nep-afr New Economics Papers
on Africa
Issue of 2017‒10‒15
seven papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Studies on employment and extractive industry-dominated African countries By Evoh, Chijioke J.
  2. Integrating Africa: Some Trade Policy Research Priorities and Challenges By Bernard Hoekman; Dominique Njinkeu
  3. Exchange rate dynamics and monetary integration in the EAC contries By Cuiabano, Simone; Opoku-Afari, Maxwell
  4. The role of Innovation Hubs taking start-ups from idea to business. The case of Nairobi, Kenya By Natalie Chirchietti
  5. Modelling Systemic Risk in the South African Banking Sector Using CoVar By Mathias Manguzvane; John W. Muteba Mwamba
  6. Heterogeneity, Measurement and Misallocation in African Agriculture By Christopher Udry; Douglas Gollin
  7. ICT, Information Asymmetry and Market Power in the African Banking Industry By Asongu, Simplice; Biekpe, Nicholas

  1. By: Evoh, Chijioke J.
    Abstract: This paper analyses the challenges faced by a number of resource dependent countries in Sub-Saharan Africa to provide recommendations on how to design a set of policies to encourage productive employment growth. It examines the policy framework relating to extractive industry in a number of African, Asian and American countries to identify productive uses of the revenues for inclusive growth in other sectors of the economy, diversification away from the extractive industries through industrial and sectoral policies, as well as investment in social protection and infrastructure. The paper underlines the importance of strong institutions for governance, transparency, effective policy design and implementation. It advocates for a comprehensive approach to development relying on social protection, labour legislation and investment in social infrastructure (healthcare and education), along with cooperation with social partners and civil society through social dialogue.
    Keywords: promotion of employment, natural resources, mining, employment policy, Africa south of Sahara
    Date: 2017
  2. By: Bernard Hoekman; Dominique Njinkeu
    Abstract: This paper discusses opportunities for trade policy research to contribute more to efforts to integrate African markets, a stated policy priority for African leaders. Much of the economic research in this area has sought to quantify aggregate trade costs and the potential welfare impacts of reducing such costs, including through regional integration. This is important, but we argue that more focus is needed on the ‘micro’ dimensions of regional integration. These center on the trade-restricting effects of nontariff measures and regulatory policies and their political economy underpinnings. Of particular importance is research on mechanisms to support market integration initiatives that recognize the multidimensional nature of the sources of trade costs in Africa, and the associated political economy forces within and between countries and regional economic communities.
    Keywords: trade costs, nontariff measures, trade facilitation, regional integration, services markets
    JEL: F13 F15 O19 O55
    Date: 2017–09
  3. By: Cuiabano, Simone; Opoku-Afari, Maxwell
    Abstract: A major challenge for most countries in Sub-Saharan Africa is the evaluation of the exchange rate. This is more so in the East African Community (EAC) where macroeconomic and exchange rate management has been in particular challenged by massive foreign aid inflows partly as a result of Heavily Indebted Poor Countries (HIPC) initiative and other debt reliefs. In addition; improved macroeconomic management in the last decade attracted both short and medium to long term inflows to the region, as foreign investors turn to developing and emerging economies for yield. In this paper we estimate the fundamental equilibrium exchange rate (FEER) model for all the countries in the EAC and we assess the convergence of existing exchange rate regimes in the EAC. Our main contribution is that this exercise may contribute as a useful background for the ultimate decision of which exchange rate management framework will best fit the region during the transition period to monetary union.
    Keywords: Real exchange rates; EAC countries; cointegration; exchange rate regimes
    JEL: C32 F31 F41
    Date: 2017–09
  4. By: Natalie Chirchietti
    Abstract: In recent years, there has been a growing interest in the start-up scene in sub-Saharan Africa. "Silicon Savannah" is today widely used to describe the thriving IT industry in and around Nairobi. Kenya's geographical advantage, its favorable economic reforms, and mature start-up ecosystem makes it stands out positively. Since a lot of hype exists around the start-up scene many investors are drawn to it, but in reality very few start-ups are investment-ready. The increasing start-up requirements and needs force incubators to diversify their offer. In contrast, to traditional incubators, an Innovation Hub (Hub) is characterized based on the concept of open innovation and collaboration. A Hub nurtures an enabling environment where a community of entrepreneurs can grow. At the same time, it serves as a nexus point for the local start-up community, investors, academia, technology companies and the wider private sector. It aims to create a structure where people serendipitously interact with others that they would not typically meet. Considering the great interest for and the large amounts of money invested in Hubs by governments, universities, private companies and other interested parties, not only researchers have been raising the question of the actual benefit of Hubs. This research study aims to investigate to what extent the support offered by the Hubs is tackling the challenges faced by start-ups in Nairobi, Kenya. The analysis can serve as a basis for identifying strength and weaknesses in the Hub models.
