nep-afr New Economics Papers
on Africa
Issue of 2021‒11‒15
seven papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Working Paper 357 - Impact of COVID-19 on Mining Case Studies of four African Countries By Jerry Ahadjie; Ousman Gajigo; Danlami Gomwalk; Fred Kabanda
  2. A post Keynesian perspective on the eco zone project: Liquidity premia and external financial fragility in the West African Economic and Monetary Union, Ghana and Nigeria By Lampe, Florian; Löscher, Anne
  3. Urbanisation and demography in North and West Africa, 1950-2020 By Olivier J. Walther
  4. Unravelling the Mysteries of Underdevelopment in Africa By Elvis Dze Achuo; Tii N. Nchofoung; Simplice A. Asongu; Gildas Dohba Dinga
  5. Mining and quality of public services: The role of local governance and decentralization By Maty Konte; Rose Camille Vincent
  6. Working Paper 355 - Public debt, Chinese loans and optimal exploration-extraction in Africa By Chuku Chuku; Lin Lang; King Yoong Lim
  7. Determinants of tax morale: Cross-sectional evidence from Africa By Nyamapheni, Joseph; Robinson, Zurika

  1. By: Jerry Ahadjie (African Development Bank); Ousman Gajigo (African Development Bank); Danlami Gomwalk (African Development Bank); Fred Kabanda (African Development Bank)
    Abstract: The COVID-19 pandemic has affected many economies worldwide. It had diverse impacts on the African mining sector. This paper documents its impact by focusing on four major mineral-rich African countries: Ghana, Mali, South Africa and Zambia. An assessment of the impact of the pandemic on production, employment and government revenues in the selected countries is analysed in the paper. The effects of the pandemic created both supply and demand shocks, resulting in an overall decrease in most mineral prices (with the exception of precious metals such as gold). The situation persisted for much of 2020, with most prices mostly recovering only in 2021. It is also instructive to note that the pandemic is still on-going, thus the analysis is limited to the first quarter of 2021. In addition to reduced direct, indirect and induced employment in the mining sector, the pandemic shocks resulted in a decline in overall mining output across the four countries. This reduction was despite the positive effect on the price of gold. Mining revenues for the four countries also fell due to falling commodity prices and mining output. The paper provides some policy recommendations to ensure that the sector becomes resilient to possible future shocks of this nature.
    Keywords: Base Metals, Covid-19, Minerals, Mining, Precious Metal JEL classification: L72, Q30, Q31, Q38
    Date: 2021–10–12
  2. By: Lampe, Florian; Löscher, Anne
    Abstract: The paper treats the eco currency union project in West Africa and its implications for monetary policies against the backdrop of the international monetary order from a post-Keynesian perspective. The eco zone project envisions a common monetary union of the West African Economic and Monetary Union (WAEMU), i.e. the independent Western subzone of the CFA franc union, and the remaining non-CFA countries of the Economic Community of West African States (ECOWAS) with Nigeria and Ghana as the economically most important member states. The literature on the international currency hierarchy developed by Latin-American structuralists and the post-Keynesian Berlin School of thought focuses on the notion of a currency-specific liquidity premium that structurally determines the interest rate level in the corresponding currency areas. Based on this set of literature, we conduct a comparison between the liquidity premia of the Western CFA-franc, the Nigerian naira and the Ghanaian cedi to make conjectures about what implications a common ECOWAS currency union would have regarding monetary policy space. Being a non-pecuniary variable, the liquidity premium cannot be observed directly. We therefore approximate the liquidity premium by calculating differences in interest rates such as the central bank's base rate, the coupon rate on T-bills and bonds and the interest rate spread between Eurobonds and bonds denominated in local currency. Besides, we use balance of payment data to identify external financial fragilities that might become a crucial factor for monetary policy due to an increasing financialisation in West African economies. We find that investors demand structurally higher yields on bonds originating in Ghana and Nigeria than in the CFA-franc zone. One could interpret this as the CFA-franc conveying over a higher liquidity premium because it has to have lower yields rates to compensate for liquidity-differences to financial assets denominated in the US dollar or euro. However, another explanation is that expectations about the future developments of the cedi's and naira's exchange value by investors are more pessimistic in comparison to that of the CFA-franc. This is rooted in two major factors: Firstly, under the current arrangement, France still has leeway in monetary policy making and acts as exchange rate stabiliser by pushing for restrictive monetary policies and guaranteeing foreign exchange reserve provision. Secondly, the estimation of external financial fragility in the CFA-franc zone and Nigeria shows that the naira implies a greater risk of sudden devaluation due to a higher exposure to mobile liabilities vis-à-vis its asset endowments.
    Keywords: West African Economic and Monetary Union,CFA franc,eco zone,international currency hierarchy,external financial fragility
    JEL: E12 F33 F41 G11 O57
    Date: 2021
  3. By: Olivier J. Walther
    Abstract: This brief presents a factual and retrospective analysis of the relationships between urbanisation and demography in North Africa and West Africa. It shows that the process of demographic transition is now fully underway in this region. North of the Sahara the new demographic equilibrium features a birth rate higher than expected, according to theoretical model predictions, resulting in continuous population growth. Over 70% of the population now lives in cities, a number that is expected to continue to rise in the coming decades. South of the Sahara all countries have seen death rates plummet, followed by a decrease in birth rates. The gap between the change in the two variables has contributed to spectacular natural growth in the space of a few decades. This growth is occurring in parallel with a redistribution of populations to urban areas, which are now home to close to one of every two inhabitants. West African urbanisation is likely to accelerate the social, economic and political changes that favour the demographic transition. One of the main challenges facing the region is the question of how to reduce the regional variations seen in fertility rates between the continent’s urban and rural areas.
