nep-afr New Economics Papers
on Africa
Issue of 2016‒03‒29
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. A Better Life for All? Democratization and Electrification in Post-Apartheid South Africa By Verena Kroth; Valentino Larcinese; Joachim Wehner
  2. Foreign aid instability and bundled governance dynamics in Africa By Asongu Simplice; Jacinta C. Nwachukwu
  3. What explains the recent growth performance in Sub-Saharan Africa? Results from a Bayesian Averaging of Classical Estimates (BACE) Approach By Beatrice D. Simo-Kengne
  4. What drives cross-border bank expansion? Answers from Kenya By Odongo Kodongo
  5. Cash for Women’s Empowerment? A Mixed-Methods Evaluation of the Government of Zambia’s Child Grant Programme By Sudhanshu Handa; David Seidenfeld; Amber Peterman; Juan Bonilla; Rosa Castro Zarzur; Claire Nowlin; Hannah Ring
  6. Urbanization and poverty reduction: the role of secondary towns in Tanzania By Christiaensen, Luc; De Weerdt, Joachim; Kanbur, Ravi

  1. By: Verena Kroth; Valentino Larcinese; Joachim Wehner
    Abstract: Does democracy affect basic service delivery? If yes, who benefits, and which elements of democracy matter - enfranchisement, the liberalization of political organization, or both? In 1994, 19 million South Africans gained the right to vote. The previously banned African National Congress was elected promising "a better life for all". Using a difference-in-differences approach, we exploit heterogeneity in the share of newly enfranchised voters across municipalities to evaluate how franchise extension affected household electrification. Our unique dataset combines nightlight satellite imagery, geo-referenced census data, and municipal election results from the 1990s. We include covariates, run placebo regressions, and examine contiguous census tracts. We find that enfranchisement increased electrification. In parts of the country where municipalities lacked distribution capacity, the national electricity company prioritized core constituencies of the ANC. The effect of democratization on basic services depends on the national government's ability to influence distribution at the local level.
    Keywords: Democracy, Distributive politics, Electricity, South Africa
    Date: 2016–03
  2. By: Asongu Simplice (Yaoundé/Cameroun); Jacinta C. Nwachukwu (Coventry University)
    Abstract: Purpose- With the recent financial crisis and reduction of foreign aid by donor countries, the aid-institutions debate is shifting to how aid instability affects governance in developing countries. We engage the policy debate by assessing the role of foreign aid instability on governance dynamics in fifty three African countries for the period 1996-2010. Design/methodology/approach- An autoregressive endogeneity-robust Generalized Methods of Moments is employed. Instabilities are measured in terms of standard errors and standard deviations. Three main aid indicators are used, namely: total aid, aid from multilateral donors and bilateral aid. Principal Component Analysis is used to bundle governance indicators, namely: political governance (voice & accountability and political stability/non violence), economic governance (regulation quality and government effectiveness), institutional governance (rule of law and corruption-control) and general governance (political, economic and institutional governance). Findings- Our findings show that foreign aid instability increases governance standards, especially political and general governance. Practical implications- In the presence of foreign aid instability, governments could be constrained to improve governance standards in exchange for, or anticipation of greater dependence on local tax revenues. Moreover, bundling governance indicators improves insights into how macroeconomic variables affect governance. This is essentially because, while aid instability improves general governance, for the most part it is not consistently for economic and institutional governance. Originality/value- The paper has contributed to the aid-institutions’ literature by examining how aid instabilities affect an aggregate index of governance dynamics in Africa.
