nep-afr New Economics Papers
on Africa
Issue of 2023‒11‒13
six papers chosen by
Sam Sarpong, Xiamen University Malaysia Campus

  1. A Survey of Central Bank Digital Currency Adoption in African countries By Ozili, Peterson K
  2. Replacing Customs Revenue with Taxes on Income and Domestic Consumption: The South African Experience By Andreas Freytag; Krige Siebrits
  3. Climate change and migration: the case of Africa By Bruno Conte
  4. From drought to distress: unpacking the mental health effects of water scarcity By Richard Freund
  5. Seeking for the shift towards challenge-oriented innovation policies: Tracing digitalization policies over two decades in Africa By Otioma, Chuks; Nsanzumuhire, Silas U.; Grillitsch, Markus; Jirström, Magnus
  6. Driving change in the Democratic Republic of Congo : an initial mapping of participation in mineral regulation and responsible sourcing By Katz-Lavigne, Sarah; Arian, Hadassah; Deberdt, Raphaël; Geenen, Sara

  1. By: Ozili, Peterson K
    Abstract: The paper presents a survey of central bank digital currency (CBDC) adoption in African countries. Secondary data based on desk research were used to conduct the survey. Data for each African country were collected from publicly available information about each country’s interest and efforts in issuing a central bank digital currency. The survey shows that 70 per cent of African countries have not shown any interest in central bank digital currency. The West African region has the highest number of countries that have not shown any interest in central bank digital currency. Only 4 African countries have a robust payment system infrastructure that can support central bank digital currency. Only 14 African countries have officially indicated interest in central bank digital currency. Only 13 African countries have announced that they are studying central bank digital currency to determine whether they will pursue central bank digital currency as a short-term or long-term goal. Only 4 African countries have reached the pilot test stage of issuing a central bank digital currency. Finally, only one African country has formally issued a central bank digital currency. The policy implication of the findings is that there is low interest in central bank digital currency in the African continent. The low interest in central bank digital currency in African is attributed to the strong preference for cash payments, lack of a robust payment system, low use of digital payments, central banks’ focus on other priorities, fear of failure, lack of government interest in digital currency and concerns about CBDC privacy risk and security threats. These factors can slowdown the level of development and economic inclusion in African countries. There is need to accelerate the issuance of CBDC in African countries.
    Keywords: central bank digital currency, CBDC, Africa, blockchain, distributed ledger technology, CBDC survey.
    JEL: E50 E51 E52 E58 E59
    Date: 2023
  2. By: Andreas Freytag; Krige Siebrits
    Abstract: The African Continental Free Trade Agreement (AfCFTA) was signed by 54 member states of the African Union and is the largest free trade area in the world. Among other things, dismantling tariffs will have effects on public revenues in member states; this will require a revenue transition from customs duties to other forms of public revenues such as income and value added taxes. This transition may be a politically difficult process. This paper analyses the process of revenue transition in South Africa after World War I and after the end of the Apartheid regime to improve understanding of the constraints to and effects of such a revenue transition. The transition in South Africa from a tax revenue structure anchored by customs revenue to one dominated by income taxes and taxes on domestic consumption was a protracted and unplanned process. The general revenue needs of the government led to the introduction of income taxes in 1914 and a broad-based consumption tax in 1979. In addition, excise taxes have been in use ever since the establishment of the Union of South Africa in 1910 and in recent times have become increasingly important for other purposes as well. Along with the shift in the role of customs duties from revenue-generating to protective instruments and fairly extensive use of non-tariff barriers, these developments meant that import taxes became markedly less important tax handles during the course of the 20th century. As a result, the revenue implications of the trade liberalisation process in the early 1990s were minor, and the implementation of AfCFTA would not be a large shock to government revenue in South Africa either.
    Keywords: free trade agreements, revenue transition, taxes, South Africa
    JEL: H20 H27
    Date: 2023
  3. By: Bruno Conte
