nep-afr New Economics Papers
on Africa
Issue of 2019‒01‒21
five papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Governance and Domestic Investment in Africa By Chimere O. Iheonu
  2. Measuring Ethnic Stratification and its Effect on Trust in Africa By Roland Hodler; Sorawoot Srisuma; Alberto Vesperoni; Noémie Zurlinden
  3. Learning from the "Best": The Impact of Tax-Benefit Systems in Africa By Bargain, Olivier; Jara Tamayo, Holguer Xavier; Kwenda, Prudence; Ntuli, Miracle
  4. An Analysis of the Impact of Economic Growth, Political Instability and Exchange Rate on Tourism Growth in South Africa By Daniel Francois Meyer
  5. The role of unmet demand in the dynamics of energy supply forms: The case of electricity market structures in sub-Saharan Africa By Alexis Vessat

  1. By: Chimere O. Iheonu (University of Nigeria, Nsukka)
    Abstract: The study empirically examined the impact of governance on domestic investment in 16 African countries with a balanced panel data set, between the years 2002 and 2015. The study employed six unbundled governance indicators from the World Bank, World Governance Indicators and constructed three bundled governance indicators using the Principal Component Analysis. The Driscoll and Kraay Fixed Effects model which accounts for serial correlation, groupwise heteroskedasticity and cross-sectional dependence were employed with empirical results revealing that all the indicators of governance positively and significantly influence domestic investment in Africa, except for government effectiveness which happens to be insignificant. Also, Voice/Accountability and the Control of Corruption exert more influence on domestic investment as indicated by their coefficient values. Furthermore, economic growth is also an important factor in explaining domestic investment in Africa. Policy recommendations are discussed.
    Keywords: Governance; Domestic Investment; Africa; PCA; Fixed Effects Model
    JEL: C1 E2 R5
    Date: 2019–01
  2. By: Roland Hodler; Sorawoot Srisuma; Alberto Vesperoni; Noémie Zurlinden
    Abstract: We define and axiomatically characterize an index of ethnic stratification that measures the extent to which the hierarchy in socio-economic positions across the individuals of a society follows ethnolinguistic lines. This index generalizes the idea of between-group inequality to situations where data on economic and ethnolinguistic distances between pairs of individuals is available. We define an estimator of our index that takes the form of a second order U-statistic and has well-behaved statistical properties, and we show that ethnic stratification is empirically related to low levels of trust in other people and institutions at the local level in Africa.
    Keywords: inequality, ethnic diversity, ethnic fractionalization, trust
    JEL: D31 D63 Z13
    Date: 2018
  3. By: Bargain, Olivier (University of Bordeaux); Jara Tamayo, Holguer Xavier (University of Essex); Kwenda, Prudence (Wits University); Ntuli, Miracle (Wits University)
    Abstract: Redistributive systems in Africa are still in their infancy but are constantly expanding in order to finance increasing public spending. This paper aims at characterizing the redistributive potential of six African countries: Ghana, Zambia, Mozambique, Tanzania, Ethiopia and South Africa. These countries show contrasted situations in terms of income distribution. We assess the role of tax-benefit systems to explain these differences. Using newly developed tax-benefit microsimulations for all six countries, we produce counterfactual simulations whereby the system of the most (least) redistributive country is applied to the population of all other countries. In this way, we can decompose the total country difference in income distribution between the contribution of tax-benefit policies versus the contribution of other factors (market income distributions, demographics, etc.). This analysis contributes to the recent literature on the redistributive role of socio-fiscal policies in developing countries and highlights the role of microsimulation techniques to characterize how different African countries can learn from each other to improve social protection and reduce inequality.
    Keywords: tax-benefit policy, microsimulation, inequality, poverty, Africa
    JEL: H23 H53 I32
    Date: 2018–12
  4. By: Daniel Francois Meyer (North-West University)
    Abstract: Globally the tourism sector is one of the main economic sectors in attracting and generating foreign revenue. The sector accounts for seven percent of global foreign revenue as an export industry. In South Africa the low growth environment over the last decade has resulted in the need to find alternative economic sectors in support to traditional sectors such as mining and manufacturing, to drive higher levels of economic growth in the country. The aim of this study was to analyse the relationship between tourism as the dependent variable, and economic growth, exchange rate changes and political stability, as independent variables. The study region selected is South Africa, which is classified as a developing country and is in many cases seen as the proxy for emerging economies. This study followed a quantitative research approach with time series data from 1996 to 2017. The relationships between the variables were analysed by means of the Johansen cointegration, Vector Error Correction and Granger causality econometric models. The results indicated that there are both long and short-run relationships between the variables. A number of policy recommendations that could potentially contribute to the extension of the role of tourism in development include improved political and currency stability in the country as well as the relaxation of visa requirements.
    Keywords: Economic growth, political instability, South Africa, tourism
    Date: 2018–11
  5. By: Alexis Vessat (ART-Dev - Acteurs, Ressources et Territoires dans le Développement - CIRAD - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - UPVD - Université de Perpignan Via Domitia - UM3 - Université Paul-Valéry - Montpellier 3 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The energy sector in sub-Saharan Africa is in a state of flux. Based on an approach borrowed from industrial economics, using historical examples that point to three successive transformations of electricity market structure, our analysis differs from previous studies by looking at demand as a consequence of supply. Our results show, an extremely fragmented demand for energy in sub-Saharan African countries, within which a very dynamic unmet demand drives change in how supply is offered. New forms of energy provisioning introduced on the electricity market put into question the initial ongrid network model. The appearance of decentralized electricity production shows that there is a potential for going beyond current limitations and moving away from a supply structure focused on the maintenance and improvement of on-grid networks without consideration of the needs of rural populations on one hand, and on the other hand, the establishment of expensive mini-grids that provide inferior energy services to rural populations. New territorial linkages focus on mechanisms seen in energy demand.
    Keywords: Centralized electricity production,electricity market reform,sub-Saharan Africa,decentralized mini- and off-grid production systems,demand fragmentation,supply dynamics and changes,rural electricity demand,access to electricity
    Date: 2017–11–28

This nep-afr issue is ©2019 by Sam Sarpong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.