nep-afr New Economics Papers
on Africa
Issue of 2021‒09‒27
seven papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Effect of Exchange Rate Volatility on Tax Revenue Performance in Sub-Saharan Africa By Isaac K. Ofori; Camara K. Obeng; Peter Y. Mwinlaaru
  2. Infrastructure development as a prerequisite for structural change in Africa By Yselle F. Malah Kuete; Simplice A. Asongu
  3. Catching the Drivers of Inclusive Growth in Sub-Saharan Africa: An Application of Machine Learning By Isaac K. Ofori
  4. To “ECO” or not to “ECO”? Evidence for the single currency agenda of ECOWAS By Adediran, Idris; Salisu, Afees; Ogbonna, Ahamuefula E
  5. “Whom you know” and labour market outcomes: An empirical investigation in Ghana. By Baah-Boateng, William; Twum, Eric; Twumasi Baffour, Priscilla
  6. Financing Public Private Partnerships (PPPs) in Botswana Through the Capital Market By Kelesego Mmolainyane
  7. Impacts of the Cocoa Living Income Differential Policy in Ghana and Côte d’Ivoire By Ole Boysen; Emanuele Ferrari; Victor Nechifor; Pascal Tillie

  1. By: Isaac K. Ofori (University of Insubria, Varese, Italy); Camara K. Obeng (University of Cape Coast, Cape Coast, Ghana); Peter Y. Mwinlaaru (University of Cape Coast, Cape Coast, Ghana)
    Abstract: Efforts to spur growth in sub-Sahara Africa have been intensified amid structural and institutional constraints. Tax revenue, the chief source of funding for developmental purposes in SSA remains low and unstable. In fact, the SSA sub-region finds it difficult generating tax revenue up to 20 per cent of GDP. One factor that has not caught the attention of policymakers in terms of its impact on tax revenue performance is exchange rate volatility. Using macrodata spanning 1984 to 2017 for 21 countries, we provide empirical evidence from a panel autoregressive distributed lag technique to show that exchange rate volatility is directly harmful to tax revenue performance, and indirectly through trade openness.
    Keywords: Cointegration, Exchange Rate Volatility, GARCH, Sub-Sahara Africa, Tax Revenue
    JEL: E5 H2 H7 F6 O4 Q55
    Date: 2021–01
  2. By: Yselle F. Malah Kuete (University of Yaoundé 2, SOA, P.O. Box 1365); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: Structural change is seen by development economics theorists as a driver of sustained and sustainable economic growth. African countries that have understood this prioritize structural change policies in their national development programs in order to reduce poverty and promote employment through commodity-based industrialization. How does infrastructure development contribute to this process? The purpose of this paper is to answer this question by examining empirically whether the state of infrastructure development in Africa stimulates structural change, understood as the development of the manufacturing sector. After outlining the state of infrastructure quality in the region, and discussing some theoretical channels through which this relationship might pass, we estimate fixed effects models from 52 African countries over the period 2003-2018. Results which are robust to controlling for institutional dynamics and the natural resource curse hypothesis suggest that structural change in Africa is optimized with the development of infrastructure, particularly energy and information and communication technologies. Among other policy implications arising from these findings, the establishment of partnership projects with other developed countries in terms of superstructure for enhanced industrialization is recommended.
    Keywords: Infrastructure development, structural change, manufacturing sector, Africa
    JEL: N67 N77 C23
    Date: 2021–01
  3. By: Isaac K. Ofori (University of Insubria, Varese, Italy)
    Abstract: A conspicuous lacuna in the literature on Sub-Saharan Africa (SSA) is the lack of clarity on variables key for driving and predicting inclusive growth. To address this, I train the machine learning algorithms for the Standard lasso, the Minimum Schwarz Bayesian Information Criterion (Minimum BIC) lasso, and the Adaptive lasso to study patterns in a dataset comprising 97 covariates of inclusive growth for 43 SSA countries. First, the regularization results show that only 13 variables are key for driving inclusive growth in SSA. Further, the results show that out of the 13, the poverty headcount (US$1.90) matters most. Second, the findings reveal that ‘Minimum BIC lasso’ is best for predicting inclusive growth in SSA. Policy recommendations are provided in line with the region’s green agenda and the coming into force of the African Continental Free Trade Area.
    Keywords: Clean Fuel, Economic Growth, Machine Learning, Lasso, Sub-Saharan Africa, Regularization, Poverty.
