nep-afr New Economics Papers
on Africa
Issue of 2016‒09‒04
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. An Economic Assessment of Bioethanol Production from Sugar Cane: The Case of South Africa By Marcel Kohler
  2. Can Unconditional Cash Transfers Lead to Sustainable Poverty Reduction? Evidence from two government-led programmes in Zambia By Luisa Natali; Sudhanshu Handa; David Seidenfeld; Benjamin Davis; Gelson Tembo; UNICEF Office of Research - Innocenti
  3. Bring Back Our Light: Power Outages and Industrial Performance in Sub-Saharan Africa By Justice Tei Mensah
  4. Effect of gold mining on income distribution in Ghana By George Adu; Franklin Amuakwa-Mensah; George Marbuah; Justice Tei Mensah
  5. Financial Innovation and Economic Growth in the SADC By Alex Bara; Gift Mugano; Pierre Le Roux
  6. Africa's Prospects for Enjoying a Demographic Dividend By Bloom, David E.; Kuhn, Michael; Prettner, Klaus

  1. By: Marcel Kohler
    Abstract: The destabilising economic impact of South Africa’s dependence on imported crude oil is a key motivation behind the country’s drive to develop a biofuel industry. Much concern has been raised over the impact of biofuels production on price of food for the country's poor. It is this concern that has seen the prohibition of maize and the favouring of sugar cane as a feedstock in South Africa's Biofuels Industrial Strategy. This paper sets out to analyse the economic feasibility of producing bioethanol from sugar based on the industry's efforts to diversify its market base. The study suggests that bioethanol production is financially viable at an average US$102/bbl for the period 2005-2015, based on estimates that producers typically pay the equivalent of US$67/bbl for sugar cane feedstock, incur approximately US$20/bbl in operating & maintenance costs and require the equivalent of US$15/bbl to recoup capital investments. To kick-start the commercial production of fuel grade ethanol in South Africa, producers require mandated subsidisation. State support for bioethanol producers in the form of a guaranteed minimum selling price for bioethanol of 95 percent of the basic fuel price, exemption from fuel taxes in addition to specific capital investment allowances are required.
    Keywords: Biofuels, Costing, South Africa
    JEL: Q42
    Date: 2016–08
  2. By: Luisa Natali; Sudhanshu Handa; David Seidenfeld; Benjamin Davis; Gelson Tembo; UNICEF Office of Research - Innocenti
    Abstract: In sub-Saharan Africa, the poorest region in the world, the number of cash transfer programmes has doubled in the last five years and reaches close to 50 million people. What is the impact of these programmes, and do they offer a sustained pathway out of ultra-poverty? In this paper we examine these questions using experimental data from two unconditional cash transfer programmes implemented by the Government of Zambia. We find far-reaching effects of these two programmes, not just on their primary objective, food security and consumption, but also on a range of productive and economic outcomes. After three years, we observe that household spending is 59 per cent larger than the value of the transfer received, implying a sizeable multiplier effect. These multipliers work through increased non-farm business activity and agricultural production.
    Keywords: cash transfers; poverty reduction; production increase;
    Date: 2016
  3. By: Justice Tei Mensah (Swedish University of Agricultural Sciences)
    Abstract: Power cuts have become a characteristic feature of many Sub-Saharan African economies. This paper attempts to investigate the micro and macro impacts of power outages by estimating the effects on firm revenue and productivity, and output growth of the manufacturing and industrial sectors. Further, I evaluate the impact of self-generation in ameliorating the effects of electricity shortages on firm performance using a quasi-experimental approach. Results from the analysis reveal significant negative effects of electricity shortages on firm revenue and productivity, and output growth of manufacturing and industrial sectors. Finally, contrary to the notion that self-generation may be helpful to firms during outage periods, evidence from this paper suggest the reliance on self-generation is associated with productivity losses albeit short run revenue gains.
    Keywords: Power Outages, Sub-Saharan Africa, Electricity, Productivity, Firms
    JEL: D04 D24 L11 L94 O12
    Date: 2016–06
  4. By: George Adu (The Nordic Africa Institute, Uppsala University); Franklin Amuakwa-Mensah (Department of Economics, Swedish University of Agricultural Sciences); George Marbuah (Department of Economics, Swedish University of Agricultural Sciences); Justice Tei Mensah (Department of Economics, Swedish University of Agricultural Sciences)
    Abstract: This paper examined the effect of mining on household income and welfare and how such effects are distributed over different quantiles of income and welfare. Using the three most recent rounds of the Ghana Living Standards Surveys together with information on the location of gold mines during the survey years, we estimated effects of living in a mining area on real gross income, employment income, and real per capita household expenditure (a proxy for welfare) using average and quantile treatment effect models. We find robust evidence of negative effect of mining on household income and welfare. Our results also indicate that the income reducing effect of mining activity falls heavily on households at bottom of the income distribution. In the case of household welfare, the interesting revelation from our result is that the negative effect of mining falls largely on both the lower and upper ends of the welfare distribution, with much heavier burden at the lower relative to the upper tail. Our paper, thus, provides ample evidence that mining activity does not only reduce income and welfare, but further increases inequality in the distribution of income and welfare.
    Keywords: Gold mining, Income and welfare distribution, Quantile treatment effect, Ghana
    JEL: C31 O13
    Date: 2016–07
  5. By: Alex Bara; Gift Mugano; Pierre Le Roux
    Abstract: The study empirically establishes the causal relationship between financial innovation and economic growth in SADC. Using an Autoregressive Distributed Lag (ARDL) Model, estimated by Pooled Mean Group and Dynamic Fixed Effects, the study finds that financial innovation has a positive relationship to economic growth in long run for SADC. The long run estimations, however, show existence of a weak relationship. Introducing a direct measure of financial innovation buttresses the role of financial innovation in growth in SADC. Panel Granger causality tests establish that there is no causality, in any direction, between financial innovation and growth both in the short and long run.
    Keywords: : Innovation, financial innovation, economic growth, SADC, Autoregressive Distributed Lag (ARDL)
    JEL: G21 G28 O31 O33
    Date: 2016–08
  6. By: Bloom, David E. (Harvard University); Kuhn, Michael (Vienna Institute of Demography); Prettner, Klaus (University of Hohenheim)
    Abstract: We assess Africa's prospects for enjoying a demographic dividend. While fertility rates and dependency ratios in Africa remain high, they have started to decline. According to UN projections, they will fall further in the coming decades such that by the mid-21st century the ratio of the working-age to dependent population will be greater than in Asia, Europe, and Northern America. This projection suggests Africa has considerable potential to enjoy a demographic dividend. Whether and when it actually materializes, and also its magnitude, hinges on policies and institutions in key realms that include macroeconomic management, human capital, trade, governance, and labor and capital markets. Given strong complementarities among these areas, coordinated policies will likely be most effective in generating the momentum needed to pull Africa's economies out of a development trap.
    Keywords: Africa, declining fertility, demographic dividend, development, education, health, infrastructure
    JEL: J11 J13 J16 O10
    Date: 2016–08

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