nep-afr New Economics Papers
on Africa
Issue of 2022‒06‒20
five papers chosen by
Sam Sarpong
Xiamen University Malaysia Campus

  1. Remittances and Income Inequality in Africa: Financial Development Thresholds for Economic Policy By Ofori, Isaac K.; Gbolonyo, Emmanuel; Dossou, Marcel A. T.; Nkrumah, Richard K.
  2. Stock Market and Economic Growth: Evidence from Africa By Manuel Ennes Ferreira; João Dias; Jelson Serafim
  3. Tax Obsessions: Taxpayer Registration and the Informal Sector in sub-Saharan Africa By Moore, Mick
  4. Small Nets for Big Fish? Tax Enforcement on the Richest – Evidence from Uganda By Santoro, Fabrizio; Waiswa, Ronald
  5. COVID-19 and food (in)security in Africa: Review of the emerging empirical evidence By Tabe-Ojong, Martin Paul Jr.; Nshakira-Rukundo, Emmanuel; Gebrekidan, Bisrat

  1. By: Ofori, Isaac K.; Gbolonyo, Emmanuel; Dossou, Marcel A. T.; Nkrumah, Richard K.
    Abstract: The study employs macrodata on 42 African countries to examine whether remittances and financial development (including the sub-components of access, depth and efficiency) contribute to the equalisation of incomes across the continent. Robust evidence from the dynamic GMM estimator shows that: (i) remittances heighten income inequality in Africa, (ii) Africa’s financial system is not potent enough for repacking remittances towards the equalisation of incomes, and (iii) vis-à-vis financial access and depth, inefficiencies characterising Africa’s financial institution is the main reason remittances contribute to the widening of the income disparity gap. Nonetheless, the optimism which we provide by way of threshold analysis shows that channelling efforts into the development of Africa’s financial sector could yield shared income distribution dividends. In particular, efforts should be made to achieve a minimum of 23.05 per cent of financial access, and 3.02 per cent for that of efficiency of financial institutions if Africa’s financial sector is to repackage external finance towards the equalisation of incomes. A few policy recommendations are provided in the end.
    Keywords: Africa; Financial Development; Financial Sector Efficiency; Income Inequality; Remittances.
    JEL: F4 F6 G2 O15 O55
    Date: 2022
  2. By: Manuel Ennes Ferreira; João Dias; Jelson Serafim
    Abstract: We assessed the impact of stock market development on growth in Africa. It uses annual data from a panel of 9 countries in Africa over the period 1992–2017. Panel Vector Autoregressive econometrics technique is used in data analysis. Our main findings are that stock market development has a positive effect on economic growth. Investment, human capital, and openness also positively influence economic growth in Africa. The inflation and government expenditure affect economic growth negatively. The paper also finds that using the impulse response function, economic growth reacts to the stock market for 8 years and goes back to the initial level.
    Keywords: Stock market, Economic growth, Panel vector autoregressive
    JEL: G00 O16 C23
    Date: 2022–05
  3. By: Moore, Mick
    Abstract: Motivation: There are three puzzling features of sub-Saharan African tax systems: tax administrations maintain records on vast numbers of small enterprises that actually provide no revenue; they continually invest resources into registering even more of these “unproductive taxpayers†; and discussions about taxing small enterprises are framed by the ambiguous, misleading concept of the “informal sector†. Purpose: To make sense of these separate, puzzling practices and narratives by exploring the synergies between them, and the broader organisational and political interests that they serve. Methods and approach: There is little statistical or sociological information on the functioning of national tax administrations in sub-Saharan Africa. The analysis is based on the results of recent research; a thorough search for useful data; my own extensive interactions with African tax administrators and relevant international organizations; and a sensitivity to the political dimensions of taxation. Findings: The three features of tax systems that are individually puzzling make sense when examined holistically. The continual drive to register more taxpayers provides an unduly favourable impression of the extent of policy and managerial efforts to collect more revenue. The informal sector narrative locates the apparent cause of revenue scarcity in the alleged under-taxation of small enterprises and poorer people, and thus helps divert attention from failures adequately to tax more privileged Africans and larger enterprises. Policy implications: Be very wary of claims that it would be a good idea to invest resources in registering large numbers of new taxpayers in sub-Saharan Africa. Try to avoid using the term “informal sector†when discussing issues of tax policy and administration—it is confusing and diversionary.
    Keywords: Finance,
    Date: 2022
  4. By: Santoro, Fabrizio; Waiswa, Ronald
    Abstract: Appropriately taxing the richest is a priority for every government, even more so in Africa, where higher revenue mobilisation is needed to fund growth. In Uganda, the revenue authority launched a specific unit to monitor the tax affairs of the richest individuals. Thanks to a close collaboration with the Uganda Revenue Authority (URA), we evaluate the impact of such policy on a range of tax filing and payment outcomes of targeted taxpayers, as gathered from a wealth of administrative data. We show that the policy only has been partially successful. While it increased the probability of filing, especially by politically relevant taxpayers, it produced a seemingly small response in which treated taxpayers would declare less on different margins, with the end result of not declaring more tax liabilities. On the tax payment side, only a small yet significant impact on tax collected is measured. In parallel, we show a strong compensating response across tax heads. Importantly, we also measure the spillover effect on companies associated with the richest taxpayers, again documenting complex compensating reactions. We inform future policymaking decisions, suggesting a higher simultaneous focus on different tax heads and a more holistic approach to monitoring both individual and corporate tax accounts.
    Keywords: Governance,
    Date: 2022
  5. By: Tabe-Ojong, Martin Paul Jr.; Nshakira-Rukundo, Emmanuel; Gebrekidan, Bisrat
    Abstract: COVID-19 risks rolling back many of the efforts and global successes recorded in reducing poverty and food insecurity. We undertake a systematic review of the growing microeconomic literature on the association between COVID-19 and food (in)security in Africa, discussing its implications for food policy and research. In doing so, we highlight some of the methodological weaknesses in answering policy-relevant questions on the causal link between COVID-19 and food insecurity. We also review the various coping strategies households are using to build resilience to COVID-19 and explore the role of social protection and other tools in mitigating some of the negative effects of COVID-19. This review provides evidence that COVID-19 is associated with food insecurity both ex-ante and ex-durante. There are many attempts to suggest this relationship may be causal with some robust methods in some contexts, but data limitations prevail which constrains causal learning. We also find evidence that income losses, loss of employment, and heightened food prices may be mediating the relationship between COVID-19 and food insecurity. Going further, we additionally review the mitigating role of social protection and remittances in reducing the negative effects of COVID-19 on food insecurity. Relatedly, we also show evidence that households are using various coping strategies such as food rationing and dietary change to cushion themselves against the COVID-19 shock but most of these measures remain adversely correlated with food insecurity. We end with a discussion on some potential interesting areas where future efforts can be geared to improve learning on the relationship between COVID-19, food insecurity, and building resilience to shocks.
    Keywords: AFRICA; AFRICA SOUTH OF SAHARA; CENTRAL AFRICA; EAST AFRICA; NORTH AFRICA; SOUTHERN AFRICA; WEST AFRICA; food security; Coronavirus; coronavirus disease; Coronavirinae; COVID-19; food prices; resilience; shock; income
    Date: 2022

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