nep-afr New Economics Papers
on Africa
Issue of 2022‒01‒24
seven papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Testing the Triple Deficit Hypothesis for Sub-Saharan Africa: Implications for the African Continental Free Trade Area By Samson N. Okafor; Chukwunonso Ekesiobi; Ogonna Ifebi; Stephen K. Dimnwobi; Simplice A. Asongu
  2. The Republic of Mauritius and the African Continental Free Trade Area:Opportunities and Challenges in a post COVID-19 environment By Isabelle Tsakok
  3. Boosting mineral revenues in Zambia: Policy options for a sustainable fiscal regime By Andrew Mwaba; Steve Kayizzi-Mugerwa
  4. The case of ‘double’ mining and conservation frontiers: evidence from DRC and Madagascar By Simpson, Fergus; Vuola, Marketta
  5. How Zambia and China Co-Created a Debt "Tragedy of the Commons" By Brautigam, Deborah
  6. Structural Change and Inequality in Africa By Morsy, Hanan; Shimeles, Abebe; Nabassaga, Tiguene
  7. Is Digital Credit Filling a Hole or Digging a Hole? Evidence from Malawi By Valentina Brailovskaya; Pascaline Dupas; Jonathan Robinson

  1. By: Samson N. Okafor (Central Bank of Nigeria, Abuja, Nigeria); Chukwunonso Ekesiobi (Chukwuemeka Odumegwu Ojukwu University, Nigeria); Ogonna Ifebi (Chukwuemeka Odumegwu Ojukwu University, Nigeria); Stephen K. Dimnwobi (NnamdiAzikiwe University, Awka, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: Aware of the nature of deficits in the current account, fiscal account, and the financial account balances of the countries in the Sub-Saharan Africa (SSA) region, this inquiry assessed the relationship between these deficits and the implication of such relationship for the African Continental Free Trade Area (AfCFTA). To do this, the study adopted panel data analysis techniques using the Pooled Mean Group-Autoregressive Distributed Lag (PMG-ARDL) specifications to test for the Triple Deficit Hypothesis (TDH) in the region. The findings of the study revealed the presence of the TDH in SSA where bidirectional causality exists between current account balance and budget balance, and between saving gap and current account balance, with a unidirectional causality running from budget balance to saving gap. The adoption of sound fiscal, monetary, and trade interventions in the region constitutes the major policy recommendations.
    Keywords: Triple Deficit Hypothesis; Sub-Saharan Africa; African Continental Free Trade Area
    Date: 2021–01
  2. By: Isabelle Tsakok
    Abstract: The African Continental Free Trade Area (AfCFTA) gives Mauritius the golden opportunity to access Africa’s vast market of 1.3 billion people, with an estimated GDP of $3.4 trillion. This opportunity could not have come at a better time, as Mauritius suffered a heavy blow from the COVID-19 pandemic in 2020. It also lost its preferential trade agreements on sugar and textiles in the 2000s, and has struggled with diminished export and productivity growth. To turn this opportunity into a new engine of growth, Mauritius must once again transform itself from an economy that relies on labor-intensive sectors to a new foundation of knowledge-intensive sectors of the fourth industrial revolution (4IR). This is a daunting challenge, especially in the fiscally constrained environment post COVID-19. The successful experiences of the European Union, ASEAN and MERCOSUR (though to a lesser extent) show that their visionary leaders transformed their shattered countries into vibrant economies delivering sustained growth and poverty reduction by relentlessly pursuing and expanding regional market integration. Mauritius can derive useful insights on how to move forward not only from these successful experiences but also from its own ability to turn crisis into opportunity by developing new and diversified markets.
    Date: 2021–11
  3. By: Andrew Mwaba; Steve Kayizzi-Mugerwa
    Abstract: Zambia has changed its mineral tax regime repeatedly during the past decades in a bid to raise mineral revenue, but with only modest success. This paper looks at what the country needs to do to create a mining fiscal regime that could sustain operations, boost output, and raise revenues without eroding investment and profitability in the mines. The paper argues that enhancing local ownership of the mines will help assuage resource nationalism while stabilizing the business environment overall.
