nep-afr New Economics Papers
on Africa
Issue of 2016‒01‒03
five papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Tapping Potentials of Innovation for Food Security and Sustainable Agricultural Growth: An Africa-Wide Perspective By Husmann, Christine; von Braun, Joachim; Badiane, Ousmane; Akinbamijo, Yemi; Abiodun, Fatunbi Oluwole; Virchow, Detlef
  2. Global commodity chains, financial markets, and local market structures: Price risks in the coffee sector in Ethiopia By Tröster, Bernhard; Staritz, Cornelia
  3. Extractive Institutional Structure and Economic Development: Evidence from Nigeria By Khan, Karim
  4. Debt sustainability in Sub-Saharan Africa : unraveling country-specific risks By Battaile,William G.; Hernandez,Fernando Leonardo; Norambuena,Vivian
  5. Income diversification among female-headed farming households By Vimefall, Elin

  1. By: Husmann, Christine; von Braun, Joachim; Badiane, Ousmane; Akinbamijo, Yemi; Abiodun, Fatunbi Oluwole; Virchow, Detlef
    Abstract: While in the past, increased use of inputs and expansion of agricultural land accounted for a good part of agricultural growth in Africa, improvements in productivity will need to be a major driver of growth in the future. Thus, agricultural innovations are needed to sustainably increase productivity, i.e. output per unit of all inputs, while maintaining environmental quality and resources. Such innovations require enhanced investments in research and development. This study identifies potentials in agriculture and food systems in Africa for enhanced food security. For maximum impact, the Special Initiative “One World – No Hunger” of BMZ needs to take note of the whole African landscape of actions in agriculture and food security. Therefor this study provides a detailed review of related ongoing and recent initiatives, in order to help identify in what ways investments under the “One World – No Hunger“ Special Initiative from a broad strategic perspective might best connect and serve in coherent and complementary ways to increase food and nutrition security and sustainable agricultural productivity growth. Innovations in the agricultural sector are key to ensure food security and achieve the right to food. Investments in the agricultural sector are crucial not only to increase food production but also because the returns on investments in terms of poverty reduction effects are often highest in in this sector. Furthermore, food insecurity and violent conflicts are inextricably interlinked with food insecurity being both a driver and a consequence of violent conflicts and related refugee flows. African countries have recently made major commitments to invest in agriculture. The Comprehensive Africa Agriculture Development Programme (CAADP), that was initiated in 2003 and has been reinforced by the Malabo Declaration in 2014, is now the reference point and measure of commitment in Africa. With CAADP, African countries committed to spend 10% of their total public expenditures on agriculture to achieve an annual agricultural growth rate of 6%. Other African and international initiatives, including new partnerships between African governments, donors and the private sector like the New Alliance for Food Security and Nutrition or Feed the Future, have since been launched to support the CAADP process. Investment opportunities differ across Africa. In view of the above mentioned goals, it is suggested here that development investments by Germany target countries which reveal potentials indicated by 1. having a track record of political commitment to foster sustainable agricultural growth, as indicated by performance under CAADP, and 2. showing actual progress in sustainable agricultural productivity driven by related innovations, as indicated by comprehensive productivity measurement and innovation actions on the ground, and 3. prioritizing actions for hunger and malnutrition reduction and showing progress (for instance measured by the Global Hunger Index), but where agricultural and rural development and nutrition interventions are likely to make a significant difference, as indicated by public policy and room for civil society actions. The records and potentials of 42 African countries are identified accordingly, using comprehensive assessments of agronomic, economic and governance criteria that can be transparently tracked.
    Keywords: Agriculture, Innovations, Food and Nutrition Security, Agricultural Policy, Sustainable Growth, Crop Production/Industries, Environmental Economics and Policy, International Development, Research and Development/Tech Change/Emerging Technologies,
    Date: 2015–12
  2. By: Tröster, Bernhard; Staritz, Cornelia
    Abstract: Risks related to commodity price volatility are a major thread to actors in commodity chains, particularly to smallholder farmers in low income countries. Therefore, price setting and transmission within global commodity chains are of crucial importance from a developmental and distributional perspective. With the end of global price stabilization mechanisms in the 1980s, financial derivative markets have taken over the central role in price discovery and risk management. This is also true for the case of coffee, being the agro-commodity with the highest trading volume on financial commodity exchanges. In this paper, the coffee commodity chain is assessed with a focus on Ethiopia, the largest coffee exporter in Sub-Saharan Africa. Given the crucial role of the coffee sector for exports and for millions of smallholders, price risks for Ethiopian and international actors are analyzed along two indicators - exposure to price risks and ability to mitigate price risks. Even though Ethiopia imposes strict regulations on local value addition in green coffee production, the use of a market-based price discovery system via the Ethiopian Commodity Exchange exposes local actors to highly volatile international coffee prices, but with limited access to risk management. This is in contrast to lead firms in the global coffee chain - international traders and roasters - which use various strategies to deal with and also profit from price risks, mainly interlinked to financial derivate markets.