    JEL: C01 C14 C51 C52 C55 F43 O4 O55
    Date: 2021–01
  4. By: Adediran, Idris; Salisu, Afees; Ogbonna, Ahamuefula E
    Abstract: In this study, we provide results to aid the ECOWAS in its final decision on the adoption of the single currency (the “ECO”) for the proposed regional monetary union. We demonstrate, with the fractional integration and cointegration techniques, evidences for the proposed monetary policy mechanism in the region to deal with shocks and the single currency to serve as a stabilisation tool. Hence, the results support the adoption of the ECO, with emphasis on preferably linking it with the US dollar than the Euro.
    Keywords: ECOWAS; Fractional Cointegration; Single Currency
    JEL: C51 F36 O55
    Date: 2020–05–05
  5. By: Baah-Boateng, William; Twum, Eric; Twumasi Baffour, Priscilla
    Abstract: The relevance of social networks sometimes referred to in Ghana as “whom you know” in the job acquisition process and its effect on labour market outcomes (wages, job satisfaction and job tenure) have been highlighted by a number of studies. Most of these studies have concentrated largely on monetary post-hire outcomes with limited research on non-pecuniary aspects. Using a cox proportional hazard model to analyse a survey of 150 formal sector workers in the services sector in Accra, the study observes that first, jobs acquired through the help of workers’ friends and relatives did not last long. The first jobs could be a stepping-stone for better jobs. This effect is however not statistically significant after controlling for individual and firm-level covariates. Conclusions are however made with caution due to the small sample size and the nature of respondents’ majority of whom are highly educated and relatively younger. Future research can explore further social networks and labour markets particularly in Africa where familiarity and identical ethnic bonds are visible and stronger.
    Keywords: Social networks, Job tenure, Cox proportional hazard model.
    JEL: J63
    Date: 2019–12
  6. By: Kelesego Mmolainyane (Botswana Institute for Development Policy Analysis)
    Abstract: In her quest to further graduate to the high-income status, Botswana seeks to invest more in infrastructure development for both productive and social use. An efficient and effective infrastructure provision is fundamental to excellent public service delivery and access. Sadly, Botswana, like many other world economies, has a challenge of having an infrastructure financing gap. One of the innovative ways to fill this gap is through public private partnerships (PPPs) with the capital market that has excess liquidity. Infrastructure PPPs are complex and capital intensive projects that require project finance experts to advise parties involved regarding returns and risks associated with each project. Various project-financing models can be designed to suit project specifications and they cannot be over-generalised for all PPP projects. Nevertheless, given the tight fiscal space, Botswana now, more than ever, should consider issuing PPP bonds and applying user changes model to finance economic PPP infrastructure for sustainable and inclusive economic growth.
    Keywords: PPPs; Capital market; Project financing; Botswana
    JEL: E44 E47 E62
    Date: 2020–03
  7. By: Ole Boysen (European Commission – JRC); Emanuele Ferrari (European Commission – JRC); Victor Nechifor (European Commission – JRC); Pascal Tillie (European Commission – JRC)
    Abstract: Poverty continues to be a widespread issue among cocoa farmers while chocolate consumers become increasingly sensitive for the sustainability issues associated with the supply chain. The poverty issue is often attributed to the low prices of cocoa and the unequal distribution of profit margins across the chocolate value chain, at least partially. Poverty, in turn, is considered to be the root of further sustainability issues. To raise the value share and price accruing to their farmers by leveraging their collective market power, the two biggest cocoa producing countries Côte d’Ivoire and Ghana jointly announced in 2019 the cocoa Living Income Differential (LID) policy. The question is to what extent and under which circumstances could the policy reach this goal in the long run, considering the numerous unknowns around the details of the policy and market actors’ reactions, and how sustainable it is. To analyse this question, we implement a global multi-regional partial equilibrium model of the world cocoa market to simulate scenarios accounting for alternative assumptions about these unknowns. The study shows that the LID’s effects on prices and welfare of cocoa farmers in the two countries range from none to substantially positive, varying in magnitude with the scenarios. But it also highlights that the farmgate price target, which is reached in Ghana under most scenarios, is reached in Côte d’Ivoire only with additional supply management measures. The two countries’ government budgets and cocoa farmers in other countries lose out substantially in many cases, what is identified, among other issues, as potential threats to the sustainability of the policy that require attention. Evaluated in light of past attempts by governments and other actors to raise farmer welfare in the cocoa but also other agricultural sectors, one policy alternative stands out, although coming with its own challenges.
    Keywords: Cocoa, Living Income Differential, Côte d'Ivoire, Ghana, sustainability, partial equilibrium model, policy impact assessment
    JEL: Q01 Q11 Q18
    Date: 2021–09

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