nep-afr New Economics Papers
on Africa
Issue of 2021‒02‒15
eight papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. The impact of Chinese FDI in Africa: evidence from Ethiopia By Crescenzi, Riccardo; Limodio, Nicola
  2. Africa's Manufacturing Puzzle: Evidence from Tanzanian and Ethiopian Firms By Xinshen Diao; Mia Ellis; Margaret S. McMillan; Dani Rodrik
  3. Is Regional Trade Integration a Growth and Convergence Engine in Africa? By Vigninou Gammadigbe
  4. The tax burden on mobile network operators in Africa By Grégoire Rota-Graziosi; Fayçal Sawadogo
  5. Surmounting the Disconnect in Practical Lessons between Curriculum Expectations and Learners’ Prior Experiences By Adri Du Toit
  6. We Don't Need No Education: The Effect of Natural Resource Income Shocks on Human Capital By Gradstein, Mark; Ishak, Phoebe W.
  7. Where less is more: institutional voids and business families in Sub-Saharan Africa By William Murithi; Natalia Vershinina; Peter Rodgers
  8. Fiscal Dominance in Sub-Saharan Africa Revisited By John Hooley; Lam Nguyen; Mika Saito; Shirin Nikaein Towfighian

  1. By: Crescenzi, Riccardo; Limodio, Nicola
    Abstract: We exploit exogenous variation in China’s export taxes to investigate the impact of Chinese foreign direct investment (FDI) in Ethiopia. Higher sector-specific export taxes in China lead to more Chinese FDI in Ethiopian districts specialized in those sectors and generate highly heterogeneous effects. Domestic firms competing with Chinese FDI reduce their sales, investment, inputs and prices, while firms in upstream and downstream sectors expand. We build a 20-year district panel of night lights and observe that Chinese FDI leads to no instantaneous impact on local growth, but significant and persistently positive effects after 6-12 years.
    Keywords: foreign direct investment; domestic investment; growth; 639633-MASSIVE-ERC2014-STG
    JEL: F23 O16 O47
    Date: 2021–01–01
  2. By: Xinshen Diao; Mia Ellis; Margaret S. McMillan; Dani Rodrik
    Abstract: Recent growth accelerations in Africa are characterized by increasing productivity in agriculture, a declining share of the labor force employed in agriculture and declining productivity in modern sectors such as manufacturing. To shed light on this puzzle, we disaggregate firms in the manufacturing sector by size using two newly created panels of manufacturing firms, one for Tanzania covering 2008-2016 and one for Ethiopia covering 1996-2017. Our analysis reveals a dichotomy between larger firms that exhibit superior productivity performance but do not expand employment much, and small firms that absorb employment but do not experience any productivity growth. We suggest the poor employment performance of large firms is related to use of capital-intensive techniques associated with global trends in technology.
    JEL: O1 O14
    Date: 2021–01
  3. By: Vigninou Gammadigbe
    Abstract: The main objective of Regional Trade Agreements (RTAs) is to stimulate economic growth in participating countries through increased trade, economies of scale, knowledge and technology transfer. Using a panel data over the period 1979 to 2018, this paper examines the contribution of regional trade integration (RTI) to economic growth and income convergence in Africa and its major Regional Economic Communities (RECs). The results of the instrumental variable and panel fixed-effects estimation show that RTI promotes economic growth in Africa. However, it fosters income divergence, reflecting the distribution of the gains from regional integration in favor of the more developed economies of the continent. The results of this study show the importance to support the African Continental Free Trade Area (AfCFTA) project with policies aimed at reducing non-tariff barriers to trade and improving infrastructure in order to maximize the effects on growth in all participating countries.
    Date: 2021–01–29
  4. By: Grégoire Rota-Graziosi (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique, FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Fayçal Sawadogo (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique, FERDI - Fondation pour les Etudes et Recherches sur le Développement International)
    Abstract: We estimate the tax burden on the mobile telecommunication sector in twenty-five African countries. This tax burden encompasses not only standard and particular taxes under the control of the Ministry of Finance (MoF), but also fees raised by national telecommunication Regulatory Agency (RA). Given the lack of financial data at the country level, we build a representative mobile network operator, named TELCO, using the GSMA Intelligence database. We compute the Average Effective Tax Rate (AETR) for this firm considering general and special taxes and fees levied only on the telecommunication sector. We develop a web application ( telecom/), which allows the reader to replicate our analysis or to modify TELCO and tax parameters. The AETR varies significantly across countries, ranging from 33 percent in Ethiopia to 118 percent in Niger. Special taxes and fees represent a large share of the AETR illustrating some taxation by regulation and a potential tax competition (a race to the top) between the MoF and the RA. We compare the AETR of TELCO to this of a representative gold mining plant and a standard firm with similar gross return. The tax burden of the telecommunication sector is higher than this of the mining sector in 15 countries out of the 19 countries for which we have data on the gold mining sector.
