nep-afr New Economics Papers
on Africa
Issue of 2020‒07‒27
seven papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Does the Pursuit of Outreach Consistently Stifle the Financial Performance of Microfinance Institutions in sub-Saharan Africa? By Sydney Chikalipah
  2. Competition, Competitiveness and Growth in Sub-Saharan Africa By Reda Cherif; Sandesh Dhungana; Xiangming Fang; Jesus R Gonzalez-Garcia; Yuanchen Yang; Mustafa Yenice; Jung Eun Yoon
  3. Integrated Governance for Coherent Implementation of the SDGs in Egypt By Gamze Igrioglu; Adam Ostry; Miriam Allam
  4. Enterprising women in Southern Africa: When does land ownership matter? By Zuzana Brixiová; Thierry Kangoye; Fiona Tregenna
  5. Measuring Unilateral Effects under Data Scarcity: A Merger Case in South Africa By Ivaldi, Marc; Mncube, Liberty; Sánchez del Villar, Marina
  6. The Employment Effects of Ethnic Politics By Amodio, Francesco; Chiovelli, Giorgio; Hohmann, Sebastian
  7. The long Road towards Supply Chain Trade in Africa By Jaime de Melo; Anna Twum

  1. By: Sydney Chikalipah
    Abstract: We study the relationship between outreach and the financial performance of 479 microfinance institutions (MFIs) in 37 countries of sub-Saharan African (SSA), covering the period 1998 to 2012. This study builds on earlier literature on the relationship between outreach and the financial performance of MFIs across countries. Unlike many prior microfinance studies, we investigate the outreach-financial performance nexus by adopting novel approaches: (i) of linear and non-linear specification, (ii) of solely focusing on SSA, and (iii) of segregating the two-outreach variables into different segments, with the aim of determining the optimal outreach thresholds (or tipping point). By employing the OLS and GMM method, we find evidence indicating a positive and statistically significant relationship between outreach and the financial performance among MFIs in SSA. In addition, providing small microcredits below the USD 600 threshold is associated with lower profitability than larger loans. Equally, we observed that MFIs serving more than 30,000 clients reported a strong financial performance, rather than the MFIs that were serving less than that threshold. The study findings have implications for the managers and stakeholders with a vested interest in the microfinance industry of SSA.
    Keywords: Microfinance, Outreach, Profitability and sub-Saharan Africa
    JEL: C32 G21 O12 O16 O55
    Date: 2020–03
  2. By: Reda Cherif; Sandesh Dhungana; Xiangming Fang; Jesus R Gonzalez-Garcia; Yuanchen Yang; Mustafa Yenice; Jung Eun Yoon
    Abstract: Does greater product market competition improve external competitiveness and growth? This paper examines this question by using country-and firm-level data for a sample of 39 sub-Saharan African countries over 2000–17, as well as other emerging market economies and developing countries, and finds that an improvement in domestic competition is associated with a signficant increase in real GDP per capita growth rate, achieved mainly through an improvement in export competitiveness and productivity growth. Price levels, including of essential items, are also generally lowered with an increase in competition. Moreover, at the firm-level, evidence shows that greater competition—proxied through a decline in corporate market power—is associated with an increase in firm’s investment and the labor’s share in output. These effects are more pronounced in the manufacturing sector and among domestic firms compared to foreign firms.
    Keywords: Economic integration;Trade policy;Global competitiveness;Total factor productivity;International trade agreements;Markups,Market Power,Competition,Sub-Saharan Africa,WP,sub-Saharan African country,markup,sub-Saharan,effect of competition,emerge market economy
    Date: 2020–02–14
  3. By: Gamze Igrioglu; Adam Ostry; Miriam Allam
    Abstract: Egypt has embarked on an ambitious reform agenda to achieve key strategic objectives for the country’s growth and development by 2030. This working paper examines Egypt’s institutional and decision-making framework governing the implementation of the Sustainable Development Goals (SDGs) such as vertical and horizontal coordination across silos for better strategy design and implementation; the use of evidence, including data and impact assessments, in making decisions; and public consultations and results-based budgeting for more open, transparent, accountable and participatory governance. It assesses monitoring, evaluation and feedback frameworks to ensure that policy choices and trade-offs reflect empirical evidence on what works, what does not, and why, in pursuing the SDGs. This paper provides concrete policy recommendations in support of Egypt’s ongoing efforts toward SDG implementation, based on proven OECD country practice.
