnics. Also, there is a positive association between ethno-linguistic fractionalisation and bribery which, in fractionalised areas, eradicates the negative effect of co-ethnicity on bribery

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