nep-afr New Economics Papers
on Africa
Issue of 2019‒01‒14
five papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Telecommunication Submarine- Cable Deployment and the Digital Divide in Sub-Saharan Africa By Joël CARIOLLE
  2. Examining the Interactive Growth Effect of Development Aid and Institutional Quality in Sub-Saharan Africa By Mehmet Balcilar; Berkan Tokar; Godwin Olasehinde-Williams
  3. Regime changes and fiscal sustainability in Kenya with comparative nonlinear Granger causalities across East-African countries By William Nganga; Julien Chevallier; Simon Ndiritu
  4. Size,effeciency,market power and economies of scale in the African banking sector By Asongu, Simplice A; Odhiambo, Nicholas M
  5. The politics of violence and populism in post-colonial democracy: The role of political society in South Africa By Koelble, Thomas A.

  1. By: Joël CARIOLLE (Ferdi)
    Abstract: The recent deployment of fibre-optic submarine cables (SMCs) in sub-Saharan Africa (SSA) raised the prospects for the digital economy expansion and the whole sub-continent take-off, but also exposed countries and populations to new sources of vulnerability. This paper provides empirical evidence on the ambivalent effect of SMC deployment on the digital divide in 46 SSA countries. On the one hand, results show that the laying of SEACOM, MainOne and EASSy cables in 2009-2010 has yielded a three percentage points increase in internet penetration rates. On the other hand, exogenous sources of telecommunication disruptions related to SMC laying – the country exposure to SMC outages and the population distance from SMC landing stations – are found to reduce internet and mobile penetration rates, to lower investments in ICTs, and to increase mobile-cellular tariffs and the wireline network instability. Therefore, while SMC arrival in SSA has reduced the digital divide, this divide would be lower if SSA countries were less digitally vulnerable.
    Date: 2018–11
  2. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University); Berkan Tokar (Department of Economics, Eastern Mediterranean University); Godwin Olasehinde-Williams (Department of Economics, Eastern Mediterranean University)
    Abstract: This study analyses the interconnectivity of growth, aid and institutions in Sub-Saharan Africa. The study employs annual data on a panel of 39 countries for the period 1996-2017. The hypothesis that the growth impact of aid and institutions could be interactive was examined. The hypothesis was tested using panel data for official development assistance, aggregate and individual measures of institutional quality, and economic growth, while controlling for sub-regional differences in Southern Africa, Eastern Africa, Western Africa and Central Africa. The results indicate the following: Aid has a direct positive, and an indirect negative growth impact through its interaction with domestic institutions. The synergistic growth impact of aid and institutions is substitutive rather than complementary. The substitutive effect is most pronounced in Western Africa, followed by Eastern Africa, and then Southern Africa but lowest in Central Africa. Good quality institutions are positively correlated with growth, and the institutions that reduce rent-seeking and protect property rights are the types of institutions with the biggest growth effects.
    Keywords: CO2 emissions; Economic Growth, Official Development Assistance, Institutions, Sub-Saharan Africa, Panel GMM
    JEL: F35 F50 O43 O55
    Date: 2018
  3. By: William Nganga (Strathmore University); Julien Chevallier (UP8 - Université Paris 8 Vincennes-Saint-Denis); Simon Ndiritu (Strathmore University)
    Abstract: This study seeks to investigate the nature of fiscal policy regime in Kenya, and the extent to which fiscal policy is sustainable in the long run by taking into account periodic regime changes. Markov-switching models were used to determine fiscal policy regimes endogenously. Regime switching tests were used to test whether the No-Ponzi game condition and the debt stabilizing condition were met. The results established that the regime-switching model was suitable in explaining regime sustainable and sustainable cycles. An investigation of fiscal policy regimes established that both sustainable and unsustainable regimes were dominant and each lasted for an average of four years. There was evidence to suggest the existence of procyclical fiscal policy in Kenya. Regime switching tests for long-run sustainability suggested that the No-Ponzi game condition weakly holds in the Kenyan economy. Regime-based sensitivity analysis suggests that the persistence of unsustainability regime for more than four years could threaten long-run fiscal sustainability. Sensitivity tests are conducted by resorting to (i) Self-Exciting Threshold Autoregressive Models at the country-level, and (ii) non-linear Granger causalities across a Feed- Forward Artificial Neural Network composed of East-African countries (Burundi, Kenya, Rwanda, Tanzania and Uganda).
    Keywords: Fiscal policy; Markov-switching; No-Ponzi game condition; SETAR; Non-linear Granger causality; Feed-Forward Artificial Neural Network
    Date: 2018–11–30
  4. By: Asongu, Simplice A; Odhiambo, Nicholas M
    Abstract: There is a growing body of evidence that interest rate spreads in Africa are higher for big banks compared to small banks. One concern is that big banks might be using their market power to charge higher lending rates as they become larger, more efficient, and unchallenged. In contrast, several studies found that when bank size increases beyond certain thresholds, diseconomies of scale are introduced that lead to inefficiency. In that case, we also would expect to see widened interest margins. This study examines the connection between bank size and efficiency to understand whether that relationship is influenced by exploitation of market power or economies of scale. Using a panel of 162 African banks for 2001???2011, we analyzed the empirical data using instrumental variables and fixed effects regressions, with overlapping and non-overlapping thresholds for bank size. We found two key results. First, bank size increases bank interest rate margins with an inverted U-shaped nexus. Second, market power and economies of scale do not increase or decrease the interest rate margins significantly. The main policy implication is that interest rate margins cannot be elucidated by either market power or economies of scale. Other implications are discussed.
    Keywords: Sub-Saharan Africa;banks;lending rates;effeciency;quite life hypothesis
    Date: 2018–12
  5. By: Koelble, Thomas A.
    Abstract: This paper argues that current levels of violence and populism in post-colonial spaces such as South Africa are a consequence of a socio-history of violent dispossession, exploitation and impoverishment and is perpetuated by the continuation of the socio-economic and political conditions rooted in that history of exceptional violence, inequality and injustice. A switch in the political system does not reduce violence by itself. The disposition towards violence can only be shifted by a fundamental shift away from the economics and politics of the apartheid era. Since such a shift is unlikely to occur under current conditions, the perpetuation of violence and populist politics are likely to remain key features and consti-tutive elements of post-apartheid democracy.
    Date: 2018

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