nep-afr New Economics Papers
on Africa
Issue of 2020‒08‒31
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Economic Neoliberalism and African Development By Augustin Kwasi Fosu; Dede Woade Gafa
  2. More elections, more burden? On the relationship between elections and public debt in Africa By Bayale, Nimonka; Tchagnao, Abdou-Fataou; Chavula, Hopestone Kayiska
  3. Productive efficiency, technological change and catch up within Africa By Mensah, Emmanuel B.; Owusu, Solomon; Foster-McGregor, Neil
  4. Partnership for inclusive growth: Can linkages with large firms spur the growth of SMEs in Tanzania? By Josaphat Kweka; Fadhili Sooi
  5. Entrepreneurship, Human Capacity Development and Youth Employment Generation: A Study of Selected Sub-Saharan Africa Countries By Oyolola, Feyisayo; Otonne, Adewumi
  6. How does Fintech Innovation Matter for Bank Fragility in SSA? By Nguena, Christian-Lambert

  1. By: Augustin Kwasi Fosu (Institute of Statistical, Social, and Economic Research, University of Ghana, Legon, Ghana; Faculty of Economic and Management Sciences, University of Pretoria, Pretoria, South Africa; Centre for the Study of African Economies (CSAE), University of Oxford, Oxford, UK); Dede Woade Gafa (Department of Economics, University of Ghana, Legon, Ghana)
    Abstract: The paper analyses the possible impacts of the neoliberalism policies pursued in sub-Saharan Africa (SSA) on the economic development in the region during post-independence. It first presents a brief account of the socioeconomic situation in the immediate post-independence era until the adoption of the stabilisation and structural adjustment programmes by SSA countries. The paper, then, discusses the implementation of `neoliberal' reforms in the region. It also examines SSA's growth and development performance during the pre- and post-reforms periods, and provides some insights into the driving forces behind the region's economic outcomes. The study uncovers notable differences in economic policy across SSA countries, with policy orientation in most countries reflecting `partial' rather than `pure' neoliberalism. Nevertheless, at least at the regional level, there is an apparent reversal from dismal performance to impressive growth, accompanied by major improvements in development indicators following the reforms. These economic gains are observed to have been bolstered by relative political stability and reasonably market-friendly policies, supported by improved democratic institutions. Thus, maintaining such an institutional framework appears critical for continued economic development in Africa.
    Date: 2020–08
  2. By: Bayale, Nimonka; Tchagnao, Abdou-Fataou; Chavula, Hopestone Kayiska
    Abstract: The political determinants of public indebtedness in developing countries is still generating a lot of interest among academics and policy makers. This paper investigates whether elections influence the public debt dynamics relying on data from 51 African countries spanning 1990 to 2015. The analyses are conducted using the fixed effects and the system Generalized Method of Moments (GMM). The results reveal that although all types of elections increase public debt, only the impact of the presidential elections are significant. The findings are robust irrespective of the estimation technique. The paper recommends African countries to rationalize public resources, particularly in the election years.
    Keywords: Public debt; Elections; Africa; Fixed effects; System GMM.
    JEL: C23 D72 F34 H60 N17
    Date: 2020–07–10
  3. By: Mensah, Emmanuel B. (Maastricht University, UNU-MERIT); Owusu, Solomon (Maastricht University, UNU-MERIT); Foster-McGregor, Neil (Maastricht University, UNU-MERIT)
    Abstract: The peculiar nature of African development presents unique technological challenges. This often requires African-induced innovation or a combination of frontier and local technologies to solve problems unique to Africa. However, most researchers study technological change in Africa in relation to some globally defined technology frontier. The diffusion of knowledge from this global frontier to other regions however decreases in intensity with geographic and relational distance. Given that African countries are geographically and relationally close to each other, this paper makes a departure from this existing literature and studies technological change and technological catch up within African by considering catch-up with respect to an African technology leader. We do this by using structural methods (Shift and Share catch-up decomposition) and nonparametric methods (Data Envelopment Analysis) to estimate an African production frontier. We further measure productivity change in sub-Saharan Africa and disentangle the change due to general technological progress and efficiency change using the Malmquist Productivity Index (MPI). Our results show that Botswana and Mauritius are the only two countries in Africa which have converged to the productivity level as well as the efficiency level of the frontier. This successful convergence is driven more by efficiency catch-up and less by technological change. We explore the special role of efficiency catch-up by decomposing it into within-sector convergence, between -sector convergence and initial specialization. The results highlight the special role of structural change in catch-up. This paper contributes to recent evidence suggesting that countries can climb up the income ladder at a faster rate through a two-pronged transformation – i.e. structural change and technological catch-up.