    JEL: H83 H11 H4 H7 I3
    Date: 2020–07–09
  4. By: Zuzana Brixiová (University of Economics in Prague and VSB – Technical University of Ostrava, SALDRU Research Affiliate, University of Cape Town); Thierry Kangoye (African Development Bank); Fiona Tregenna (University of Johannesburg)
    Abstract: Limited access to finance is one of the major barriers for women entrepreneurs in Africa. This paper presents a model of start-ups in which firms' sales and profits depend on their productivity and access to credit. However, due to the lack of collateral assets such as land, female entrepreneurs have more constrained access to credit than do men. Testing the model on data from the World Bank Enterprise Surveys in Eswatini, Lesotho, and Zimbabwe, we find land ownership to be important for female entrepreneurial performance in terms of sales levels. This finding suggests that the small Southern African economies would benefit from removing obstacles to women's land tenure and enabling financial institutions to lend against movable collateral. While land ownership is linked with higher sales levels, it seems less critical for sales growth and innovation where access to short term loans for working capital seems to be key.
    Keywords: entrepreneurial sales, innovation, credit, land, gender, Africa
    Date: 2020
  5. By: Ivaldi, Marc; Mncube, Liberty; Sánchez del Villar, Marina
    Abstract: In this paper, we use a differentiated-products set up to assess the impact on competition of a merger between Greif and Rheem South Africa. Both parties are active in the industrial packaging products sector. The parties’ activities overlap, among others, in the production of large steel drums. Our analysis suggests that there is a low degree of substitutability between large steel drums and other products in the market. For this reason, we focus our competitive assessment on the unilateral effects of large steel drums. We rely on a limited amount of relatively high-level data to arrive to robust conclusions on the unilateral effects that the merger would induce. We study these unilateral effects using two empirical tools, the upwards pricing pressure (UPP) and the gross upwards pricing pressure index (GUPPI). These two measures are complementary in assessing the competitive harm that the merger could induce. UPP nets out the incentive to raise prices due to lower competition with the incentive to reduce prices due to lower marginal costs. GUPPI focuses on the incentive to raise prices post-merger and is linked to the market definition that competition authorities use when defining the relevant market. To our knowledge, this paper provides the first application in the African continent of such empirical analysis. We calculate these two measures following the conclusion of the Tribunal. We conclude that both UPP and GUPPI consistently signal that the merger would create strong incentives to raise prices.
    Date: 2020–07–10
  6. By: Amodio, Francesco; Chiovelli, Giorgio; Hohmann, Sebastian
    Abstract: This paper studies the labor market consequences of ethnic politics in African democracies. We combine geo-referenced data from 15 countries, 32 parliamentary elections, 62 political parties, 243 ethnic groups, 2,200 electoral constituencies, and 400,000 individuals. We implement a regression discontinuity design that compares individuals from ethnicities connected to parties at the margin of electing a local representative in the national parliament. We find that having a local ethnic politician in parliament increases the likelihood of being employed by 2-3 percentage points. We hypothesize that this effect originates from strategic interactions between ethnic politicians and traditional leaders, the latter retaining the power to allocate land and agricultural jobs in exchange for votes. The available evidence supports this hypothesis. First, the employment effect is concentrated in the historical homelands of ethnicities with strong pre-colonial institutions. Second, individuals from connected ethnicities are more likely to be employed in agriculture, and in those countries where customary land tenure is officially recognized by national legislation. Third, they are also more likely to identify traditional leaders as partisan, and as being mainly responsible for the allocation of land. Evidence shows that ethnic politics shapes the distribution of productive resources across sectors and ethnic groups.
    Keywords: Africa; democracy; employment; ethnic politics; traditional leaders
    JEL: J15 J70 O10 P26 Q15
    Date: 2019–12
  7. By: Jaime de Melo (FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Anna Twum
    Abstract: The recent Africa Continental Free Trade Area (AFCFTA), in force since May 2019, is an important opportunity to developing and deepen supply chain trade across Africa. Evidence shows that integration into production networks-Global value Chains (GVCs) or Regional Value Chains (RVCs)-provides new opportunities for developing countries to participate in global trade and diversify their export baskets through hyperspecialisation in fragmented production processes. Without an ecosystem of supply chain trade, a country would have to be able to produce a complete product before entering a new line of business.
    Date: 2020–05–29

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