    Keywords: Instability; Foreign aid; Governance; Development; Africa
    JEL: C53 F35 F47 O11 O55
    Date: 2015–12
  3. By: Beatrice D. Simo-Kengne
    Abstract: This paper empirically identifies the main driving forces behind the recent development in economic growth across Sub-Saharan Africa based on a two-step procedure. Given the role of convergence in explaining the level of economic development, the first step employs the new extension of the sigma convergence developed by Phillip and Sul (2007) to test and endogenously identify the formation of different steady state paths across a sample of 34 countries selected based on available data over the period 1996-2010. Empirical results vindicate the existence of three main convergence clubs and a divergent group of 8 countries; suggesting that Sub-Sahara African countries do not form a homogenous club. The second step implements a Bayesian Averaging of Classical Estimates (BACE) method on the only convergent groups in order to explicitly account for the assumed conditional convergence in cross-sectional growth regressions. Estimation results prove support that 8 out of 18 selected explanatory variables documented in the literature are significantly and strongly associated with the long term economic growth. Particularly, investment and the relative price of exports are found to be favourable to the recent regional economic performance while public consumption and remittances appear to be of less contribution. Other important variables include scientific research, trade taxes, land availability and population growth which are unexpectedly found to be negatively associated with economic growth. Although their sign certainty probabilities are reportedly insignificant, these results raise a number of policy challenges including poor quality of institutions, the exposure to world shocks given the dependence to international trade taxes, the poor quality of human capital and more importantly a threat of skilled labour immigration.
    Keywords: economic growth, BACE, Convergence club, Sub Saharan Africa
    JEL: E20 E60 N17
    Date: 2016
  4. By: Odongo Kodongo
    Abstract: This paper investigates the drivers of bank foreign expansion in East Africa. Our results support the view that institutional quality is vital at the planning phase of banks’ going-abroad decision but its importance is muted once the decision has been taken. Second, relatively competitive markets and weak market power at home seem to “push†banks abroad. Third, banks seek to exploit the benefits of their relative efficiency through regional expansion. Fourth, relatively higher foreign country inflation is a deterrent to banks expansion abroad. Finally, desire for greater earnings, economic integration, and follow-the-client hypothesis do not explain banks’ foreign expansion decisions.
    Keywords: East Africa, Foreign bank expansion, Internationalization theories, Poisson regression
    JEL: F23 G15 G21
    Date: 2016
  5. By: Sudhanshu Handa; David Seidenfeld; Amber Peterman; Juan Bonilla; Rosa Castro Zarzur; Claire Nowlin; Hannah Ring
    Abstract: This paper reports findings from a mixed-methods evaluation of the Government of Zambia’s Child Grant Programme, a poverty-targeted, unconditional transfer given to mothers or primary caregivers of young children aged 0 to 5. Qualitatively, we found that changes in intrahousehold relationships were limited by entrenched gender norms, which indicate men as heads of household and primary decision-makers. However, women’s narratives showed the transfer did increase overall household well-being because they felt increased financial empowerment and were able to retain control over transfers for household investment and savings for emergencies. The study found that women in beneficiary households were making more sole and joint decisions, although impacts translated into relatively modest increases.
    Keywords: cash transfers; decision making; household income; women's empowerment;
    JEL: D1
    Date: 2016
  6. By: Christiaensen, Luc; De Weerdt, Joachim; Kanbur, Ravi
    Abstract: In 2007, the world reached an important “tipping point” — half its population became urban. But not only is the world urbanizing, it has been doing so much more rapidly. While it took Industrial Europe 110 years (1800-1910) to increase its rate of urbanization from 15 to 40 percent, Asia and Africa did so in only 50 years (1960-2010), or twice as fast. And the urban population in the developing world is also concentrating, living increasingly in few large cities. This also holds in Africa, which already has a clear bimodal distribution of its urban population (Dorosh and Thurlow, 2013). Nonetheless, barring some exceptions, the academic literature and policy mind-sets have been squarely focused on the aggregate rate of urbanization. They seldom go beyond the dichotomous rural-urban distinction, thereby ignoring the distribution of the urban population across cities of different sizes. Results from our research suggest, however, that the composition of urbanization might be as important as its aggregate rate.
    Keywords: Tanzania; poverty reduction; urbanization
    Date: 2016–01

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