nep-afr New Economics Papers
on Africa
Issue of 2016‒04‒30
eight papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Who benefits from the rapidly increasing Voluntary Sustainability Standards? Evidence from Fairtrade and Organic coffee in Ethiopia By Minten, Bart J.; Dereje, Mekdim; Engeda, Ermias; Tamru, Seneshaw
  2. The Asian Gold Rush: a Critique of the Win-Win Chinese Strategy Towards Africa By Camilla Crovella
  3. The Effectiveness of Industrial Policy in Developing Countries: Causal Evidence from Ethiopian Manufacturing Firms By Tewodros Makonnen Gebrewolde; James Rockey
  4. Can the big push approach end rural poverty in Africa? : Insights from Sauri millennium village in Kenya By Wanjala, Bernadette
  5. Social network effects on mobile money adoption in Uganda By Murendo, Conrad; Wollni, Meike; de Brauw, Alan; Mugabi, Nicholas
  6. Market Level Effects of World Food Program Local and Regional Procurement of Food Aid in Africa By Zavale, Helder; Myers, Robert; Tschirley, David
  7. Water Scarcity and Irrigation Efficiency in Egypt By Osman, Rehab; Ferrari, Emanuele; McDonald, Scott
  8. The Political and Economic Dynamics of Foreign Aid in Africa: A case study of United States and Chinese Aid to Sub -Sahara Africa By Kafayat Amusa, Nara Monkam, Nicola Viegi

  1. By: Minten, Bart J.; Dereje, Mekdim; Engeda, Ermias; Tamru, Seneshaw
    Abstract: Voluntary Sustainability Standards (VSS) are rapidly increasing in global value chains. While consumers (mostly in developed countries) are willing to pay significant premiums for such stand-ards, it is however not well understood how effective these incentives are transmitted to producing countries. We study VSS in Ethiopia’s coffee sector, its most important export commodity, using a unique census of transaction data at the export level and large-scale data at the production level. We find that transmission of the export quality premiums to coffee producers is limited, with only one-third of this premium being passed on. Moreover, as quality premiums are small and with low average production levels from coffee farmers in these settings, these premiums would only lead to an increased income of 20 USD per year even with a perfect transmission scenario, and would therefore have little effect on the livelihoods of an average coffee farmer.
    Keywords: Environmental Economics and Policy, International Development, International Relations/Trade,
    Date: 2015
  2. By: Camilla Crovella
    Abstract: Africa has observed an impressively growing Chinese presence in the last 20 years. Signals of this can be identified in the strong investments the Asian country has carried out on the continent, always depicting such attitude as a business partnership, where the former exploits African raw materials and favours the economic and social development of the latter in return. Indeed, China supports its interest in the African continent on the ground of the win-win strategy, as this partnership would bring advantages to both parties. However, several voices have raised on the international scene, denouncing a Chinese predatory attitude and a form of exploitation, which can be compared to the Western Colonialism. Even if it can be stated that the current situation is not comparable to colonialism in Western conception, it is also undeniable that Africa is being shaped by the Chinese following the model of their own economic, financial and social system. So stated, it is clear that the win-win strategy does no longer suit to such scenery. For this reason, it should be renamed as a win-through strategy, to describe how China is making this partnership successful by turning Africa into a big reproduction of its own system.
    Keywords: China; Africa; Sino-African relationship; win-win strategy; going out strategy; non-interference.
    JEL: Y8
    Date: 2015–10
  3. By: Tewodros Makonnen Gebrewolde; James Rockey
    Abstract: Prioritizing the growth of particular sectors or regions is often part of LDC growth strategies. We study a prototypical example of such policies in Ethiopia, exploiting geographic and sectoral variation in the form and scale of the policy for identification. Using product-level data on Ethiopian manufacturing firms we show that the policy was unsuccessful: There was no improvement in productivity, productive assets, or employment. The policy failed due to its negative effects on productivity of the entry of new firms and existing firms diversifying. Moreover, subsidised loans and tax-breaks led to an increase in capital but not in machinery.
    Keywords: Industrial Policy; Ethiopia; Manufacturing
    JEL: H25 H81 O14 O25
    Date: 2016–04–12
  4. By: Wanjala, Bernadette (Tilburg University, School of Economics and Management)
    Abstract: This study sought to provide the first independent rigorous evaluation of the Millennium Villages Project, using Sauri millennium village (Kenya) as a case study. Sauri has been coined as a success story of the MVP across Africa, which makes it an ideal case study to assess the impact of the MVP interventions. The study is an ex-post evaluation and therefore applies non-experimental evaluation methods. The first empirical chapter of the thesis seeks to estimate the magnitude of the changes induced by the MVP interventions in agricultural productivity, production margins, selfconsumption and different sources of household income. We find significant MVP effects on agricultural productivity and total household income (including selfconsumption) but insignificant cash income effects. The chapter concludes that there is a need to test assumptions on which the theories of change are based in order to ensure effectiveness of the interventions. The second empirical chapter assesses whether the MVP effects could be explained by the level of diversification of sources of income. We find that: (i) there was an insignificant difference in the level of diversification between the millennium villages and the control villages; (ii) the main push factors into diversification were the small land and large household sizes; (iii) variations in income and poverty were also explained by land and household sizes, among other factors, with an insignificant MVP dummy and (iv) households that diversified more had lower MVP effects, a likely indication of MVP’s focus on agricultural interventions as opposed to the nonfarm economy. The third empirical chapter examined whether the performance of market institutions (input, output and credit markets) promoted or undermined the achievement of the MVP goals. We find that (i) increased access to inputs enhanced agricultural productivity in the first year, but the gains were not sustained after the phasing out of the input subsidy; (ii) collective marketing of produce through cereal banks was not successful and (iii) interventions in credit markets were not successful, given the low repayment rates of microfinance loans and low uptake of credit financing from commercial banks. Constraints to access to credit (especially lack of collateral and cost of borrowing) were still prevalent in Sauri after the MVP. The concluding chapter provides a summary of the findings, identifies key emerging issues and provides areas for further research. The key emerging issues were: the importance of designing the project as an experiment to enable more accurate impact evaluation, the failure to test the assumptions of the theory of change and sustainability of the gains beyond the project period.
