COMESA Region Research Articles

Enhancing regional sustainable industrialisation and poverty reduction post‐COVID. The case of the common market for the eastern and southern Africa region

AbstractIndustrialisation is important for attaining economic development in an economy as well as other macroeconomic objectives, such as economic growth and low levels of unemployment. This research aimed to examine how the Common Market for Eastern and Southern Africa can use industrialisation for effective poverty reduction. The research adopted the panel autoregressive distributed lag model. Data were sourced from the World Bank from 1994 to 2022. The results demonstrated that social security, remittances, industrial development and development aid are crucial factors that can be leveraged to reduce poverty in the COMESA region. It was established that if industrialisation increases by 1%, poverty will decrease by 19% in the long run. It was suggested that trade barriers be removed, and modern technology be harnessed to ensure the value‐benefit of the beneficiation of raw materials for effective poverty reduction.

Impact of Supply Side Shocks on Kenyan Exports to COMESA

The study sought to determine the impact of supply-side shocks on Kenyan exports to COMESA region. This was motivated by the increasing number of shocks that have hit the country, the region and the global economy in the recent past. Using secondary data covering the period from 1990 to 2021, the study applied the Vector Auto Regression model and estimated impulse response functions to show the effect of shocks on each of Kenya's exports to the region. The study established that Kenya's exports to COMESA as a region are impacted by oil price shocks, variations in investment level in Kenya and exchange rate. Erratic weather patterns characterized by droughts do not affect the country's exports to the region. Therefore, the paper recommends that for Kenya to boost its exports to the region and subsequently boost Intra-COMESA trade, the government of Kenya should promote investment and ensure that the country gets enough crude oil supplies even when global prices are rising as this will boost the country's exports to the region.

COMESA Migration Flows: Evidence from Top-5 Inflows and Outflows

While migration out of the African continent seems more visible given the attention it receives based on recent debates mostly shaped by the media, intra-African migration and inter-state migration in Africa is large owing to the numbers involved in absolute terms. This study considers the Top-5 inflows and the reciprocal top five outflows by each COMESA country. Utilizing the gravity model of migration, the study sought to predict the degree of migration interaction. Focusing on the COMESA region integration block (21 countries), this study examined its Top-5 inflows and outflows migrations. Using national data migration flows statistics available from migrationdataportal.org for the year 2010. The statistics defines an international migrant as an individual who has a different usual country of residence in 2010 compared with 2005. These statistics were estimated by combining country-to-country international flows with estimates of 5-year internal migration flows. The study estimated an empirical model as a measure for both Inflows and Outflows to better understand the COMESA migration flows as a part of intra-African migration and consider the factors may explain changes in the volumes and the direction of these changes in migrations. The study finds that; there is significant reciprocity between COMESA inflows and outflows, the common border and the common 2nd/ethnic language significantly influences both COMESA inflows and outflows, and the Political Stability negatively influences COMESA inflows and outflows, notably, however, the distance between countries neither influences COMESA Inflows nor Outflows.

Monetary Policy Credibility and Economic Growth: A Comparative Analysis of COMESA and ECOWAS Countries

The study aims to highlight the effect of the credibility of monetary policy on economic growth concerning the COMESA compared with the ECOWAS economies. Those groups of countries are reached throughout the monetary policy credibility measurement to get an insight into whether the monetary policy is at the origin of the economic growth level of the country. The dynamic panel data consists of 5 years, from 2015 to 2020, for 11 countries of COMESA and ECOWAS. The findings from the two-system-GMM approach show a significant positive effect of the monetary policy credibility on economic growth in the COMESA region. On the other hand, the monetary policy credibility has an insignificant impact on the economic growth in the ECOWAS region. The findings lead us to recommend to the policymakers of central banks to ensure that they choose the appropriate monetary policy to return to growth, full employment and price stability.

Issuer and Investor Proprietary Rights in Eastern and Southern African Frontier Securities Markets—The Role of the Compensation Fund, and the Case for a Regional Compensation Fund

