nep-afr New Economics Papers
on Africa
Issue of 2016‒06‒18
eight papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Capital flight and foreign direct investment in Africa An investigation of the role of natural resource endowment By Léonce Ndikumana; Mare Sarr
  2. Industry in Tanzania : Performance, prospects, and public policy By John Page
  3. The Power to Tax in Sub-Saharan Africa: LTUs, VATs, and SARAs. By Christian EBEKE; M MANSOUR; Grégoire ROTA-GRAZIOSI
  4. Foreign Aid and Foreign Direct Investment in Sub-Saharan Africa: A Panel Data Analysis By Kafayat Amusa; Nara Monkam; Nicola Viegi
  5. Inflation Dynamics in a Dollarised Economy: The Case of Zimbabwe By William Kavila and Pierre Le Roux
  6. Aspirations and income, food security and subjective well-being in rural Ethiopia By Daniel Ayalew Mekonnen; Nicolas Gerber
  7. Rule-takers or rule-makers? A new look at African bilateral investment treaty practice By Daniel Rais
  8. Africa’s rising commodity export dependency on China By Carlos Casanova; Alicia Garcia-Herrero

  1. By: Léonce Ndikumana; Mare Sarr
    Abstract: This paper aims to provide theoretical and empirical insights into the puzzling simultaneous rise in foreign direct investment (FDI) inflows in Africa and capital flight from the continent over the past decades. It specifically explores two questions: Is FDI a potential driver of capital flight? And, is natural resource endowment a possible channel for the capital flight.FDI link? The econometric analysis is based on 32 African countries over the period 1970.2"013 using dynamic panel data estimation methods.Three important findings emerge from the analysis. First, while there is no robust evidence that capital flight is fuelled by annual FDI inflows (there is no equivalent to debt-fuelled capital flight), there is a positive relationship between the stock of FDI and capital flight. Second, natural resource endowment is directly related positively to capital flight and resource endowment is associated with a stronger FDI flight link, especially in the case of oil. Third, high-quality institutions somehow weaken the link between FDI and capital flight, although they do not completely eliminate the relationship. The results point to potential gains from improvements in institutional quality in African countries through minimizing the contribution of FDI and natural resources to capital flight.
    Keywords: Capital, Investments, Foreign, Natural resources
    Date: 2016
  2. By: John Page
    Abstract: Tanzania ranks among the leading stars of the .African growth miracle., but a sector that has been largely absent from the Tanzania success story is industry. Although growth of manufacturing has outpaced economic growth over the past decade, relative to international norms and its ambitious plans to achieve middle-income status Tanzania suffers from a .manufacturing deficit. at its current level of per capita income.The paper discusses a number of policy initiatives that should be undertaken to strengthen the industrial sector.s recent dynamism, including strengthening Special Economic Zones, improving trade logistics, and reforming Micro and Small Enterprise programmes.
    Keywords: Industrial policy, Manufacturing
    Date: 2016
  3. By: Christian EBEKE; M MANSOUR; Grégoire ROTA-GRAZIOSI (Centre d'Etudes et de Recherches sur le Développement International(CERDI))
    Abstract: In the context of achieving the new Sustainable Development Goals, revenue mobilization is a high priority in developing countries and in Sub-Saharan Africa, where governments’ ability to tax remains limited. Using a unique revenue dataset spanning the period 1980-2010, we analyze three important tax reforms: the Large Taxpayers Unit (LTU), the Value Added Tax (VAT), and the Semi-Autonomous Revenue Agency (SARA). We propose an ex-post impact assessment of these tax reforms in SSA countries based on propensity-score matching methodology (PSM) and synthetic control method (SCM). VAT and SARA are found to have an unambiguously large and positive effect on non-resource taxes, while the impact of LTU is insignificant—LTU seems however an important precondition for the adoption of the first two reforms. We conclude also that VAT and SARA display some synergy, and their positive effects strengthen several years after their adoption.
    Keywords: Tax reforms, Africa, Revenue mobilization, Causality.