    Date: 2016
  5. By: Murendo, Conrad; Wollni, Meike; de Brauw, Alan; Mugabi, Nicholas
    Abstract: Social networks play a vital role in generating social learning and information exchange that can drive the diffusion of new financial innovations. This is particularly relevant for developing countries where education, extension and financial information services are underprovided. This article identifies the effect of social networks on the adoption of mobile money by households in Uganda. Using data from a household survey, conditional logistic regression is estimated controlling for correlated effects and other information sources. Results show that mobile money adoption is positively influenced by the size of social network members exchanging information, and the effect is more pronounced for non-poor households. The structure of social network however has no effect. The findings show that information exchange through social networks is crucial for adoption of mobile money. Mobile money adoption is likely to be enhanced if promotion programs reach more social networks.
    Keywords: social networks, mobile money, adoption, Uganda, Consumer/Household Economics, Research and Development/Tech Change/Emerging Technologies, D14, D85, O33, Q12,
    Date: 2015
  6. By: Zavale, Helder; Myers, Robert; Tschirley, David
    Abstract: This paper assesses the impact of local and regional procurement (LRP) of food aid on local market prices in Africa. In particular we study maize in Uganda and Mozambique and beans in Ethiopia. Two complementary modelling approaches are employed: a vector autoregression (VAR) and a computational model (CM). The VAR is a reduced-form econometric approach while the CM is a structural simulation approach. Using two different approaches provides a useful consistency check. Results from the VAR show average price increases brought about by LRP are statistically significant and range from 2% to 16%. The size of the average estimated price effects are economically meaningful for maize in Uganda but much smaller (though still statistically significant) for maize in Mozambique and beans in Ethiopia. In all three country applications, LRP is estimated to have no effect on price variability. Results from the CM fall within a 90% confidence bound around results obtained from the VAR.
    Keywords: Food Consumption/Nutrition/Food Safety, Food Security and Poverty, International Development,
    Date: 2015
  7. By: Osman, Rehab; Ferrari, Emanuele; McDonald, Scott
    Abstract: This study provides quantitative assessments for the impacts of efficiency enhancement for different types of irrigation water under water scarcity conditions. It employs a single country CGE (STAGE) model calibrated to an extended version of a recently constructed SAM for Egypt 2008/09. The SAM segments the agricultural accounts by season and by irrigation scheme; Nile water- and groundwater-dependent as well as rain-fed agricultural activities. The simulations show that Egypt should manage potential reductions in the supply for Nile water with more efficient irrigation practice that secures higher productivity for Nile water, groundwater and irrigated land. The results suggests more ambitious plan to boost irrigation efficiency for summer rice in order to overweight any potential shrinkages in its output and exports. Furthermore, even doubling all non-conventional water resources is not sufficient to compensate the potential adverse impacts of Nile water losses. This highlights the importance of irrigation efficiency for the Egyptian economy
    Keywords: Water Availability, Agriculture Productivity, Nile Basin, Computable General Equilibrium (CGE) Models, Crop Production/Industries, Environmental Economics and Policy, Q25, D58, C68.,
    Date: 2015
  8. By: Kafayat Amusa, Nara Monkam, Nicola Viegi
    Abstract: The foreign aid arena as it pertains to the African continent has traditionally been dominated by the Organization of Economic Co-operation and Development (OECD) countries, however over the last three decades non-traditional donors such as the China, South Africa and Brazil have emerged in the donor field. The increasing importance of non-traditional donors has meant that the economic and political stronghold of Western and OECD countries in sub-Sahara African (SSA) has gradually ebbed, due to increased competition amongst donors on the continent. Specifically, as the economic and political reach of the United States (USA), the second largest bilateral donor to SSA has diminished, amongst the group of emerging donors, China has become the largest contributor of aid to SSA countries. There appears to be a political - economic dynamic that points to the existence of two competing reasons underpinning the foreign aid trend in SSA. Using a comparative approach, this study examines the determinants of aid allocation by China and the United States to SSA countries. The study finds that both donor motives and recipient need are factors in US and Chinese aid allocation to SSA. Additionally, the study finds differences in US aid allocation determinants pre and post China’s entry into SSA’s aid field. Furthermore, evidence of income and population bias is observed for both donor countries.
    Keywords: foreign aid allocation, donor motives, recipient need, Sub-Saharan Africa
    JEL: F35
    Date: 2016

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