Although empirical evidence shows that investment flows to Sub-Saharan Africa, in form of foreign portfolio investment (FPI), have been on the rise in the past two decades, further evidence shows that actually, investment flows into the Common Market for Eastern and Southern Africa (the COMESA Region) have been very low. Against this backdrop, the need for an efficient Domestic Compensation Fund (DCF) has been highlighted. It is also against the said background that the establishment of a Regional Compensation Fund (RCF)—as a complement of the DCF—has been mooted as a possible way of enhancing the attractiveness regional securities markets as they compete with other markets outside the COMESA Region for those FPI flows to Sub-Saharan Africa. This article examines mainly the Zambian regulatory and institutional framework which regulates the public distribution of securities domestically and across international borders so as establish whether or not it provides adequate incentives and safeguards for prompt and adequate compensation of investors and other market participants who suffer pecuniary loss on account of the default of a licenced person or their employee. The study employs the doctrinal and the non-doctrinal approaches to examining the effectiveness of regulatory rules and institutions. The main finding of the study was that the regulatory and institutional framework for the public distribution of securities does not provide adequate incentives and safeguards for prompt and adequate compensation of investors and other market participants as aforesaid. In particular, the results of the study show that (a) although the regulatory and institutional framework provides for the compensation of the investors and other market participants for their losses, it does not (i) provide for recourse to other bodies for the recovery of unmet or unsatisfied claims or portion of the claim, (ii) fix the time-frame for the determination of compensation claims, (iii) provide for a statutory right of appeal against the determinations or decisions of the DCF, and (iv) a RCF has not been mooted yet or established as a complement to the DCFs in the COMESA Region. The central argument of this article is that liquid and efficient DCFs which are supported by a vibrant RCF are likely to promote market participation and enhance the resilience and fortitude of domestic securities markets in the COMESA Region as they strive to recover from the financial shocks of COVID-19.

DIGITAL INCLUSION FOR ENTERPRISES, JOBS AND VULNERABLE PERSONS

“Digital transformation of micro-enterprises in Ghana” reports on a study undertaken by Karanasios, Senyo and Effah, associate professors who sought to better understand how resource-poor micro-enterprises in developing countries adapted to COVID-19. They examined how micro-enterprises in Ghana were able to leverage and combine a range of low-cost or free digital technology – such as WhatsApp, Instagram and mobile money – to reimagine their business while managing their resource constraints. They interviewed 47 participants across 34 micro-enterprises, government agencies and technology firms. They also drew upon key reports and data from national and international bodies. Also, the study was driven by the need to improve e-business usage and digital financial inclusion of the MSMEs of the COMESA region. The study aimed to develop and test a framework that augmented digital financial inclusion through e-business usage among MSMEs. The specific objectives were to examine the dynamic trend of e-business adoption among MSMEs of the region, to analyze the factors affecting their adoption of e-business, and to examine the impact of e-business adoption on digital financial inclusion among them. This century is characterized by great innovations in technology. However, not everybody is connected. Gaps persist between individuals when accessing and using various digital technologies. Vulnerable people are more affected. The study aimed at discovering also factors that influence digital inclusion for the vulnerable people in the economies some countries in Africa.

Doing Business in the COMESA Region: The Role of Innovation and Trade Facilitation

Abstract Developing oil-dependent countries, like Oman, have growing potentials to broaden their export base aside from the hydrocarbon sector, thus enhancing economic growth. The article aims to identify factors to enhance Oman non-oil exports to the COMESA countries with a focus on innovations and trade facilitation. At the macro level, the article uses country trade data to explore the determinants of trade. At the firm level, the focus is on firm export behavior and innovation. Results show the key role of trade facilitation and firm-level innovations in particular at the commodity level. Innovation is significant and positive for commodities like vegetables, plastic, hides, stone, glass, and machinery. Government’s policies to boost exports and enhance economic growth should be geared to reducing market risks facing exporting firms as well as rewarding innovative companies through better innovation-targeted policies.

Does Investment Structure Matters in the Nexus Between Income Diversification and Financial Performance in Comesa Region? Evidence from Commercial Banks in Kenya

Purpose: The article examines whether investment structure moderates the relationship between income diversification and financial performance of Commercial banks in COMESA region. Approach/Methodology/Design: The study adopted positivist research paradigm and explanatory research design. The data was collected from 31 commercials banks in Kenya from 2008 to 2019.The study considered the following variables: Income Diversification, Investment Structure and Financial Performance. Modern portfolio theory, Agency theory and resource based view theory were adopted. Findings: The study established that income diversification have positive significant effects on the financial performance. The bank investment structure recorded a negative significant effect on financial performance of the commercial banks. Further, the interaction between investment structure and income diversification presented a negative significant effect on financial performance of the commercial banks. The study adds to debate on diversification premiums and discounts by establishing that investment structure moderates the relationship between income diversification and financial performance. COMESA banks have reasons to diversify their income but should consider the mix of the investment structure to achieve optimum results. Practical Implications: Since the study support the benefits of diversification, COMESA as a region can accelerate on pushing for policies that encourage bank diversification to improve the profitability. Additionally, the diversifying banks should optimally adjust their investment structures to propel diversification benefits to compensate the declining interest income. Originality/value: This study contributes to conflicting diversification premiums and discounts by introducing the moderating role of bank investment structure, this indirect effects adds to modern portfolio theory and agency theory that asserts direct relationship of both diversification premiums and discounts respectively.

