nep-afr New Economics Papers
on Africa
Issue of 2023‒08‒14
seven papers chosen by
Sam Sarpong
Xiamen University Malaysia Campus

  1. The uneven path to recovery: The sub-Saharan experience By Michael Danquah; Amina Ebrahim; Maureen Were
  2. Financial feasibility of developing solar groundwater irrigation in Ghana By Xie, Hua; Ringler, Claudia
  3. Implementation of local content regulation: The case study of a foreign-owned mining operation in Tanzania By Jambo Ramadhani; Emmanuel Maliti
  4. On the Importance of African Traditional Religion for Economic Behavior By Lewis Dunia Butinda; Aimable Amani Lameke; Nathan Nunn; Max Posch; Raúl Sánchez de la Sierra
  5. Analysis of cashless economy, demand for money and price determination : A possibility for implementation in Nigeria By EKPEYONG, PAUL
  6. Green hydrogen: Implications for international cooperation. With special reference to South Africa By Stamm, Andreas; Altenburg, Tilman; Strohmaier, Rita; Oyan, Ece; Thoms, Katharina
  7. Does Competition from the Informal Sector Reduce Tax Compliance in the Formal Sector? Evidence from Ethiopia By Yimam, Seid; Asmare, Fissha; Moore, Mick

  1. By: Michael Danquah; Amina Ebrahim; Maureen Were
    Abstract: COVID-19 cases were first confirmed in March 2020 in Ghana, Kenya, and South Africa. These countries put in place several stringent measures, including lockdowns, to contain the spread of the virus. Various policies were also rolled out to address the disruption in economic activities, to mitigate the adverse impacts, particularly on the vulnerable, and to revive the economy. In this paper, we discuss the evolution of the pandemic and containment measures, the subsequent policy responses, and the effectiveness of these policies in Ghana, Kenya, and South Africa.
    Keywords: COVID-19, Sub-Saharan Africa, COVID-19 policy response, economic recovery
    Date: 2023
  2. By: Xie, Hua; Ringler, Claudia
    Abstract: Ghana is home to 32 million people, 13 million of whom live in rural areas and work mostly in agriculture. Although substantial progress has been made, food insecurity still affects a large share of the population; during 2019–2021 more than one third of the population experienced moderate or severe food insecurity, and in 2020 14% of children below the age of five were stunted.
    Keywords: GHANA; WEST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; groundwater irrigation; irrigation; groundwater; solar powered irrigation systems; investment
    Date: 2023
  3. By: Jambo Ramadhani; Emmanuel Maliti
    Abstract: Based on a case study of an anonymous mining company in Tanzania, this study assesses the implementation of the local content (LC) regulations and guidelines in the country. The analysis focused on the key LC aspects of the direct workforce (employment and training), procurement of goods and services, and technological transfer to uncover the extent to which the company implements the LC regulations.
    Keywords: Local content, Mining, Workforce, Local procurement, Technology transfer, Tanzania
    Date: 2023
  4. By: Lewis Dunia Butinda; Aimable Amani Lameke; Nathan Nunn; Max Posch; Raúl Sánchez de la Sierra
    Abstract: Within the field of economics, despite being widespread, African traditional religions tend to be perceived as unimportant and ignored when studying economic decision-making. This study tests whether this presumption is correct. Using daily data on business decisions and performance of beer sellers in the eastern Democratic Republic of the Congo, we study the importance of traditional religious beliefs for economic behavior and outcomes. Beer sellers perceive the risk of theft in their shops to be higher than it actually is, causing them to hold lower inventories, more frequent stock-outs, and reduced profits. We facilitate randomly-timed access to commonly-used, but typically prohibitively expensive rituals, which reduce the perceived risk of theft. We find that the rituals partially correct the beliefs about the risk of theft for sellers who report believing in the ritual’s efficacy. These sellers purchase more inventory, experience fewer stock-outs, and have larger sales, revenues, and profits. To distinguish the belief in the efficacy of the ritual from other incidental effects of participation, we analyze these outcomes for sellers who do not believe in the ritual. For these individuals, we find none of the observed effects. The findings provide evidence of the importance of African traditional religions, demonstrating that they can influence behavior and outcomes that are important for economic development.
    JEL: L81 O12 Z12 Z13
    Date: 2023–07
    Abstract: This study explores the feasibility of implementing a cashless policy in Nigeria and its impact on money demand and price determination. Drawing from renowned scholars such as Keynes, Friedman, and Woodford, the analysis delves into the dynamics of monetary policy, the role of money in trade and financial markets, and factors influencing price levels. The study investigates the relationship between money demand and the implementation of a cashless policy. It emphasizes the behavior of real balances, transaction velocity, and the effects of monetary policy on trading activity and asset prices. The findings indicate that as an economy moves towards a cashless system, various factors come into play. Transaction velocity, a measure of cash efficiency, becomes critical, increasing as cash usage diminishes and the economy becomes more cashless. Additionally, the study reveals that implementing a cashless policy affects price determination. Contrary to conventional belief, even as real balances approach zero in a cashless economy, asset