    Keywords: Fiscal regime, Investment, Mineral tax, Transfer pricing, low-carbon future, Mining taxation
    Date: 2021
  4. By: Simpson, Fergus; Vuola, Marketta
    Abstract: This article contributes to the literature on commodity frontiers by providing evidence from locales where two different frontiers overlap. We focus on intersecting commodity frontiers produced through biodiversity conservation and mineral extraction that increasingly compete for control over land and resources. We frame commodity frontiers as organised through the territorialisation of rural landscapes via different types of protected areas (strict, flexible) and various scales of mining activity (artisanal, semi-industrial, industrial). With reference to case studies from eastern Democratic Republic of Congo and northern Madagascar, we disaggregate the processes of territorialisation both at and between conservation and mining frontiers. It is argued that flexible approaches to protected area management and artisanal and semi-industrial modes of mining can be viewed as territorial adaptations to enable frontiers to co-exist where strict conservation and large-scale mining would otherwise exclude one-another. We conclude that contexts where state power is limited, and the boundaries between legal and illegal become blurred, are likely to be especially conducive to the emergence of double frontiers.
    Keywords: commodity frontiers; territorialisation; mining; conservation; Madagascar; DR Congo
    Date: 2021–12
  5. By: Brautigam, Deborah
    Abstract: Zambia's debt difficulties hit headlines in November 2020 when the country defaulted on its Eurobond payments. In August 2021 a new president, Hakainde Hichilema, took office, facing a debt burden that had never been fully transparent to Zambia's public and the world. In this Policy Brief, CARI Director Deborah Brautigam analyzes how Chinese creditors, contractors, and Zambian stakeholders failed to take steps to make Zambia's borrowing sustainable. Curious why Zambia was a clear outlier, the author explores the system for project development and loan approval in Zambia and China and offers concrete policy recommendations.
    Date: 2021
  6. By: Morsy, Hanan (African Development Bank); Shimeles, Abebe (African Development Bank); Nabassaga, Tiguene (HEC Montreal)
    Abstract: This paper examines how inequality could be tackled through structural transformation using unit record data from the Demographic and Health Surveys (DHS) for Africa. Results suggest inequality between countries tends to be higher when the share of labor employed or value-added in the agriculture sector is higher, while no effect is seen for industry and services sectors' contributions to employment or value-added of the gross domestic product (GDP). On the other hand, within-country inequality tends to be strongly affected by structural change. A one standard deviation growth in the movement of labor from low- to high-productivity sectors could decrease overall inequality by 0.5 percent and inequality of opportunity by 1.1 percent. Results from other data sources strongly support these findings suggesting that rapid structural transformation could lead to sustained reduction in inequality in Africa. Other factors correlated strongly with inequality reduction include human capital which tend to have large and significant income or asset equalizing effect in Africa, particularly at higher level of education. Growth in urbanization and high initial per capita GDP tend to worsen inequality, while initial inequality tended to stem the rise in inequality.
    Keywords: structural transformation, inequality, labor productivity growth
    JEL: D30 D31 J2
    Date: 2021–11
  7. By: Valentina Brailovskaya; Pascaline Dupas; Jonathan Robinson
    Abstract: Digital credit has expanded rapidly in Africa, mostly in the form of short-term, high-interest loans offered via mobile money. Loan terms are often opaque and consumer financial literacy is low, providing opportunities for predatory lending. A regression discontinuity analysis shows no negative effect of access to digital loans on financial well-being, but the majority of borrowers fail to repay on time and incur high late fees. We randomize exposure to a short phone-based financial literacy intervention. The intervention improved knowledge and marginally improved loan repayment but increased loan demand, increasing overall default risk.
    JEL: D14 O12 O16
    Date: 2021–12

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