nep-afr New Economics Papers
on Africa
Issue of 2017‒11‒12
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Intra-Regional Foreign Direct Investment In SADC: South Africa and Mauritius Outward Foreign Direct Investment By Onelie B. Nkuna
  2. An Analysis of Factors that Determine firm Survival during Economic Crises: The Case of Zimbabwe Manufacturing Firms By Dr. Albert Makochekanwa
  3. The Effect of Macroeconomic Stability on Inward FDI in African Developing Countries. By Shah, Mumtaz Hussain
  4. Nighttime Lights as a Proxy for Human Development at the Local Level By Anna Bruederle; Roland Hodler
  5. The Effect of Oil Spills on Infant Mortality: Evidence from Nigeria By Anna Bruederle; Roland Hodler
  6. Colonial Legacies: Shaping African Cities By Neeraj Baruah; J. Vernon Henderson; Cong Peng

  1. By: Onelie B. Nkuna
    Abstract: This paper looks at intra-SADC (Southern African Development Community) Foreign Direct Investment (FDI) and focuses on Mauritius and South Africa’s outward FDI. Data from 1999 to 2010 are collated and qualitative analyses conducted. The study reveals that Mauritius’ outward FDI was mainly in the service sector and largely went to Madagascar, Seychelles and Mozambique, which were also the country’s main trading partners, except for Botswana. Meanwhile, South African investments were mainly in Mauritius, Tanzania and Mozambique, while the country’s main trading partners were Botswana, Zambia, Zimbabwe, Swaziland and Angola. The study also found the following to be potential drivers of Mauritian and South African outward investments, and hence intra-SADC FDI flows: geographical proximity, market access, liberalized markets, stable macroeconomic and political environment, natural resource availability, and policy and institutional framework. Graphical analyses and simple correlations reveal that trade and FDI are positively correlated for Mauritius and South Africa’s outward investment, suggestive of a complementarity relationship.
    Date: 2017–10
  2. By: Dr. Albert Makochekanwa
    Abstract: The study analysed the various factors which contributed to the survival of manufacturing firms in Zimbabwe during the country’s crisis of the 1990s and the one between 2000 and 2008. The study employed both descriptive statistics using firm level data from World Bank Enterprise Survey, and a logistic econometric model. The findings from descriptive analysis indicate that survival of manufacturing firms in the 1990s was, among others, determined by such factors as access to finance (whether from bank loans, informal sources, or a company’s retained profits) to fund its operations including input procurement. Secondly, exportation was an important determinant which positively enhanced a given firm’s survival. Third, availability of electricity power to support manufacturing activities was a positive enhancement for firm survival. Findings from the 2011survey shows that the problem of foreign currency shortages were so severe that some firms were forced to exit the manufacturing business as they could not be able to source some of their vital inputs from the international market. Secondly, given that by 2011 corruption was a major problem for manufacturing firms, this implies that these gifts (bribes) increased the operational costs of these firms, and as such reduced their profit margins, thus negatively affecting their manufacturing business. Third, a number of firms interviewed said that they had been incurring losses on an annual basis due to electricity outages. At national level, firms lost around 6.9% of their total annual sales due to electricity power blackouts. Lastly, access to finance, especially from formal sources like banks, was also a major challenge as most banks were not providing loans to companies due to severe liquidity constraints. Turning to the exit (survival) logistic model which was estimated using the survey from 2011, the results showed availability of credit was an important factor affecting survival of manufacturing firms in the Zimbabwean context given that most firms’ balance sheets and net profits were rendered valueless, and as such firms found themselves looking for loans to finance working capital or make new investments that would ensure continuity and growth. The study also found that competition from both formal and informal competitors increased the probability of firms exiting the manufacturing sector. With regards to foreign ownership (or the extent to which a firm is a subsidiary of a multinational corporation), results indicate that foreign firms’ subsidiaries in Zimbabwe were more likely to stay in the economy comparable to domestic firms during economic crisis. The square of firm size (size2) was found to be negative and significant, implying that very large firms were assumed to be more established and expected to weather the common problems that bedevil small firms, and as such, they (very large firms) are less likely to exit. The impact of older firm (age2) on the probability of exit was negative and significant. As such, very old firms were assumed to be established and have more years of experience in conducting their line of business, thus less likely to exit from manufacturing activities.