An introduction to cross-border payments within the COMESA region of Africa

Within Africa, cross-border payments are yet to become seamless and efficient, and correspondent banking relationships with multiple intermediaries still dominate the payments arena. The cultural divide between anglophone and francophone countries extends to key differences in legal and regulatory frameworks, governance structures, payment channels and currencies. This paper explores the landscape of cross-border payments and the various associated challenges, emphasising the importance of keeping to a specific journey and focusing on one hurdle at a time. Written against the backdrop of the recently passed Africa Continental Free Trade Area agreement, this paper argues that if Africa is to succeed in its pursuit of an effective cross-border retail payments environment, the various stakeholders involved will have to embrace customer-friendly interfaces, fair pricing, standard operating rules and predictable/ reliable payment rails. While it is possible to have differences in infrastructure, as shall be seen in the paper, the adoption of common principles is essential to the development of the sector.

Global value chains, private governance and multiple end-markets: insights from Kenyan leather

AbstractThis article analyses how the private governance of global value chains (GVCs) varies across multiple end-markets. This is explored through a two-stage mixed-methods analysis of Kenya’s participation in leather value chains serving Europe, China, India and the COMESA region. We first draw on transaction-level customs data to analyse private governance in terms of the stability of buyer–supplier interactions and presence of intermediaries. We then interrogate these results through supplier interviews. Our article highlights the combined role of product specifications and trust in shaping private governance, and heterogeneity of GVCs across the global North and South, as well as within the South. It further questions commonly held assumptions that lower quality products (generally characterising Southern end-markets) are necessarily governed by market-based coordination mechanisms. We therefore challenge links established in the GVC literature between product standards and private governance.

The Effects of Exchange Rate Volatility on Exports in COMESA: A Panel Gravity Model Approach

In the recent past, exchange rate volatility has become a matter of concern for developing and emerging economies partly due to monetary policy actions of advanced economies and partly due to domestic policy actions. This study examines the effects of exchange rate volatility on exports, using a panel gravity model covering the period 1997 to 2019, to estimate pooled, fixed and random effects models for a panel of 19 COMESA member countries. Applying two alternative measures of exchange rate volatility, empirical results reveal that exchange rate volatility tends to depress both intra and extra-COMESA trade. The results suggest that policy makers in COMESA should not ignore exchange rate volatility when designing trade policies and strategies in member countries. Monetary authorities should strive to stabilize exchange rates by addressing the underlying causes of large, unpredictable and damaging exchange rate fluctuations while cautiously avoiding either further destabilizing the exchange rate or depleting foreign reserve buffers that could result in vulnerability to external shocks. It is also important to develop regional infrastructure like roads, railways and ports to further integrate the region and hence unlock the trade potential for COMESA region.

Growth Impact of Foreign Direct Investment in the COMESA Region: Does Infrastructure Development Matter?

Using country-level panel data, this study investigates the impact of foreign direct investment on the gross domestic product per capita in the Common Market for Eastern and Southern Africa region over the 2000-2015 period. The estimates are generated using the one-step generalized method of a moments-difference estimator. The study found that foreign direct investment exerted a negative while quality development of infrastructure has a positive impact on economic growth in the region. In addition, the quality development of infrastructure has a positive effect on the ability of the region to absorb and benefit from the spillovers of foreign direct investment. The findings suggest that the states of the region should target to attract foreign direct investment which complements economic growth and improve the quality development of infrastructure so as to realize positive economic growth from the investment.

Macroeconomic Vs. Resource Determinants of Economic Growth in Africa: A COMESA and ECOWAS Study

ABSTRACTThis study simultaneously investigates the macroeconomic and the resource determinants of economic growth in the ECOWAS and the COMESA regions. The objective of this study was to empirically ascertain which of the two determinant is key for growth in both regions. To achieve this, the pool mean group technique of analysis was adopted. Empirical findings from the study analysis suggest that long-run economic growth determination in the ECOWAS region, is more reliant on macroeconomic variables and not resource price. While in the COMESA, the impact of macroeconomic determinants on long-run growth is less. In addition, reliance on resource price for long-run growth in the COMESA is found to be growth decelerating. In the short-run, growth determination in the ECOWAS is highly responsive to resource price negatively, while macroeconomic determinants of growth are weak. However, findings for the COMESA region suggest that short-run growth is highly responsive to macroeconomic determinants negatively, and to resource price positively. Hence, for countries in both regions to achieve sustainable long-term growth, there is the need for improvement in their macroeconomic management.

