nep-afr New Economics Papers
on Africa
Issue of 2020‒01‒13
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. The link between government expenditure and debt as potential drivers of economic growth in South Africa By ABIGAIL STIGLINGH; LERATO MOTHIBI
  2. The criticality of growth, urbanization, electricity and fossil fuel consumption to environment sustainability in Africa By Simplice A. Asongu; Mary Oluwatoyin Agboola; Andrew Adewale Alola; Festus Victor Bekun
  3. Trade Liberalization and Firm Profitability: Insights from Ghana's Manufacturing Sector. By Hoedoafia, Mabel Akosua
  4. The Spending Challenge for Reaching the SDGs in Sub-Saharan Africa: Lessons Learned from Benin and Rwanda By Delphine Prady; Mouhamadou Sy
  5. Fear Not For Man? Armed conflict and social capital in Mali By Thomas Calvo; Emmanuelle Lavallée; Mireille Razafindrakoto; François Roubaud
  6. Price discrimination in bribe payments: Evidence from informal cross-border trade in West Africa By Sami Bensassi; Joachim Jarreau

    Abstract: The financial burden of public debt in the lives of South Africans has undergone considerable change and continues to evolve since the beginning of democracy in 1994. Many countries, specifically the OCED countries have experienced expanding levels of debt to GDP ratio since the global financial crises in 2008/2009, where South Africa?s gross debt ratio averaged 44.8% in 2017. Making use of the autoregressive distributive lag model (ARDL), the study utilises data from 1980 to 2017 in order to investigate the relationship between government expenditure and debt as potential drivers of economic growth. Furthermore, the study?s aim is to identify weather or not government expenditure and debt could be identified as positive or negative contributors towards economic growth in South Africa. The study further seeks to identify the link between government expenditure and debt since, government expenditure in South Africa has diligently surpassed its revenue, where the deficit is in most cases is funded through the accumulation of unsustainable debt. The findings of the study reveal a negative relationship between economic growth and government expenditure. In addition, the study also reveals a positive relationship between economic growth and government debt. This therefore indicates the need for stricter government expenditure and debt management policies, as unsustainable debt levels and unregulated government expenditure could be detrimental for the South African economy.
    Keywords: ARDL model, economic growth, government expenditure, debt.
    JEL: D00 C01 A10
    Date: 2019–10
  2. By: Simplice A. Asongu (Yaoundé/Cameroon); Mary Oluwatoyin Agboola (Riyadh, Saudi Arabia); Andrew Adewale Alola (Istanbul Gelisim University, Istanbul, Turkey); Festus Victor Bekun (Istanbul Gelisim University, Istanbul, Turkey)
    Abstract: While most African economies are primarily sandwiched with the seemingly unsurmountable task of attaining consistent economic growth and unhindered energy supply, the enormous threat posed by environmental degradation has further complicated the economic and environmental sustainability drive. In this context, the present study examines the effect of economic growth, urbanization, electricity consumption, fossil fuel energy consumption, and total natural resources rent on pollutant emissions in Africa over the period 1980-2014. By employing selected African countries, the current study relies on the Kao and Pedroni cointegration tests to cointegration analysis, the Pesaran’s Panel Pooled Mean Group-Autoregressive distributive lag methodology (ARDL-PMG) for long run regression while Dumitrescu and Hurlin (2012) is employed for the detection of causality direction among the outlined variables. The study traces long run equilibrium relationships b-etween examined indicators. The ARDL-PMG results suggest a statistical positive relationship between pollutant emissions and urbanization, electricity consumption and non-renewable energy consumption. Dumitrescu and Hurlin (2012) Granger causality test lends support to the long-run regression results. Bi-directional causality is observed between pollutant emissions, electricity consumption, economic growth and pollutant emissions while a unidirectional causality is apparent between total natural resources rent and pollutant emissions. Based on these results, several policy implications for the African continent were suggested. (a) The need for a paradigm shift from fossil fuel sources to renewables is encouraged in the region (b) The need to embrace carbon storage and capturing techniques to decouple pollutant emissions from economic growth on the continent’s growth trajectory. Further policy insights are elucidated.