    JEL: C1 O55 O23 H2
    Date: 2016–06
  4. By: Kafayat Amusa (Department of Economics, University of Pretoria and University of South Africa); Nara Monkam (African Tax Administration Forum); Nicola Viegi (Department of Economics, University of Pretoria)
    Abstract: Funding constraints experienced by Sub-Saharan African (SSA) countries has led to reliance on foreign direct investment (FDI) and foreign aid as alternative sources of finance. Despite the importance of FDI for growth, SSA has failed to attract an increasing share of global FDI and at the same time faces volatile aid flows. This study examines the role of foreign aid in enhancing FDI inflows to 31 SSA countries for the period 1995 to 2012. Using panel data estimation techniques, the results suggest that productive infrastructure aid is complementary to FDI inflows and socio-economic infrastructure aid has no significant impact on FDI inflows. When resource (oil) motive of FDI is considered, the results indicate that productive and socio-economic infrastructure aid to oil-producing SSA countries results in less FDI inflows compared to non-oil producing SSA countries. Finally, the significance of sectoral aid analysis is highlighted by the finding of a complementary role of energy infrastructure aid to FDI inflows and an insignificant impact of transport infrastructure aid.
    Keywords: Foreign aid, foreign direct investment, Sub-Saharan Africa
    JEL: F35 F21
    Date: 2016–06
  5. By: William Kavila and Pierre Le Roux
    Abstract: This paper explores the dynamics of inflation in the dollarised Zimbabwean economy using the Autoregressive Distributed Lag Model (ARDL) with monthly data from 2009:1 to 2012:12. The main determinants of inflation were found to be the US dollar/South African rand exchange rate, international oil prices, inflation expectations and South African inflation rate. During the local currency era, inflation dynamics in Zimbabwe were explained by excess growth in money supply, changes in import and administered prices, unit labour costs and output (Chhibber, Cottani, Firuzabadi and Walton, 1989). According to Makochekanwa (2007), hyperinflation during the same era was attributed to excess money supply growth, lagged inflation and political factors. Coorey, Clausen, Funke, Munoz and Ould-Abdallah (2007) affirmed these findings by identifying excess money supply growth as a source of high inflation in Zimbabwe during the local currency era. In essence, the findings of this study point to a shift in inflation dynamics in Zimbabwe. This shift in inflation dynamics means that policies, which were used to respond to both internal and external shocks that have an impact on price formation, might not be applicable in a dollarised economy.
    Keywords: Inflation, dollarisation, Autoregressive Distributed Lag Model
    JEL: E31 E42 C50
    Date: 2016
  6. By: Daniel Ayalew Mekonnen; Nicolas Gerber
    Abstract: Despite some improvements in recent years, poverty and food insecurity remain widespread and the main challenges in Ethiopia. Using individual and household level data collected in rural Ethiopia, we examine if aspirations are strongly associated with well-being outcomes, as posited in the aspirations failure framework articulated by Ray (2006) and others. We employ both bivariate and multivariate analyses. We find that aspirations (particularly that of the household head) are indeed strongly associated with the household per-capita income and expenditure and with various triangulating measures of household food (in)security including per-capita calorie consumption, the food consumption score (FCS), the household dietary diversity score (HDDS), and the household food insecurity access scale (HFIAS). Contrary to a few other studies, we also find strong evidence that, in rural Ethiopia, aspirations are positively associated with satisfaction in life and/or happiness. Findings in this study provide suggestive evidence that policies aimed at improving well-being outcomes might benefit from multiple effects (both direct and indirect) if they incorporate aspirations raising strategies.
    JEL: D1 O1 Q1 Q12 Q16
    Date: 2016–05
  7. By: Daniel Rais
    Abstract: Working Paper 2016/7 by Wolfgang Alschner and Dmitriy Skougarevskiy
    Date: 2016–06–07
  8. By: Carlos Casanova; Alicia Garcia-Herrero
    Abstract: In this paper, we look at China-Africa trade links in more detail and evaluate some of the implications of Africa’s growing commodity export dependency on China going forward, particularly in the context of a slowdown in China.
    Keywords: Asia , Economic Analysis , Emerging Economies , Regional Analysis , Working Paper
    JEL: D51 F02 F14
    Date: 2016–05

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