    Keywords: global commodity chains,financialization,commodity prices,price risks,price risk management,coffee sector,Ethiopia,commodity exchange
    Date: 2015
  3. By: Khan, Karim
    Abstract: The institutional perspective of cross-country differences in economic outcomes gives contrasting explanations on the persistence of extractive institutions in developing countries. Colonization, social fragmentation and the existence and use of natural resources are the most frequently discussed causes in the available literature. In this study, we analyze all the three explanations together by providing a case study of Nigeria. Nigeria is characterized by colonial legacy, social divide revealed by ethnicity and religion, and huge windfalls from oil. Based on our analysis, we argue that the lack and incoherence of formal institutional order is the main factor for Nigerian underdevelopment. Ethnic politics has shaped the formal institutional framework as a central stage for the disbursement of patronage and other types of the largesse. Colonial legacy has reinforced the effect of ethnicity by failing to provide a national ideology; and instead, providing a regional structure to rule. Similarly, the windfalls from oil have intensified the effect of ethnicity by invoking civil conflicts, arising mainly from the distribution of common pool. Thus, no single factor on its own can explain the persistence of extractive institutions; rather, it is the combination of exogenous and endogenous factors that collectively shape institutions.
    Keywords: Extractive Institutions, Economic Development, Colonization, Social Fragmentation, Natural resources, Nigeria
    JEL: E0 E01 O43 O55
    Date: 2015–12
  4. By: Battaile,William G.; Hernandez,Fernando Leonardo; Norambuena,Vivian
    Abstract: Sub-Saharan African countries as a group showed a considerable reduction in public and external indebtedness in the early 2000s as a result of debt relief programs, higher economic growth, and improved fiscal management for some countries. More recently, however, vulnerabilities in some countries are on the rise, including a few with very rapid debt accumulation. This paper looks at the heterogeneous experiences across Sub-Saharan African countries and the detailed dynamics that have driven changes in public debt since the global financial crisis. Borrowing to support fiscal deficits since 2009, including through domestic markets and Eurobond issuance, has driven a net increase in public debt for all countries except oil exporters benefitting from buoyant commodity prices and fragile states receiving post-2008 Highly Indebted Poor Country relief. Current account deficits and foreign direct investment inflows drove the external debt dynamics, with balance of payments problems associated with very rapid external debt accumulation in some cases. Pockets of increasing vulnerabilities of debt financing profiles and sensitivity of debt burden indicators to macro-fiscal shocks require close monitoring. Specific risks that policy makers in Sub-Saharan Africa need to pay attention to going forward include the recent fall in commodity prices, especially oil, the slowdown in China and the sluggish recovery in Europe, dependence on non-debt-creating flows, and accounting for contingent liabilities.
    Keywords: External Debt,Access to Finance,Economic Theory&Research,Bankruptcy and Resolution of Financial Distress,Debt Markets
    Date: 2015–12–21
  5. By: Vimefall, Elin (Örebro University School of Business)
    Abstract: In most rural parts of sub-Saharan Africa, production on one’s own farm is still the main source of income. However, other sources are becoming more important and obtaining income from outside the agricultural sector has been identified as an important path out of poverty. To take advantage of these more attractive livelihood strategies, households need to overcome several barriers to entry. Female-headed households have been found to have less education, less productive resources, and less access to credit than male-headed households; thus, they have limited options. Using data from the RIGA database, we analyze income diversification among female-headed households in rural Kenya. Using a multinomial logit model, we find that households headed by a married woman are approximately 12 percentage points more likely to rely only on income from their own farms compared to households headed by monogamously married man. Female-headed households are also less likely to diversify into non-agricultural wage work than male-headed households.
    Keywords: Income diversification; Livelihood; Female-headed households; Kenya
    JEL: J16 O12 O15 O55
    Date: 2015–12–23

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