    Keywords: non- renewable energy consumption; electricity consumption; economic growth; panel econometrics; Africa
    JEL: C32 Q40
    Date: 2019–01
  3. By: Hoedoafia, Mabel Akosua
    Abstract: The private sector is recognized as an engine of growth; hence a well-developed private sector is deemed as the means to accelerate the rapid industrialization needed in developing countries. In this light, The Government of Ghana over the years has put in place policies to make the private sector flourish. A key strategy was the liberalization of trade through the economic recovery and structural adjustment programmes in the 1980s. However, much is not known about the impact of such policies on the profitability of the private sector especially with respect to trade. Indeed, there is a paucity of research addressing the profitability of firms due to trade liberalization especially the private sector in the African context. This paper fills this gap by investigating how tariffs as a measure of trade liberalization affect the profitability of Ghanaian private firms in the manufacturing sector using firm-level data spanning 1991 to 2001. Profitability is measured as the net profit margin of a firm. A two-step approach was employed in the empirical analysis of the tariff-profitability nexus. The net profit margin of firms was estimated in the first step. After which the effect of tariffs on the estimated net profit margin of firms was examined. The findings reveal that tariff reductions result in increased profitability of local firms. In addition, productivity was found to positively impact firm profitability.
    Keywords: profitability, tariffs, private sector, manufacturing, trade liberalization, Ghana
    JEL: F1 F13 F14 O24
    Date: 2019–11–26
  4. By: Delphine Prady; Mouhamadou Sy
    Abstract: This paper documents the additional spending that is required for sub Saharan Africa (SSA) to achieve meaningful progress in SDGs by 2030. Benin and Rwanda are presented in detail through case studies. The main lessons are: i) average additional spending across SSA is significant, at 19 percent of GDP in 2030; ii) countries must prioritize their development objectives according to their capacity to deliver satisfactory outcomes, iii) financing strategies should articulate multiple sources given the scale of additional spending, and iv) strong national ownership of SDGs is key and should be reflected in long-term development plans and medium-term policy commitments.
    Date: 2019–12–06
  5. By: Thomas Calvo (DIAL-LEDa, IRD, Université Paris-Dauphine, PSL Université); Emmanuelle Lavallée (DIAL, LEDa, IRD, Université Paris-Dauphine, Université PSL); Mireille Razafindrakoto (DIAL-LEDa, IRD, Université Paris-Dauphine, PSL Université); François Roubaud (DIAL-LEDa, IRD, Université Paris-Dauphine, PSL Université)
    Abstract: This paper studies the effects of armed conflict on social capital in Mali, where a violent conflict has been raging since 2012. We examine the conflict's impacts on associational membership using event location data and unique survey data on governance, peace and security (GPS-SHaSA). We show that, in conflict-exposed areas, adult involvement in associations increases from 7 to 14 percentage points. Instrumental variable and difference-in-differences strategies complementary mitigate reverse causation and omitted variable biases as estimated results remain very consistent. Robust estimations constrained to non-migrants samples also rule out selection into migration. Yet this result, consistent with the argument that armed conflict cultivates social engagement, is not a positive outcome in the case of Mali. The increase is observed solely for family and political associations, which are comparatively inward-looking and act as interest groups. We interpret this finding as a form of withdrawal behind group or community boundaries, an interpretation supported by further analysis of interpersonal trust. This sort of withdrawal may exacerbate ethnic divisions and deepen the conflict.
    Keywords: Social capital; Con ict; Participation; Trust; Mali.
    JEL: D71 F51 O12 Z13
    Date: 2019–07
  6. By: Sami Bensassi (Birmingham Business School - University of Birmingham [Birmingham]); Joachim Jarreau (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine)
    Abstract: What factors explain the persistence and pervasiveness of corruption in certain parts of the world? In West Africa, many day-to-day transactions require the payment of bribes. Quantitative evidence on these bribes and their determinants is scarce. This paper sheds light on the level and the frequency of bribe payments in informal coss-border trade. It examines how bribes depend on the trade regime and on market structure. We rely on data from a survey of traders in Benin to estimate the determinants of bribe payments. We exploit variations in the trade regime across Benin's borders, as well as changes in trade restrictions over time and variations in route availability across space and time. We find that reductions in trade barriers help to lower bribes, but do not eliminate them, with bribes remaining frequent in liberalized trade regimes. These results suggest that collusive corruption – used to circumvent regulations and taxes – coexists with coercive corruption, where officials use their monopoly power to extract transfers from traders.
    Keywords: Informal trade,Corruption,Trade policy
    Date: 2019

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