prices remain responsive to monetary policy. This implies that monetary equilibrium prices do not necessarily converge to their nonmonetary equilibrium counterparts when real balances vanish. Based on these findings, a viable policy recommendation emerges: the monetary authority should carefully manage the money supply per investor to control and stabilize the price level in a cashless economy. Adjusting the money supply allows the authority to achieve and maintain a desired price level, even in a cashless environment. However, the study acknowledges limitations and calls for further research. Specifically, exploring the implications and challenges of implementing a cashless policy in Nigeria is necessary. Factors such as financial inclusion, technological infrastructure, and public acceptance should be examined to assess the feasibility and potential impacts of a cashless economy on different segments of society. Overall, this study contributes valuable insights into the possibility of implementing a cashless policy, its effects on money demand and price determination, and its implications for economic stability and efficiency in Nigeria.
    Keywords: price, cashless policy, monetary policy, price determination, efficiency
    JEL: E4 E41 E42 E44
    Date: 2023–07–13
  6. By: Stamm, Andreas; Altenburg, Tilman; Strohmaier, Rita; Oyan, Ece; Thoms, Katharina
    Abstract: Green hydrogen - produced with renewable energy - is indispensable for the decarbonisation of economies, especially concerning 'hard-to-abate' activities such as the production of steel, cement and fertilisers as well as maritime transport and aviation. The demand for green hydrogen is therefore booming. Currently, green hydrogen is far more expensive than fossil fuel-based alternatives, but major initiatives are underway to develop a global green hydrogen market and bring costs down. Green hydrogen is expected to become cost-competitive in the mid-2030s. Given their endowment with solar and wind energy, many countries in the Global South are well-positioned to produce low-cost green hydrogen and are therefore attracting investments. Whether and to what extent these investments will create value and employment for - and improve environmental conditions in - the host economies depends on policies. This discussion paper analyses the potential industrial development spillovers of green hydrogen production, distinguishing seven clusters of upstream and downstream industries that might receive a stimulus from green hydrogen. Yet, it also underlines that there is no automatism. Unless accompanied by industrial and innovation policies, and unless there are explicit provisions for using revenues for a Just Transition, hydrogen investments may lead to the formation of socially exclusive enclaves. The paper consists of two parts. Part A provides basic information on the emerging green hydrogen market and its technological ramifications, the opportunities for countries with abundant resources for renewable energy, how national policies can maximise the effects in terms of sustainable national development and how this can be supported by international cooperation. Part B delves into the specific case of South Africa, which is one of the countries that has an advanced hydrogen roadmap and hosts several German and international development projects. The country case shows how a national hydrogen strategy can be tailored to specific country conditions and how international cooperation can support its design and implementation.
    Keywords: Green hydrogen, energy transition, industrial development, industrial policy, South Africa, Just Transition, technological learning, international cooperation
    Date: 2023
  7. By: Yimam, Seid; Asmare, Fissha; Moore, Mick
    Abstract: It is widely believed that the existence of ‘informal sector’ enterprises that visibly do not pay direct taxes reduces the willingness of owners of formal, tax-registered enterprises to pay their own taxes. We call this the adverse evasion spillover hypothesis. It is for several reasons hard to test this hypothesis, especially in this most general form. We test a more focused version, with two components. One is that the levels of tax compliance of formal firms are reduced when those firms perceive that they are adversely affected by direct economic competition from informal enterprises. The other is that these effects are especially marked for smaller formal sector firms. Two particular procedures enabled us to collect the data needed to test these hypotheses in a satisfactory way. First, the Ethiopian Ministry of Revenue kindly gave us access to ten years of their administrative data relating to a representative sample of 408 tax-registered firms located in Addis Ababa. Because these records included information on whether firms had been penalised for attempts to understate their tax obligations, we were able to divide our sample into two groups of more and less compliant firms. We then surveyed the owners of those firms, adding in questions about their perceptions of the extent to which they felt adversely affected by competition from informal enterprises, but giving no hint that we were especially interested in tax compliance, or that we had access to their tax compliance record. Our two hypotheses were validated. The more that formal, tax-registered firms perceived that they faced market competition from informal enterprises, the lower were their levels of tax compliance. This adverse impact of perceived competition on tax compliance was greater for smaller formal, tax-registered enterprises.
    Keywords: Finance, Trade, Work and Labour,
    Date: 2023

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