nep-afr New Economics Papers
on Africa
Issue of 2023‒01‒09
seven papers chosen by
Sam Sarpong
Xiamen University Malaysia Campus

  1. Digital Financial Services and Digital IDs: What Potential do They Have for Better Taxation in Africa? By Scarpini, Celeste; Santoro, Fabrizio; Munoz, Laura; Prichard, Wilson; Mascagni, Giulia
  2. Monetary Stability and Regional Currency Board: towards a two-tier system to accelerate regional integration in the Horn of Africa. (A Policy Proposal) By Aman, Moustapha; Nenovsky, Nikolay
  3. Drivers of economic growth: The special case of Sub-Saharan Africa By Helfer, Helena
  4. Building downstream capacity for critical minerals in Africa: Challenges and opportunities By Cullen S. Hendrix
  5. Rural income diversification in Ethiopia: Patterns, trends, and welfare impacts By Abate, Gashaw Tadesse; Bachewe, Fantu Nisrane; Regassa, Mekdim; Minot, Nicholas
  6. The impact of corruption on migration flows: evidence from Sub Saharan African countries By Bianca Balsimelli Ghelli; Elton Bequiraj; Marilena Giannetti
  7. Understanding the Political Economy of South Africa’s Carbon Tax By Baker, Lucy

  1. By: Scarpini, Celeste; Santoro, Fabrizio; Munoz, Laura; Prichard, Wilson; Mascagni, Giulia
    Abstract: New digital technologies, such as Digital Financial Services (DFS) and digital IDs, are gaining momentum in Africa and lower income countries (LICs) more broadly. These technologies could have an impact on an increasingly digitised and IT-driven tax administration, since they hold potential to improve a number of core functions of a revenue authority. Yet, increasing evidence on existing technology in tax administration indicates a number of barriers, which are likely to mute these gains. Against this background, this paper summarises critical questions relevant to research and policy to make more effective use of digital technology in contexts of weak fiscal capacity and IT development: • What is the nature and potential of DFS and digital IDs in the specific context of LICs? • Given the scarce evidence relating to DFS, digital IDs and taxation, what can be learned from how existing data and technology is used in LICs’ revenue authorities? • How can tax administrations make the best use of DFS and digital IDs in the future? This Research in Brief is a summary of ICTD Working Paper 137.
    Keywords: Governance,
    Date: 2022
  2. By: Aman, Moustapha; Nenovsky, Nikolay
    Abstract: The last few decades have been marked by a proliferation of currency union projects in Africa. In a context of exchange rate instability and poorly convertible currencies, the authorities in most of the countries of the Horn of Africa are looking for an exchange rate regime that can stabilise and develop their economies. To achieve monetary stability in this sub-region, which is at the crossroads of some of the busiest sea and land routes, this paper reflects on the potential benefits of a monetary system that is characterised by a two-tiered architecture: national currencies and a common currency governed by a regional Currency Board.
    Keywords: monetary regime, Currency board, Central Bank, Horn of Africa
    JEL: E58 F45
    Date: 2022–09–16
  3. By: Helfer, Helena
    Abstract: While global studies on drivers of economic growth are useful to derive global tendencies, a more insightful analysis that leads to explicit policy implications is possible when investigating smaller entities. In this study, we focus on a panel of 40 African countries located in the Sub-Saharan region. The panel covers the times period from 1995 to 2016. We combine data on institutions with data on economic growth in order to determine which institutions are especially conductive to growth. Our analysis is framed by the approach of a hierarchy of institutions in which political institutions provide a framework in which contemporary political, economic and societal institutions develop and foster economic growht. This framework provides a solid foundation for empirical analysis and allows for multi-facetted interpretation. We find that political institutions, and among them political rights and civil liberties, are the most conductive to economic growth in the region.
    Keywords: Economic Growth,Institutions,Sub-Saharan Afric
    JEL: H00 O11 O43 P51
    Date: 2022
  4. By: Cullen S. Hendrix (Peterson Institute for International Economics)
