nep-afr New Economics Papers
on Africa
Issue of 2018‒07‒30
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Trump's tariff’s impact on Africa and the ambiguous role of African agency By Kohnert, Dirk
  2. Revenue Sharing in Mining in Africa: Empirical Proxies and Determinants of Government Take By Lundstøl, Olav
  3. Testing the quiet life hypothesis in the African banking industry By Asongu, Simplice A; Odhiambo, Nicholas M.
  4. Urbanization And International Migration From Africa By Giovanni Ferri; Roshan Borsato
  5. Does trade openness spur economic growth in Botswana? An empirical investigation By Malefane, Malefa Rose; Odhiambo, Nicholas M.
  6. Financial market evolution in Africa: Is it demand-following or supply-leading? By Odhiambo, Nicholas M.; Nyasha, Shiella; Zerihun, Mulatu F.; Tipoy, Christian

  1. By: Kohnert, Dirk
    Abstract: The international discussion of Trump's dispute over import tariffs for steel, aluminum and even cars is so far focused on the big global players. However, African countries suffer in particular from the planned punitive tariffs, similar to the famous African proverb: ‘When elephants fight, it is the grass that suffers’. After years of talk on partnership for economic development (AGOA, Cotonou Agreement, EPAs, etc) Trump’s tariffs mean a severe blow to participatory foreign trade and sustainable industrialization in Africa. Egypt and South Africa for example, the potentially most affected African countries, face massive job losses and earning opportunities, with all the consequences that this entails for their already fragile economy and the population in dire poverty. Trump’s intervention thus joins the continued power politics of former colonial powers vis à vis Africa. Nevertheless, despite these asymmetric power relations, unfair trade relations and the desolate state of African infant industries are not necessarily due to externalities. More often than not they are home-made. African agency plays an ambiguous role in enhancing participatory trade and indigenous industrialization.
    Keywords: foreign trade, tarrifs, USA, Africa, South Africa, Egypt, Nigeria, agency, corruption
    JEL: F13 F51 F52 H21 N67 N77 P16 P52 Z1
    Date: 2018–06–29
  2. By: Lundstøl, Olav
    Abstract: Revenues from mining constitute a significant development opportunity, particularly in income-poor but resource-rich countries in Africa. However, there is limited knowledge regarding the extent to which such countries have benefitted from the recent global mineral boom from 2003-2013. This paper finds existing approaches to testing rent theory to be a complicated basis for the assessment of resource revenue sharing between government and companies. Exploring instead a proxy focusing on the ratio of the adjusted mining contribution to government revenues compared to its contribution to gross domestic product, this paper finds levels of mining revenue sharing from 1994-2013 to be well below optimal, although improving in recent years. One exception was Botswana, where ownership interest also constituted an important element, contributing to 58 per cent of total government revenue from mining from 2000-2012. If the other African case countries examined (Ghana, South Africa, Tanzania and Zambia) had achieved the same relative ratio of mining contribution to the revenue and economy, we estimate that government revenue from mining could have been from 2-13 per cent of GDP higher per year on average. The paper finds that the main determinants of revenue sharing were tax, price and production levels, with the cost of investment and operation much less significant.
    Keywords: Governance,
    Date: 2018
  3. By: Asongu, Simplice A; Odhiambo, Nicholas M.
    Abstract: The Quiet Life Hypothesis (QLH) is the pursuit of less efficiency by firms. In this study, we assess if powerful banks in the African banking industry are increasing financial access. The QLH is therefore consistent with the pursuit of financial intermediation inefficiency by large banks. To investigate the hypothesis, we first estimate the Lerner index. Then, using Two Stage Least Squares, we assess the effect of the Lerner index on financial access proxied by loan price and loan quantity. The empirical evidence is based on a panel of 162 banks from 42 African countries for the period 2001-2011. The findings support the QLH, although quiet life is driven by the below-median Lerner index sub-sample. Policy implications are discussed.
    Keywords: Financial access; Bank performance; Africa
    Date: 2018–05–07
  4. By: Giovanni Ferri (LUMSA University); Roshan Borsato (LUMSA University)
    Abstract: Climate change exacerbates desertification forcing millions of rural people to urbanize, especially in developing countries. Our quantitative analysis across African countries highlights migrants’ two typical sequential moves: i) people escape from villages to cities; ii) through cities’ enabling settings, some of them emigrate to developed countries. We find that: i) previous lower fresh water availability – our climate-related proxy – and drops in GDP’s agricultural share in Sub-Sahara seem to boost subsequent urbanization: ii) previously heightened urbanization subsequently inflates emigration rates. Thus, policies to combat land impoverishment/desertification would help both the environment and easing the stress that migration casts on societies’ balance.
    Keywords: Desertification, Climate change, Urbanization, International migration.
    JEL: F22 O15 O18 O55 Q54 R14 R23
    Date: 2018–07
  5. By: Malefane, Malefa Rose; Odhiambo, Nicholas M.
    Abstract: In this paper, the dynamic relationship between trade openness and economic growth in Botswana is examined using the Autoregressive Distributed Lag (ARDL) bounds testing approach. In order to test the robustness of the results, four proxies of trade openness were used in the estimation. Three of the four proxies were constructed from trade ratios, while the fourth proxy was a composite index of trade openness. The idea behind the use of different proxies was to ascertain whether the impact of trade openness in Botswana depends on the type of trade openness taken into consideration. The empirical results of this study reveal that, when the ratio of exports plus imports to GDP is used, and when the ratio of exports to GDP is used as a proxy for trade openness, then, trade openness has a significant positive impact on economic growth in Botswana, both in the short run and in the long run. Likewise, when the trade openness index is employed in the empirical investigation, the results show that in both the short run and the long run, trade openness has a significant positive impact on economic growth. The overall results of this study, therefore, have important policy implications for Botswana. Among other things, Botswana???s policy makers should pursue policies that boost the country???s exports and total trade.
    Keywords: ARDL; Botswana; economic growth; exports; imports; trade openness
    Date: 2018–07–24
  6. By: Odhiambo, Nicholas M.; Nyasha, Shiella; Zerihun, Mulatu F.; Tipoy, Christian
    Abstract: In this paper, we examine the dynamic causal relationship between financial development and economic growth in French- and English-speaking African countries during the period 1990-2014 ??? using a trivariate panel Granger-causality model. The study uses three proxies of financial development, namely: liquid liabilities (FD1), deposit money bank assets (FD2), and bank deposits (FD3) to examine this linkage. Our results show that the causality between financial development and economic growth differs significantly between English-speaking countries and French-speaking countries. When FD1 and FD3 are used as proxies for financial development, a demand-following response is found to predominate in both French- and English-speaking countries. However, when FD2 is used as a proxy, the study found a unidirectional causal flow from financial development to economic growth to prevail in French-speaking African countries, but failed to find any causal relationship between financial development and economic growth in English-speaking countries in either direction.
    Keywords: Financial Development; Economic Growth; French-Speaking African Countries; English-Speaking African Countries; Panel Granger-Causality
    Date: 2018

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