Civil Remedies for Breach of Continuous Disclosure Obligation of Issuers of Securities in the Comesa Region—a Regional Comparative Analysis

Civil Remedies for Breach of Continuous Disclosure Obligation of Issuers of Securities in the Comesa Region—a Regional Comparative Analysis

The Use of Supportive Domestic Mechanisms Is a Distortion of Sugar Trade in the Comesa Region

The Use of Supportive Domestic Mechanisms Is a Distortion of Sugar Trade in the Comesa Region

International Telephone Calls and the Regulatory Environment in COMESA

Using telephone call data assembled from a number of African countries, a model is employed to estimate the role of the regulatory environment as defined by the ITU. The GMM models predict that the absolute size of the impact of regulatory improvements on outgoing call volumes is probably larger than that of prices. The paper concludes with suggestions to regulatory arms within the COMESA region for improvements.

Financial Integration and Economic Growth in the COMESA and SADC Regions

This study used panel data methods to examine the relationship between financial integration and economic growth in the COMESA and SADC regions. Using Foreign direct investment (FDI) and portfolio flows as a share of GDP, Chinn-Ito index of financial openness and debt flows as measures of financial integration, the study found that the relationship between financial integration and growth is largely insignificant in the combined sample of COMESA and SADC regions. However, the relationship changes when the two regions are separated. Whereas two of the indicators of financial integration are significant in the COMESA region, only one indicator of financial integration is significant in the SADC region implying that financial integration is more important in the COMESA region than in the SADC region. The results support the growth retarding theories of financial globalization and the convergence hypothesis in the COMESA region while the neoclassical trade theories find strong support in the SADC region. These results imply, first, that financial integration has different growth effects for different regional groupings and thus integration policies should not be universally applied. Second, these results imply that further enhancement of trade integration policies offer more promising outcomes for economic growth in the SADC region than financial integration policies while the converse is true for the COMESA region.

Regional Economic Integration and Economic Growth in the COMESA Region, 1980-2010

A key goal of the COMESA Treaty (1993) was to stimulate sustainable economic growth in the region through increased trade between member states. On the basis of a 1980–2010 annual panel dataset, we examine the contribution of COMESA integration to economic growth in the region using instrumental variables GMM regression in the framework of a cross-country growth model. Contrary to a priori expectation, we find no significant empirical support for a positive growth impact, as yet, on the region from the integration. Growth in capital stock, population, world GDP and the level of openness to international trade turned out to be the most robust drivers of growth in the COMESA region over the period.

Regional Economic Integration and Exports Performance in the COMESA Region (1980-2012)

One of the major development challenges facing Africa has been the small and fragmented economies with low incomes and low level of intra-regional exports. In an effort to promote intra-regional exports, Africa has witnessed renewed momentum for regional integration. This study examines the effect of regional economic integration on exports in the COMESA region. It employs the fixed effects regression, random effects regression and instrumental variables GMM regression to estimate an augmented trade gravity model using panel data from 1980 to 2012. The study results show that the formation of COMESA trading bloc has promoted intra-regional exports, implying intra-COMESA export bias. Comparing pre-COMESA (1980-1993) and post-COMESA (1994-2012) periods, it was found that intra-COMESA exports have grown by approximately 35 percent since COMESA was formed. This suggests that in order to enhance export flows in the region, the process of economic integration should be deepened. Thus, there is need for increased investment in transport infrastructure that will reduce long distance cost of doing business. This would have a major impact on deepening integration of COMESA economies.

Impact of liberalization on efficiency and productivity of sugar industry in Kenya

Purpose – The data used in this study is for the period 1980‐2000. Almost midway through this period (in 1992), the Kenyan government liberalized the sugar industry and the role of the market increased, while the government's role with respect to control of prices, imports and other aspects in the sector declined. This exposed the local sugar manufacturers to external competition from other sugar producers, especially from the COMESA region. This study aims to find whether there were any changes in efficiency of production between the two periods (pre and post‐liberalization).Design/methodology/approach – The study utilized two methodologies to efficiency estimation: data envelopment analysis (DEA) and the stochastic frontier. DEA uses mathematical programming techniques and does not impose any functional form on the data. However, it attributes all deviation from the mean function to inefficiencies. The stochastic frontier utilizes econometric techniques.Findings – The test for structural differences in ...