    Abstract: Demand for critical minerals--bauxite, cobalt, copper, lithium, nickel, and other minerals that underpin solar, wind, geothermal, and other forms of renewable energy and electric vehicles--is already booming and is projected to continue to grow at a rapid pace. Africa’s mineral-rich developing economies could benefit greatly from this increase in demand. Many African economies have vast critical mineral reserves, and their nascent industrial sectors imply vast export potential. These countries could increase the benefits they reap from these minerals by building downstream capacity in processing--the steps that turn mined ore (bauxite, iron ore) into refined intermediate goods (aluminum, steel). To do so, however, they need to improve their infrastructure, investment climate, and governance and learn to navigate an increasingly complicated geopolitical environment. Hendrix assesses the challenges facing four critical mineral-rich developing African economies: Guinea (bauxite); the Democratic Republic of Congo (cobalt); Madagascar (graphite and nickel); and Mozambique (graphite). The solutions he offers include (a) embracing hydropower potential--which is vast in these countries--while paying attention to social costs and distributive impacts, (b) exempting refinery-related capital goods and industrial inputs from import duties, (c) locating downstream capacity in areas of relative stability, and (d) leveraging external policy anchors to provide policy stability and transparency.
    Date: 2022–12
  5. By: Abate, Gashaw Tadesse; Bachewe, Fantu Nisrane; Regassa, Mekdim; Minot, Nicholas
    Abstract: Increased diversification of rural households into the rural non-farm economy is an important driver of economic growth and structural transformation in countries like Ethiopia where most people live in rural areas and are largely dependent on seasonal agriculture. In this study, we explore the patterns and trends of diversification and assess its drivers and welfare effects during the recent decade (2012 – 2019) using three rounds of representative household data collected from four major regions in Ethiopia. Our results show that sample households generally adopt a livelihood strategy dominated by farming and that the level of diversification has been stagnant over the period of analysis considered. More importantly, most households continue to draw a substantial share of their income from crop production, followed by livestock. The income from non-farm activities accounts only between 17-23% of the total household income. Upon exploring the link between diversification and welfare outcomes, we find that households with relatively diversified income sources have significantly higher consumption expenditure per capita, consume diverse diets, and live in house with better roof quality. Further analyses reveal that income diversification is positively associated with credit access, membership in social insurance, ownership of assets and wealth, and population density. Conversely, access to relatively large, fertile, and irrigable land discourages diversification. In sum, the results imply the need for a deliberate effort to expand the non-farm economy to tap its full potential for employment generation, income growth, and overall welfare improvements.
    Keywords: ETHIOPIA, EAST AFRICA, AFRICA SOUTH OF SAHARA, AFRICA, income, households, economic diversification, agriculture, welfare, welfare economics, crop production, livestock, rural communities, trends
    Date: 2022
  6. By: Bianca Balsimelli Ghelli; Elton Bequiraj; Marilena Giannetti
    Abstract: This paper investigates the effect of corruption on the migration flows from SSA countries to the OECD countries between 2000 and 2019. Fixed-effects and system GMM (generalized method of moments) estimation techniques are used to establish a relationship between emigration and corruption. The empirical results indicate that when corruption increases, migration flows also increase, where corruption is measured on a scale of 0 (not corrupt) to 100 (totally corrupt). Splitting the sample by income inequality suggests that increased inequality doesn't reduce the ability to emigrate. Indeed, below and above the threshold the results are the same. Finally, splitting the sample by corruption level suggests that a high level of corruption in the home country doesn't affect the migration decision.
    Keywords: Corruption; Migration; SSA countries
    JEL: F22 O55 D73
    Date: 2022–12
  7. By: Baker, Lucy
    Abstract: South Africa is the only country in sub-Saharan Africa to have enacted a carbon tax to date. Although the country was ahead of the curve when it began considering the tax’s implementation in 2010, it took until 2019 for the Carbon Tax Act to be passed (RSA 2019). By this time 58 carbon taxes in 46 countries and 31 subnational jurisdictions had been implemented. This Research in Brief is a summary of ICTD Working Paper 150 by Lucy Baker.
    Keywords: Governance,
    Date: 2022

This nep-afr issue is ©2023 by Sam Sarpong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.