nep-afr New Economics Papers
on Africa
Issue of 2022‒04‒25
five papers chosen by
Sam Sarpong
Xiamen University Malaysia Campus

  1. The impact of Russian presence in Africa By Kohnert, Dirk
  2. The Financial Performance and Macrofinancial Implications of Large State-Owned Enterprises in Sub-Saharan Africa By Torsten Wezel; Naly Carvalho
  3. Contagion across Financial Markets during COVID-19: A Look at Volatility Spillovers between the Stock and Foreign Exchange Markets in South Africa By Chevaughn van der Westhuizen; Reneé van Eyden; Goodness Aye
  4. Profit shifting by multinational corporations: Evidence from transaction-level data in Nigeria By Bathusi Gabanatlhong; Javier Garcia-Bernardo; Paulinus Iyika; Miroslav Palanský
  5. The Economic Implications of the War in Ukraine for Africa and Morocco By Abdelaaziz Ait Ali; Fahd AZAROUAL; Oumayma Bourhriba; Uri Dadush

  1. By: Kohnert, Dirk
    Abstract: Putin attaches great importance to rebuilding Russia as a world power, including relations with Africa. But while the Soviet Union used to advocate socialist modernization in Africa, Moscow no longer offers socialist ideologies. Instead, it focuses on access to African elites, particularly authoritarian leaders. It also seeks to sway elections in its favour, particularly in fragile but resource-rich states. The Kremlin says it wants to avoid competing directly with other powers active in Africa. Instead, it wants to focus on countries where neither the West nor China dominates. There it expects to be able to work more effectively. But Russia, like China, is challenging Western norms, undermining US and EU sanctions. In addition, both strategic partners support non-interference in the internal affairs of states. In addition, Russia's relations with Africa have been significantly motivated significantly by its interest in African resources and security markets. Russia's resurgence in Africa benefits not least from Islamist terrorism, for example, in the Sahel and Mozambique. It uses fragile states and ongoing conflicts to secure lucrative arms deals and mining concessions. Moscow signed military cooperation agreements with 21 African governments, including negotiations on establishing military bases. It uses paramilitary contractors to manipulate the course of local conflicts in its favour. Since 2015, Russian-African trade has doubled to around USD 20 billion per year. Russia exported $14 billion worth of goods and services and imported about $5 billion worth of African products. In return, Moscow can count on the support of African leaders in foreign policy. Thus, Eritrea voted against a UN General Assembly resolution strongly condemning Russia's war in Ukraine. 18 other African countries abstained, including Mali, Mozambique, Angola and South Africa.
    Keywords: Russia, Africa, Sub-Sahara Africa, African affairs, international trade, global power, African resources, fragile state, Islamist terrorism, arms deals, BRICS, China, Eritrea, South Africa, Mali, Mozambique
    JEL: F13 F21 F35 F51 F52 F54 G28 H56 H77 N17 N47 P16 P27 Z13
    Date: 2022–03–26
  2. By: Torsten Wezel; Naly Carvalho
    Abstract: Using a newly-compiled dataset of state-owned enterprises in Sub-Saharan Africa, we present aggregate information about profitability, liquidity and leverage. We find that 40 percent of the close to 300 surveyed SOEs are unprofitable, while larger firms also tend to be illiquid and overleveraged. In cross-sectional regressions we find that SOE debt stock sustainability is impacted by firms’ profitability and liquidity, while macroeconomic factors cannot be shown to matter, expect for some governance variables. Based on these findings and citing country examples, we also illustrate that weak SOE performance may have a macrofinancial impact affecting bank soundness through delinquent loan exposures.
    Keywords: Firm Performance, State-Owned Enterprises, Sub-Saharan Africa
    Date: 2022–03–18
  3. By: Chevaughn van der Westhuizen; Reneé van Eyden; Goodness Aye
    Abstract: The onset of the novel coronavirus pandemic (COVID-19) and previous crises have heightened interest in the interaction of stock market and exchange rate volatility. This paper aims to investigate the interdependence and volatility transmissions between the stock and foreign exchange markets for South Africa over the period 1979:01–2021:08, including the effect the COVID-19 pandemic has had on the interdependence and transmissions. Using bivariate Exponential Generalised Autoregressive Conditional Heteroscedasticity (EGARCH) modelling, this paper provides strong evidence in support of the “stock-orientated’ approach, where significant price and volatility spillovers propagate from the stock market into the foreign exchange market; whilst evidence of the “flow-orientated†approach is seen in the second moment and significant shock and asymmetric spillovers from the exchange to stock market are found. The results support the asymmetric and long-range persistence volatility spillover effect and show strong evidence of contagion between stock and foreign exchange market. These spillovers became more pronounced during the COVID-19 pandemic, confirming heightened contagion during periods of crisis. The results heed important implications for not only policymakers who are concerned by the contagion and better regulation of these markets, but also for investors and fund managers who seek to hedge investment risks in South Africa.
    Keywords: COVID-19 Pandemic; Stock market returns; Exchange rate changes; Bivariate EGARCH model; Asymmetric volatility spillover
    JEL: C22 C58 F31 G10 O11
    Date: 2022–02
  4. By: Bathusi Gabanatlhong; Javier Garcia-Bernardo; Paulinus Iyika; Miroslav Palanský
    Abstract: Research on profit shifting by multinational corporations in developing countries is limited due to a lack of data. In this paper we use, for the first time, novel administrative data on the transactions of multinational corporations operating in Nigeria vis-à-vis related parties in other jurisdictions. The data provides a breakdown of these intra-group transactions into seven categories: (1) tangible goods, (2) services and fees, (3) royalties, (4) interest, (5) dividends, (6) reimbursements, and (7) other.
    Keywords: Tax havens, Multinational firms, Profit shifting
    Date: 2022
  5. By: Abdelaaziz Ait Ali; Fahd AZAROUAL; Oumayma Bourhriba; Uri Dadush
    Abstract: The Russian-Ukrainian war will have major economic and political repercussions. In this note, we focus on the war’s economic short and long term implications on the African economy. This conflict comes at very arduous context, where Africa is still struggling to set its economy on the recovery path, amid global inflationary pressures and highly uncertain context. While natural resources countries, especially energy exporters, are sensing opportunities from the crisis, other countries such as Morocco, will be hardly hit by a double whammy of soaring energy and food prices. This will add to their external imbalances and concerns about inflation persistence and the path of their public debt.
    Date: 2022–02

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