nep-afr New Economics Papers
on Africa
Issue of 2020‒10‒19
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. The Extractive Industry’s impact on Economic Growth in SADC Countries By Nhabinde, Simeão; Heshmati, Almas
  2. Within the EAC, which countries stand to benefit from the implementation of the AfCFTA By Bulime, Enock N.W.; Nattabi, Aida K.; Shinyekwa, Isaac M.B.
  3. Building Knowledge Economies in Africa: An Introduction By Asongu, Simplice; Kuada, John
  4. The Legacy of the Slave Trade: Towards Identifying the Causal Impact of Mistrust in Medicine on Demand for Vaccination in Sub-Saharan Africa By Athias, Laure; Macina, Moudo
  5. Strengthening Producer Organizations to Increase Market Access of Smallholder Farmers in Uganda By Vargas Hill, Ruth; Maruyama, Eduardo; Olapade, Markus; Frölich, Markus
  6. Concessions, Violence, and Indirect Rule: Evidence from the Congo Free State By Sara Lowes; Eduardo Montero

  1. By: Nhabinde, Simeão; Heshmati, Almas
    Abstract: The Southern African Development Community (SADC) countries are rich in natural resources and in most of them their extractive industries extract and export natural resources with little industrial processing. This study analyzes the direct and indirect impacts that the extractive industries in the SADC countries have on their economic growth. The study also examines the hypothesis of economic convergence. Its empirical results are based on data from the 11 founding SADC countries covering the period 2004-17. The results show that despite the process of integration, the SADC economies do not converge in terms of per capita incomes. The extractive industries have direct negative impacts on the countries’ economic growth thus providing evidence of a resource curse. Extractive industries in South Africa, Botswana, and Namibia have positive direct impacts on their economic growth. However, in terms of indirect impacts, the extractive industries do not have any impact on GDP because their impact on manufacturing, human capital, public expenditure, economic openness, exchange rate, and inflation is insignificant. The study also shows that GDP, the colonial path followed by these countries, and inflation have a negative but insignificant impact on extractive industries, while manufacturing, government expenditure, and economic openness have positive but insignificant impacts in all SADC countries. Human capital and exchange rate are the only factors that have both significant positive and negative impacts on economic growth, respectively.
    Keywords: SADC,Extractive industry,Growth impact,Natural resources,Resource curse,Africa
    JEL: N57 Q13 P48
    Date: 2020
  2. By: Bulime, Enock N.W.; Nattabi, Aida K.; Shinyekwa, Isaac M.B.
    Abstract: The implementation of the African Continental Free Trade Area (AfCFTA) will affect EAC countries in terms of tax revenues, trade volumes and poverty. Estimates paint a mixed picture among specific EAC economies regarding the increase in demand following the reduction in tariffs, also known as trade effect. Burundi has the most considerable total trade effect of US$ 9.5 million, followed by Kenya with US$ 5.2 million and Uganda with US$ 4.2 million. On the other hand, Tanzania and Rwanda register adverse total trade effects. All the EAC countries incur tariff revenue losses; for instance, Kenya incurs US$ 14.2 million loss followed by Uganda with a US$ 13.5 million loss. Whereas Uganda and Burundi experience positive welfare effects, Kenya, Tanzania and Rwanda experience negative welfare effects. To benefit from the AfCFTA, EAC economies need to (i) increase competitiveness to mitigate the negative impact of trade diversion (ii) pursue policies that promote industrialisation and (iii) compensate for the customs revenue loss by leveraging the envisaged increase in the trade volumes and value for other taxes.
    Keywords: International Relations/Trade
    Date: 2020–08–28
  3. By: Asongu, Simplice; Kuada, John
    Abstract: Knowledge has emerged as a fundamental driver of economic growth and development by inter alia improving the effectiveness and efficiency of economic projects and boosting the process of finding new avenues of addressing developmental policy syndromes. Recent evidence suggests that Africa is on the threshold of significant and sustainable economic growth if its human and material resources can be effectively mobilised to support the process (Kuada & Mensah, 2017; Asongu & Tchamyou, 2019). Consequently, the World Bank’s Knowledge Economy Framework aims to explore and support the extent to which current policies in African countries affect the knowledge development process (and thereby competitiveness) on the continent. A knowledge economy is an economy in which economic prosperity largely depends on the accessibility, quality and quantity of information available, instead of the means of production (Asongu, 2017a, 2017b). This themed issue of Contemporary Social Science-‘Building Knowledge Economies in Africa’ - consists of papers that focus on, but are not limited to, the four dimensions of the World Bank’s Knowledge Economy Index. These are: information and communication technology, education, economic incentives and institutional regime, and innovation (Tchamyou, 2017). The themed issue engages with high quality contributions which, taken together, address the drivers towards knowledge-based economies. This introduction provides a context for understanding the importance of building knowledge economies in Africa and summarises the main contributions to the themed issue. The paper ends by advising scholars and policy makers regarding the risks associated with a colonial view of knowledge- notably the importance of proposing knowledge-based policies while avoiding hegemonic paradigms and hierarchical constructs. In summary, the issue consists of a set of theoretically informed, empirically robust, policy-relevant and accessible articles for both specialists and non-specialists.