    Keywords: Africa, Technological change, Technological Catch-up, Economic Growth
    JEL: O30 O47 N17
    Date: 2020–08–04
  4. By: Josaphat Kweka; Fadhili Sooi
    Abstract: A recent strand of literature on small and medium enterprise (SME) development identifies linkages with large firms as some of the enablers of development and competitiveness. However, there is a dearth of empirical studies on the topic. In this study, we assess the extent and determinants of linkages between SMEs and large firms in Tanzania and to what degree the linkage is an important driver of SME performance.
    Keywords: SMEs, firm linkages, firms, SME growth
    Date: 2020
  5. By: Oyolola, Feyisayo; Otonne, Adewumi
    Abstract: This study examined entrepreneurship, human capacity development and youth employment generation in 20 selected sub-Saharan African countries from 2005 to 2017. We employed the fixed effect Panel estimator on the secondary annual data sourced for the study. Findings from the study show that entrepreneurial activities and infrastructural development are important determinants of youth employment generation in the selected countries. The implication of these findings is that entrepreneurial activities and infrastructural development should be of concern to policy makers, and well meaning private individuals as they are observed to be significant determinant of youth employment. More importantly, individual are required to posses refined skills to match the quality of infrastructural facilities in the work place. Therefore, as a matter of policy implication these African Countries should ensure that the conclusion of this study is considered and implemented, and make considerable effort to reduce the large informal sector by putting in place laws and rules that will ensure that the activities of the self-employed people are recognized and accounted for on a large scale.
    Keywords: Human Capacity Development, Entrepreneurship and Youth Employment Generation
    JEL: J0
    Date: 2020–03–18
  6. By: Nguena, Christian-Lambert
    Abstract: There is a momentous debate on the role played by financial technology (fintech) innovation in the fragility of the banking sector. Considering the importance of financial solidness, contradictory theoretical predictions and empirical evidence, the in-depth re-investigation of this relation is needed. Using data of 690 banks across 34 Sub Saharan African countries for the period 1999-2015 along with FGLS, GMM, Panel Threshold regression and PCA econometric method, this paper empirically examines the influence of fintech innovation on bank fragility. Mainly the destabilizing impact of fintech innovation is confirmed for our baseline investigation but later relativized with a stabilizing impact after a certain threshold. Moreover, the results highlight also that the macroeconomic environment is important in explaining bank fragility and suggested that public policy should take into account some specific destabilizing consequences on the banking system. Besides, the simultaneous hypothesis test of the innovationfragility nexus conditional to some relevant variables reveals that financial openness does matter while investment, commercial openness and monetary policy do not. Lastly, the comparative analysis validates our heterogeneity hypothesis; countries with the high size banking sector, colonialized by France and members of monetary union performs better than the others in terms of bank solidness. These results indicate that suitable fintech innovation policy even between the same regions could be rather different. Financial instability appeared also to increase bank fragility. This paper contributes to the limited literature on fintech innovation at both the macro and micro levels in sub-Saharan Africa.
    Keywords: Fintech innovation,Bank fragility,Threshold regression,Technology transformation,FGLS,GMM,PCA
    JEL: G21 G28 G15 O31 O33
    Date: 2020

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