nep-afr New Economics Papers
on Africa
Issue of 2017‒07‒16
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Choices for spending government revenue: New African oil, gas, and mining economies By Sophie Witter; Maja Jakobsen
  2. Africa and global commodity markets: from cyclical realities to structural By Yves Jégourel
  3. Paying more for less: why don't households in Tanzania take advantage of bulk discounts? By Brian Dillon; Joachim De Weerdt; Ted O'Donoghue
  4. Export controls and competitiveness in African mining and minerals processing industries By Barbara Fliess; Ernst Idsardi; Riaan Rossouw
  5. Entrepreneurship, Education and the Fourth Industrial Revolution in Africa By Naudé, Wim
  6. The gun-slave hypothesis and the 18th century British slave trade By Whatley, Warren

  1. By: Sophie Witter; Maja Jakobsen
    Abstract: This paper examines a broad range of opportunities for addressing the pressing human development needs of low-income countries by using new oil, gas, and mineral discoveries. It assesses how much of an impact can be made on the funding gaps for health and education by new oil and gas revenues, and what other uses of those revenues are likely to arise. The paper argues that there is a strong case for investing natural resources revenues in social sectors, as they provide an opportunity to help to close the financing gaps in the African countries examined. However, the paper also highlights that the political economy risks of this revenue stream are higher than for other types of revenues. Finally, it illustrates how a simple diagnostic framework can be used to help to guide social sector investment decisions in the light of new natural resources revenues.
    Date: 2017
  2. By: Yves Jégourel
    Abstract: In June 2017, the second Annual Report on Commodity Analytics and Dynamics In Africa (Arcadia report) was published, in collaboration between the OCP Policy Center and CyclOpe. Its aim is to annually report on the evolution of the economic, legal, financial and societal links between Africa and the world commodity markets, both with regard to the cyclical changes in the markets, and to the structural changes or failures that may have emerged. Focusing on 2016 and early 2017, the Arcadia 2017 report analyzes the rebound in commodity prices, particularly mineral prices, which are important for the African continent. In a still difficult macroeconomic context characterized by weak world trade and (geo)political uncertainty, the recovery offered needed relief to the continent's producing countries. However, it did not allow them to significantly improve their public finances. While 2017 should be under better auspices, African countries’ commitment to addressing the many structural challenges that condition their economic and social development does not appear to have weakened. The Arcadia 2017 report focuses on a full accounting of the central issue of food security to the electrification of the continent, from the financing of African states to the reform of mining codes and agreements.
    Date: 2017–06
  3. By: Brian Dillon; Joachim De Weerdt; Ted O'Donoghue
    Abstract: Despite average per-capita consumption of roughly $1 per day, many Tanzanian households do not take advantage of bulk discounts for staple goods. Using transaction diaries covering nearly 57,000 purchases by 1,499 households over two weeks, we find that through bulk purchasing the average household could spend 8.9% less on observed quantities (or consume 15.6% more at observed expenditure). We investigate several explanations for the observed purchasing patterns, and find evidence consistent with inattention, worries about over-consumption, avoidance of social taxation, and coordination problems. Contrary to prior work, we find little evidence that liquidity constraints prevent poor households from bulk purchasing.
    Keywords: bulk discounts, liquidity constraints, inattention, social taxes, coordination costs, self-control problems, consumer behavior
    Date: 2017–05
  4. By: Barbara Fliess (OECD); Ernst Idsardi (UK Department of Work and Pensions); Riaan Rossouw (North-West University)
    Abstract: Governments may decide to control the export of unprocessed raw materials hoping that this will promote local downstream industries. There is scant empirical examination of the actual outcomes of such policies put in place. This paper describes use of export control measures by four minerals-rich African countries and looks for effects on activities downstream from the extractive sector that may be attributed to these measures. The measures studied are export taxes, non-automatic export licensing requirements and outright export bans. The industries are manganese in Gabon, lead in South Africa, copper in Zambia and chromite in Zimbabwe. For the empirical analysis the Revealed Comparative Advantage (RCA) index is calculated tracking over 20 years the relative global performance of the local mining and processing industries, for the specific minerals studied. The effect of the restrictive measures is investigated by way of identifying structural breaks in the level of the RCA index, for both the raw mineral and related processed products. The results suggest that use of export restrictions as a tool for stimulating local mineral processing does not pay off. There was no improvement in the revealed comparative advantage of processed products presumed to benefit from export controls on the raw material. Moreover, the measures may have undermined the overall performance of the industries in some of the cases studied because the relative export performance of the mined minerals deteriorated.
    Keywords: Africa, export tax, revealed comparative advantage, structural break, value chain of mining
    JEL: F1 F2 L7 O1
    Date: 2017–07–12
  5. By: Naudé, Wim (Maastricht University)
    Abstract: The Fourth Industrial Revolution (4IR) is impacting on the industrialization options for Africa inter alia through three interrelated sets of technologies, namely automation, additive manufacturing and the Industrial Internet. In this paper I set out the case for why Africa should industrialize. I then explore the opportunities and threats the 4IR pose for Africa. Threats include job-losses and the re-shoring of manufacturing to advanced economies. Among the opportunities are products-as-services, the sharing (collaborative) economy, and digital services and digital exports. These are markets that are currently underdeveloped in Africa but have substantial potential given Africa's geography, demography and on-going urbanisation. In order for the continent to benefit from the 4IR more needs to be done to improve entrepreneurship and education. A number of policy recommendations for 4IRcompatible entrepreneurship and education policies are made.
    Keywords: industrial policy, entrepreneurship, education, Africa
    JEL: O55 O25 O14 O33 L26 J24
    Date: 2017–06
  6. By: Whatley, Warren
    Abstract: The Gun-Slave Hypothesis is the long-standing idea that European gunpowder technology played a key role in growing the transatlantic slave trade. I combine annual data from the Transatlantic Slave Trade Database and the Anglo-African Trade Statistics to estimate a Vector Error Correction Model of the 18th century British slave trade that captures four versions of the Gun-Slave Hypothesis: guns-for-slaves-in-exchange, guns-for-slaves-in-production, slaves-for-guns-derived and the gun-slave cycle. Three econometric results emerge. (1) Gunpowder imports and slave exports were co-integrated in a long-run equilibrium relationship. (2) Positive deviations from equilibrium gunpowder “produced” additional slave exports. This guns-for-slaves-in-production result survives 17 placebo tests that replace gunpowder with non-lethal commodities imports. It is also confirmed by an instrumental variables estimation that uses excess capacity in the British gunpowder industry as an instrument for gunpowder. (3) Additional slave exports attracted additional gunpowder imports for 2-3 more years. Together these dynamics formed a gun-slave cycle. Impulse-response functions generate large increases in slave export in response to increases in gunpowder imports. I use these results to explain the growth of slave exports along the Guinea Coast of Africa in the 18th century.
    JEL: F66 N43 N47 N73 N77 O33
    Date: 2017

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