    Keywords: Taxation,Telecommunication sector,Project analysis,Developing countries
    Date: 2020–12–08
  5. By: Adri Du Toit (Faculty of Education, North-West University, South Africa)
    Abstract: Home Economics, Consumer Studies and other similar subjects can contribute valuable learning to the lives of learners. Efforts to globalize the contents of these subjects have, however, occasionally led to a loss of cultural inclusivity in curricula, as has been the case in South Africa. Notwithstanding the South African educational landscape needing to cater for diverse cultures, the Consumer Studies curriculum still mainly focuses on Western knowledge and skills, particularly the selection of products that learners must make in food production lessons. This leaves especially African learners feeling disconnected and unmotivated to perform well or succeed in the subject. The overarching aim of the research was to frame recommendations in the form of practical suggestions as part of efforts to surmount this disconnect in order to broaden the perceived and experienced value of food production in Consumer Studies for a wider range of culturally diverse South African learners. A qualitative case study was employed to explore if and how a Consumer Studies teacher at a school consisting of mostly African learners was attempting to overcome the disconnect between the curriculum expectations and learners’ prior experiences. Interviews and site visits were conducted to collect data, and the data were then thematically analyzed from an interpretivist perspective. The findings indicate a substantial disconnect between the expectations of the teacher (informed by curriculum requirements) and the prior experiences and learning expectations of her learners, especially as regards the qualities of successful food products. Two recommendations are made: first, the teacher should use demonstrations as a teaching method to improve learners’ familiarity with products; and second, clear visual images should be displayed to learners to aid them in understanding the expected outcomes of the products they have to make in practical lessons.
    Keywords: Consumer Studies, cultural inclusivity, curriculum expectations, demonstrations, food production lessons, visual aids
    Date: 2020–10
  6. By: Gradstein, Mark (Ben Gurion University); Ishak, Phoebe W. (Freie Universität Berlin)
    Abstract: We explore the effects of persistent income shocks on human capital using oil price fluctuations in a large sample of relevant African countries and employing micro data from multiple waves of the Demographic and Health Survey (DHS). Theoretically, such shocks enable human capital investment via the standard income effect; but also crowd it out because of substitutability between natural resource and human capital income sources - so the net outcome can go either way. Our model also suggests that the relative strength of the two effects depends on the age at which the shock is experienced and the affected gender. Consistent with these insights, we find that income shocks in early life enhance educational attainment and other derived outcomes; but reduce them if experienced in adolescence, especially for females. These results survive multiple robustness checks, and their broader implications are discussed.
    Keywords: natural resources, income shocks, human capital
    JEL: O12 I2
    Date: 2020–12
  7. By: William Murithi (DMU - De Montfort University [Leicester, United Kingdom]); Natalia Vershinina (Audencia Business School); Peter Rodgers (University of Leicester)
    Abstract: Purpose-The purpose of this paper is to offer a conceptual interpretation of the role business families play in the institutional context of sub-Saharan Africa, characterised by voids within the formal institutional setting. Responding to calls to take a holistic perspective of the institutional environment, we develop a conceptual model, showcasing the emergence of relational familial logics within business families that enable these enterprising organisations to navigate the political, economic and socio-cultural terrain of this institutional context. Design/methodology/approach-The authors undertake a review of extant literature on institutional theory, institutional voids, family business and business families and examine the relevance of these theoretical constructs in relation to the institutional environment of Sub-Saharan Africa. The authors offer tentative propositions within our conceptualisation, which the authors discuss in an inductive fashion. Findings-The review underlines the relevance of informal political, economic and socio-cultural institutions within the sub-Saharan context, within which the family as an institution drives business families engagement in institutional entrepreneurship. In doing so, the authors argue business families are best positioned to navigate the existing Sub-Saharan African institutional context. The authors underline the critical relevance of the embeddedness of social relationships that underpin relational familial logic within the sub-Saharan African collectivist socio-cultural system. Originality/value-By challenging the assumptions that institutional voids are empty spaces devoid of institutions, the authors offer an alternative view that institutional voids are spaces where there exists a misalignment of formal and informal institutions. The authors argue that in such contexts within Sub-Saharan Africa, business families are best placed to harness their embeddedness within extended family and community for entrepreneurial activity. The authors argue that family and business logics may complement each other rather than compete. The discussions and propositions have implications for future research on business families and more inclusive forms of family organisations.
    Keywords: Institutional voids,Institutions,Sub-Saharan Africa,Family firms,Institutional theory
    Date: 2020
  8. By: John Hooley; Lam Nguyen; Mika Saito; Shirin Nikaein Towfighian
    Abstract: This paper explores the causes and consequences of fiscal dominance over monetary policy in Sub-Saharan Africa (SSA). Fiscal dominance has always been a pressing problem as it can contribute to inflation and macroeconomic instability, and increasingly so as fiscal deficits and public debt are rising in many SSA countries. We find that legal limits and availability of alternative financing options play an important role in determining the extent to which government deficits tend to be financed by the central bank. We also find economically significant effects of central bank lending to government on the exchange rate and inflation.
    Date: 2021–01–29

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