    Keywords: Entrepreneurship; Innovation Hubs; Start-ups; Kenya
    JEL: M13
    Date: 2017–09
  5. By: Mathias Manguzvane; John W. Muteba Mwamba
    Abstract: In this paper we model systemic risk by making use of the conditional quantile regression to identify the most systemically important and vulnerable banks in the South Africa (SA) banking sector. We measure the marginal contributions of each bank to systemic risk by computing the delta Conditional Value at Risk which measures the difference between system risk of individual banks when they are in a normal state and when they are in distress state. Using daily stock market closing prices of six South African banking banks from 19 June 2007 to 11 April 2016; our back tested systemic risk measures suggest that the contribution of South African banks to systemic risk tends to significantly increase during periods of financial crises. The two largest banks namely First Rand Bank and Standard Bank are found to be the highest contributors to systemic risk while the smallest bank namely African Bank is found to be the least contributor to the overall systemic risk in South African banking sector. Based on the delta Conditional Value at Risk; we show that there is a need to go beyond micro prudential regulation in order to sustain stability in the South African banking sector.
    Keywords: conditional quantile, systemic risk, conditional value at risk and banking sector
    JEL: C13 C22 C58 G01 G21
    Date: 2017–09
  6. By: Christopher Udry (Yale University); Douglas Gollin (University of Oxford)
    Abstract: Empirical analysis of farm-level data from African agriculture consistently shows enormous dispersion in measured total factor productivity (TFP) at the farm level. Some farmers achieve relatively high levels of TFP, but many farms appear to operate at very low levels of measured TFP. One possible explanation for this is that some farmers have low levels of skill but continue nevertheless to farm because of market failures or distortions that make it difficult for them to be bought out by more skillful farmers. Previous research has suggested that this kind of misallocation may be an important source of differences in agricultural productivity across countries – and thus an important explanation for cross-country differences in per capita income. This paper notes that misallocation can be difficult to distinguish empirically from a range of measurement errors, classical and non-classical. It can also be difficult to measure productivity well in a highly volatile production environment. Finally, differences in farmer quality can be observationally similar to heterogeneity in unobserved land quality. Our paper presents a theoretical framework and empirical results that seek to advance our understanding of the distinctions between heterogeneity, measurement error, and misallocation in African agriculture, using data from three African countries. We use within-farmer variation in factor shares and productivity across plots to disentangle measurement error, land productivity variation and transitory shocks from misallocation as sources of dispersion in factor allocation, output and TFP. Preliminary results suggest that both measurement error and unobserved heterogeneity in land quality can account for a large amount of the measured differences in farm productivity, and these results also imply that misallocation has a relatively modest impact on output.
    Date: 2017
  7. By: Asongu, Simplice; Biekpe, Nicholas
    Abstract: This study assesses how market power in the African banking industry is affected by the complementarity between information sharing offices and information and communication technology (ICT). The empirical evidence is based on a panel of 162 banks consisting of 42 countries for the period 2001-2011. Three estimation techniques are employed, namely: (i) instrumental variable Fixed effects to control for the unobserved heterogeneity; (ii) Tobit regressions to control for the limited range in the dependent variable; and (iii) Instrumental Quantile Regressions (QR) to account for initial levels of market power. Whereas results from Fixed effects and Tobit regressions are not significant, with QR: (i) the interaction between internet penetration and public credit registries reduces market power in the 75th quartile and (ii) the interaction between mobile phone penetration and private credit bureaus increases market power in the top quintiles. Fortunately, the positive net effects are associated with negative marginal effects from the interaction between private credit bureaus and mobile phone penetration. This implies that mobile phones could complement private credit bureaus to decrease market power when certain thresholds of mobile phone penetration are attained. These thresholds are computed and discussed.
    Keywords: Financial access; Information asymmetry; ICT
    JEL: G20 G29 L96 O40 O55
    Date: 2017–05

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