    Keywords: birth rate, demography, population, urbanisation, West Africa
    JEL: N37 N97 Q56
    Date: 2021–11–11
  4. By: Elvis Dze Achuo (University of Dschang, Cameroon); Tii N. Nchofoung (University of Dschang, Cameroon); Simplice A. Asongu (Yaoundé, Cameroon); Gildas Dohba Dinga (The University of Bamenda, Cameroon)
    Abstract: Achieving sustainable development has been the dream of every society across the globe especially sequel to the dawn of the industrial revolution. Thus, understanding the fundamental determinants of the socio-politico-economic development of every economy is of prime importance for investors, policymakers, development agencies and the society at large. It is in this light that this study sought to empirically examine the key factors that explain the socioeconomic development patterns in Africa. The Instrumental Variable Two Stage Least Squares (IV-2SLS) estimation technique is adopted for a panel of 38 African countries over the 1996-2019 period. The empirical findings reveal that financial development and human capital are development enhancing in Africa while external financial inflows are detrimental to economic development. In addition, when other specific macroeconomic and structural variables were introduced in the model, the results show that institutional quality through governance, natural resources abundance, and industrialisation all explain both the social and economic development dynamics. These results were specific to income group, export structures and level of development. Moreover, salient policy implications are discussed.
    Keywords: Underdevelopment, Financial development, Human capital, Institutional quality, Africa
    Date: 2021–01
  5. By: Maty Konte (UNU-MERIT - UNU-MERIT - United Nations University - Maastricht University); Rose Camille Vincent (UNU-MERIT - UNU-MERIT - United Nations University - Maastricht University, CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: This paper investigates the local effects of mining on the quality of public services and on people's optimism about their future living conditions in Africa. Most importantly, it assesses the moderating role of local institutions and local governments' taxing rights in shaping the proximity-to-mine effects. The empirical framework connects more than 130,000 respondents from the Afrobarometer survey data (2005–2015) to their closest mines based on the geolocation coordinates of the enumeration areas (EA) and data on the mines and their respective status from the SNL Metals & Mining by the S&P. The geo-referenced data are matched with new indicators on local governments' taxing rights across the African continent. Using a difference-in-differences strategy, the results indicate that citizens living near an active mine are less likely to approve government performance in key public goods and services – including health, job creation and improving living standards of the poor. On the moderating role of local governance and local taxing rights, the findings point to a negative impact of local corruption, yet a positive impact of local authorities' discretion over tax and revenues. However, the positive impact of local taxing powers tends to reduce in environments with poor quality of local governance, high incidence of bribe payment and low level of trust in local government officials. Residents of mining communities with low corruption and comparatively high-level of raising revenue ability have the highest rate of positive appraisal compared to the other scenarios.
    Date: 2021–04
  6. By: Chuku Chuku (African Development Bank); Lin Lang (School of Social Sciences, University of Manchester); King Yoong Lim (Nottingham Business School, Nottingham Trent University)
    Abstract: TBased on an optimal oil explorationextraction model with public debts and Chinese loans, we examine analytically and empirically two theoretical propositions pertaining to the impacts of public debt and Chinese loan on economic and physical scarcity/abundance in Africa economies. First, despite a baseline independent relationship between public debt level and optimal operations, the level of public debts in an economy can have an adverse effect on the abundance measures if it breached the debt-sustainability threshold. Second, with alternative Chinese loans, the effect on optimal exploration-extraction is analytically ambiguous. To examine both propositions, we estimate endogenous binary-treatment regression models based on a panel data of 18 African economies over 2000-17. We find empirical support with regards to the adverse effect of public debt sustainability. Further, we find positive effect from Chinese loans to both abundance measures, indicating that the combined marginal benefits outweigh the marginal costs associated with the resourcecollateralized funding nature of these loans.
    Keywords: Africa, Chinese loans, Economic scarcity, Exploration and extraction, Non-renewable resources JEL classification: Q31, Q35, Q48
    Date: 2021–10–12
  7. By: Nyamapheni, Joseph; Robinson, Zurika
    Abstract: The article provides a comparative analysis of the determinants of tax morale in South Africa and Zimbabwe, as neighbouring countries. In this quantitative research, data were collected using questionnaires from the 2010?2014 and 2017?2020 World Values Survey. For Zimbabwe, Wave 6 and Wave 7 had a sample size of 1 500 and 1 200, respectively. The study concludes that governments must understand tax morale and its determinants to boost voluntary compliance. Despite their lower standards of living, Zimbabweans have higher tax morale than South Africans. The determinants of tax morale differ between economic situations and countries. Corruption, prevalent in both countries, influences tax morale. All the models show that demographic factors have little effect on tax morale. In the analysis of the determinants of tax morale, hunger was introduced as an important variable. Although this variable was insignificant for South Africa, the study showed that in Zimbabwe, there is a negative relationship between hunger and tax morale in both economic situations. Policy-makers should consider eradicating corruption and hunger to boost tax morale to improve tax compliance. Continued tax education and improvements to the perceptions of democracy should be included in the mix of tax compliance enhancement strategies.
    Keywords: Determinants; Tax morale; Order Logit Model; South Africa; Zimbabwe
    Date: 2021–10

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