    Date: 2017–03
  3. By: Shah, Mumtaz Hussain
    Abstract: In this study an attempt is made to gauge the importance of prudent macro-economic management in the location choice decision of foreign direct investors. Moreover, infrastructure availability, market size, trade liberalisation and economic development are also considered, for a set of forty three African developing countries using annual data from 1990 to 2015. The results show that better infrastructure, liberalised investment and trade regimes have significant effects on FDI inflows to the African nations. Conjectured with the host market theory hypothesis, the size of the host market positively affects inward FDI. Moreover, prudent management of macro-economy and healthy business policies manifested through stable macroeconomic indicators increases the ability of the African developing countries included in the study to receive additional Foreign Direct Investment. These findings are insensitive to the use of different proxies used for the control variables.
    Keywords: FDI, African Developing Countries, Macroeconomic Stability, Market Size, Domestic Market Liberalisation, Infrastructure availability.
    JEL: C23 F13 F14 F21 F23
    Date: 2016–12–30
  4. By: Anna Bruederle; Roland Hodler
    Abstract: Nighttime lights are increasingly used by social scientists as a proxy for economic activity and economic development in subnational spatial units. However, so far, our understanding of what nighttime lights capture is limited. We construct local indicators of household wealth, education and health from geo-coded Demographic and Health Surveys (DHS) for 29 African countries. We show that nighttime lights are positively associated with these indicators across DHS cluster locations as well as across grid cells of roughly 50 x 50 km. We conclude that nighttime lights are a good proxy for human development at the local level.
    Keywords: nighttime lights, local development, Africa
    JEL: I15 I25 I32 O15 O55
    Date: 2017
  5. By: Anna Bruederle; Roland Hodler
    Abstract: Oil spills can lead to irreversible environmental degradation and pose hazards to human health. We are the first to study the causal effects of onshore oil spills on neonatal and infant mortality rates. We use spatial data from the Nigerian Oil Spill Monitor and the Demographic and Health Surveys, and rely on the comparison of siblings conceived before and after nearby oil spills. We find that nearby oil spills double the neonatal mortality rate. These effects are fairly uniform across locations and socio-economic backgrounds. We also provide some evidence for negative health effects of nearby oil spills on surviving children.
    Keywords: oil spills, Nigeria, infant mortality, child health
    JEL: I10 I18 J13 Q53
    Date: 2017
  6. By: Neeraj Baruah; J. Vernon Henderson; Cong Peng
    Abstract: Differential institutions imposed during colonial rule continue to affect the spatial structure and urban interactions in African cities. Based on a sample of 318 cities across 28 countries using satellite data on built cover over time, Anglophone origin cities sprawl compared to Francophone ones. Anglophone cities have less intense land use and more irregular layout in the older colonial portions of cities, and more leapfrog development at the extensive margin. Results are impervious to a border experiment, many robustness tests, measures of sprawl, and sub-samples. Why would colonial origins matter? The British operated under indirect rule and a dual mandate within cities, allowing colonial and native sections to develop without an overall plan and coordination. In contrast, integrated city planning and land allocation mechanisms were a feature of French colonial rule, which was inclined to direct rule. The results also have public policy relevance. From the Demographic and Health Survey, similar households which are located in areas of the city with more leapfrog development have poorer connections to piped water, electricity, and landlines, presumably because of higher costs of providing infrastructure with urban sprawl.
    Keywords: colonialism, persistence, Africa, sprawl, urban form, urban planning, leapfrog
    JEL: H7 N97 O1 O43 P48 R5
    Date: 2017–11

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