    Abstract: How will future climate change affect rural economies like sub-Saharan Africa (SSA) in terms of migration and welfare losses? How can policy enhance SSA’s capacity to adapt to this process? I answer these questions with a quantitative framework that, coupled with rich spatial data and forecasts for the future, estimates millions of climate migrants and sizeable and unequal welfare losses in SSA. Investigating migration and trade policies as mitigating tools, I find a tradeoff associated with the former: reducing SSA migration barriers to the European Union (EU) standards eliminates aggregate welfare losses at the cost of more climate migration and high regional inequality. Reducing tariffs to the EU levels attenuates this cost.
    Keywords: climate change, migration, economic geography
    JEL: O15 Q54 R12
    Date: 2023–10
  4. By: Richard Freund
    Abstract: I provide quasi-experimental evidence of the effect of drought exposure on young adults’ experiences of anxiety and depression by leveraging a natural experiment: the 2021 drought in Ethiopia. My analysis applies a difference-in-differences strategy and couples 40 years of rainfall data with longitudinal data on mental health. I find that exposure to below long-run average rainfall increases in the probability of experiencing at least mild anxiety and depression by 0.35 and 0.29 standard deviations, respectively. These effects are strongest among those who grew up in the poorest households and those with low childhood reading ability. The impact on depression is also pronounced among those with low self-esteem. Additional evidence on mechanisms suggests the mental health effects may partly be explained by the drought’s impact on food insecurity, inflation, and perceived household poverty.
    Keywords: mental health , drought , climate change , anxiety , Ethiopia , depression
    Date: 2023
  5. By: Otioma, Chuks (UNU Merit); Nsanzumuhire, Silas U. (UNU Merit); Grillitsch, Markus (CIRCLE, Lund University); Jirström, Magnus (Lund University)
    Abstract: The current innovation-policy discourse suggests a shift towards challenge-orientation and calls for a whole of government approach to tackle grand societal challenges such as climate change, inequality, and poverty. We seek for such a shift in two countries highly exposed to these challenges, South Africa and Rwanda, and in relation to digitalization policies, which hold strong transformative potential. To do so, we develop an analytical framework, which differentiates between policy goals (intended economic, social, or environmental outcomes) and policy rationales (technology-push, system building, or transformative change). Our empirical results show little resemblance to the temporality assumed in the literature, namely that policy goals and policy rationales should shift towards challenge-orientation and transformation over time. In contrast, we find that the policies relevant for the digital transformation have been challenge-driven from the beginning addressing besides economic growth also inclusivity and poverty reduction. Also, we find a potentially generalizable pattern in transformation processes, embarking from system building, then focusing on developing products, processes, and business models, and finally specializing the instruments to address specific shortcomings. The findings complement and contrast existing studies often centered on the Global North and often covering a narrower set of innovation policies.
    Keywords: Innovation policy; grand challenges; digitalization; South Africa; Rwanda; transformation; system innovation; policy evolution
    JEL: O10 O30 O33 O38 O55
    Date: 2023–10–30
  6. By: Katz-Lavigne, Sarah; Arian, Hadassah; Deberdt, Raphaël; Geenen, Sara
    Abstract: Ethical supply chain initiatives, such as mandatory human rights due diligence (mHRDD) and responsible sourcing initiatives for minerals, are rapidly multiplying. The Democratic Republic of the Congo, faced with violent conflict and a range of human rights issues, has grown into a laboratory for such initiatives, to an extent that it has become difficult to see the forest for the trees. In this working paper, we make an attempt at providing a comprehensive – though inevitably incomplete – overview of initiatives, programmes, and projects (past, present, and upcoming) that have been created by actors at different levels of the supply chains in response to growing concerns around Congolese minerals. More specifically, these measures relate, first, to the 3Ts (tin, tantalum, tungsten) and gold, extracted in particular in the conflict-affected eastern provinces and second, the more recent booming demand for copper and cobalt (2C) from the provinces of Haut-Katanga and Lualaba in southeastern DRC. With a theoretical focus on participation, this working paper lays the groundwork for further research on the participation of small-scale producers in the design, implementation, and governance of transnational mineral supply chain initiatives.
    Keywords: DRC, DR Congo, Democratic Republic of Congo, Ethical supply chain initiatives, mandatory human rights due diligence
    Date: 2023–10

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.
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