    Keywords: Knowledge economy; Development; Africa
    JEL: O10 O30 O38 O55 O57
    Date: 2020–01
  4. By: Athias, Laure; Macina, Moudo
    Abstract: There is a large body of anecdotal evidence from sub-Saharan Africa of widespread medical distrust leading to health program failures. In this paper, to isolate an exogenous variation in trust in medicine to explain contemporary health demand in sub-Saharan Africa, we rely on a widespread historical shock: the slave trade. We combine \possessivecite{NunnWantchekon2011} historical data on the slave trade by ethnic group with individual-level data, geolocated at the district level, from the 2010-2014 Demographic and Health Surveys (DHS) to examine the reduced-form relationship between ancestors’ exposure to the slave trade and children vaccination status against measles. Exploiting variations both within countries and districts, we find that children from mothers whose ancestors were exposed to the slave trade are less likely to be vaccinated. The size of the effect offsets or even dominates the ones obtained for standard determinants of health demand, such as education or revenue. Evidence from a variety of identification strategies shows that the slave trade affects demand for vaccination only through trust in medicine. We then provide explanations for the persistent effect of the slave trade. Consistent with the economic approach, we identify religious affiliations and matrilineal lineage systems as important cultural transmission mechanisms. Consistent with the evolutionary anthropology approach, we point to the similarity of the environment across generations due to colonial and contemporaneous abusive medical treatments to explain persistence of optimal mistrusting behavior.
    Keywords: Trust, Medicine, Slave trade, Health, Culture, Cultural transmission
    JEL: D12 I12 I18 J15 N57 Z13
    Date: 2020–09–16
  5. By: Vargas Hill, Ruth (World Bank); Maruyama, Eduardo (IFPRI, International Food Policy Research Institute); Olapade, Markus (Center for Evaluation and Development (C4ED)); Frölich, Markus (University of Mannheim)
    Abstract: Smallholder agriculture in Sub-Saharan Africa is largely exposed to pervasive market failures, translating into missed opportunities and sub-optimal economic behavior. These failures can partly be traced to the importance of economies of scale in procuring inputs and marketing produce, where smallholders face disproportionately high transaction costs. Producer organizations could help to lessen transaction costs, however, only few farmers in Uganda sell through them. We introduce two interventions aimed at promoting marketing via producer organizations: Cash-on-Delivery (CoD) and Information-on-Sales (IoS), and analyze their impacts in an RCT design: We find that providing cash-on-delivery increases the probability that a member chooses to sell through the group, and hence the volumes bulked by each group. This increase in volumes appears to have enabled groups to secure higher prices for their produce. No significant effect could be found for the Information on Sales intervention, though.
    Keywords: rural producer organizations, smallholder farmers, cash constraints, asymmetric information, Uganda
    JEL: D71 O12 Q13
    Date: 2020–09
  6. By: Sara Lowes; Eduardo Montero
    Abstract: All colonial powers granted concessions to private companies to extract natural resources during the colonial era. Within Africa, these concessions were characterized by indirect rule and violence. We use the arbitrarily defined borders of rubber concessions granted in the north of the Congo Free State to examine the causal effects of this form of economic organization on development. We find that historical exposure to the concessions causes significantly worse education, wealth, and health outcomes. To examine mechanisms, we collect survey and experimental data from individuals near a former concession boundary. We find that village chiefs inside the former concessions provide fewer public goods, are less likely to be elected, and are more likely to be hereditary. However, individuals within the concessions are more trusting, more cohesive, and more supportive of sharing income. The results are relevant for the many places that were designated as concessions to private companies during the colonial era.
    JEL: D72 N47 O15 O43 Z1 Z13
    Date: 2020–10

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