African Economies Research Articles

China's Patient Capital in Africa: Navigating Long-term Investments and Economic Cooperation

Abstract: In this article, it will undertake a comprehensive examination of "patient capital" within the context of China's foreign direct investment (FDI) in Africa, introducing the concept and its distinctive characteristics. This analysis is framed against the backdrop of China's evolving economic and trade relationships with other nations. Firstly, it will provide a brief literature review outlining the essence of patient capital and its application in China's FDI strategies. Subsequently, this paper will delve into the historical trajectory of China's direct investment in Africa, examining shifts from state-owned enterprises (SOEs) to private enterprises and their subsequent impacts on African economies. This section underscores the emergence of long-term oriented "patient capital" approaches, challenging perceptions of China's investments as purely altruistic. Furthermore, it will analyze the structural composition of China's investments in Africa, emphasizing the strategic focus on long-term gains and relationship-building. This analysis sheds light on the transformational nature of China's engagement in Africa, fostering sustainable development and enhancing African countries' autonomous production capacities. To contextualize China's approach, this paper will compare it with that of the United States, exploring differences in investment strategies, motivations, and their respective outcomes on African nations. Utilizing case studies, it will assess the multi-faceted impacts of these investments on African economies and their contributions to China's domestic economic advancement. This comparative analysis underscores the practical significance of China-Africa cooperation, highlighting a historical opportunity for mutual benefit and win-win outcomes. By emphasizing sustainable development and capacity-building, China's FDI in Africa presents a compelling narrative of shared prosperity and growth.

Does the Belt and Road Initiative boost industrialization? Empirical evidence from African economies

Does the Belt and Road Initiative boost industrialization? Empirical evidence from African economies

Examining the impact of mobile money on financial inclusion in Sub-Saharan Africa: the role of institutions and governance

Purpose This paper aims to investigate the role of institutional quality in the relationship between mobile money and financial inclusion among Sub-Saharan Africa (SSA) from 2002 to 2022. Design/methodology/approach The paper uses annual data from SSA on a bundle of four financial inclusion variables, six institutional quality indicators (i.e. rule of law, government effectiveness, control of corruption, voice and accountability, regulatory quality and political stability) and total volume of mobile money transaction in a year. The two-stage least squares regression was used to validate the hypotheses. Also, the random effects model was also used to account for potential unobserved heterogeneity across countries in SSA. Findings The empirical results reveal that institutional quality and mobile money have direct impact on financial inclusion. Also, institutional quality plays a positive and significant contingency role in the relationship between mobile money and financial inclusion. Originality/value The study contributes to financial inclusion theory by providing multi-country empirical evidence to validate the theory in explaining mobile money’s role in expanding financial access. It also highlights the key insight from financial inclusion theory regarding the need for strong governance institutions for technology-enabled inclusion. By examining interactions between mobile money, institutions and financial inclusion across 15 African SSA economies, the study allows for more generalizable conclusions about contextual dependencies.

The potency of the OHADA law in the African digital economy

Abstract There are various technological developments or innovations that have (or will in the future) radically transform business transactions and the way in which people work, enter into contracts, and fulfil their contractual obligations. The principal focus of this article is to analyse the shortfall of the Organisation for the Harmonisation of Business Laws in Africa’s (OHADA) law, through its Uniform Act on General Commercial Law, in failing to embrace new technologies in a trending digital era when applying traditional contract laws rules to the buying and selling of goods. This is significant because the Uniform Act, as a tool for the regulation of cross-border sale of goods contracts, has been put to the test. Although the scope of the OHADA Uniform Act on General Commercial Law is not extensive to new technologies, this article probes the question as to whether the pulse of technology poses a challenge for the traditional 20th-century rules under OHADA. In other words, is the statute robust enough to reflect the modern digital world, or will it become outdated if it is not revamped or supplemented by other conventions to accommodate new technologies and ways of conducting business? This study uses an in-depth critical analysis of the provisions of the Uniform Act in order to ascertain its potency as it concludes that it is imperative in this modern digital age for such a statute to embody technological innovations for the efficient conduct of transnational businesses.

Cut a Tree, Cut a Man: Charcoal Production as a Bane to Green Economy in Nigeria

Symbiotically speaking, cutting a tree is akin to cutting a man or any of its counterparts in the animal kingdom. Besides solar energy, heat energy's role in humans’ daily life calls for its taming, artificial ignition, and fuelling of same for its reuse as and when due. Hence, humans’ ability to ignite and fuel fire marked a significant achievement in human evolution. Meanwhile, wood was the most traditional source of fuel in human history, which is, mainly, of two forms: firewood and charcoal. Dried wood was the common source of fuel for domestic cooking and commercial use both in the rural and urban areas in the primitive era. Although, firewood has relatively little burden on nature, charcoal, which has more adverse effects on the environment, is now taking over. Sadly, the discovery of better alternative sources such as LPG and electricity could not bring about a remarkable shift in many developing nations, including Nigeria, despite their efficiency. Taking expository and critical analysis methodologies, this paper argues that wood-fuelling hinders the achievement of the green economy in Africa, and it persists for many reasons; poor state of electricity, unavailability and/or unaffordability of the LPG, poverty, poor environmental awareness, unsophisticated and poor enforcement of environmental laws and lack of compensation for the conservators among others. In addition to the ever-suggested solutions, this paper recommends a ‘carrot and cane' system. By this, the offenders should not only be accordingly penalised but also the conservers be compensated duly. It also recommends the use of briquettes as viable alternatives.

Systematic literature review on the application of precision agriculture using artificial intelligence by small-scale farmers in Africa and its societal impact

Systematic literature review on the application of precision agriculture using artificial intelligence by small-scale farmers in Africa and its societal impact

Environmental quality in Africa and infrastructure development: The mediating impact of the knowledge economy

AbstractThe study investigates the impact of infrastructure development on environmental quality and the mediating impact of the knowledge economy in 48 African economies from 2000 to 2020. The Generalized Method of Moment is adopted to control for error term‐related problems and potential endogeneity through an instrumentation process. The following findings are established: First, Infrastructure development enhances environmental sustainability in Africa, through the reduction of greenhouse gasses. Second, it contributes to reducing CO2 emissions in liquid, solid and gaseous states of fuel consumption. These results hold after considering the infrastructure development indicators of the African Development Bank. Third, the findings further reveal that the transport, energy, water supply, and technology sectors all contribute to enhancing environmental quality. Fourth, taking into account differences in factor endowment, the findings indicate that infrastructure development helps reduce CO2 emissions in both lowly and highly endowed African countries, except for electricity and water supply in the lowly endowed economies, indicating that the development in these sectors needed to be speeded‐up to enhance environmental quality in these countries. Fifth, the findings indicate that the knowledge economy mediates with infrastructure development to promote environmental quality through the reduction CO2 emissions. The findings recommend policymakers promote infrastructure development for environmental efficiency in Africa. This is particularly enhanced through the mediation impact of the knowledge economy.

Combining the pieces: identifying key determinants of export diversification in Africa amidst model uncertainty

AbstractExport diversification can be a driver of economic growth. Policies to diversify exports attempt to defy an existing comparative advantage in low-value-added goods to promote transformation. Many structural, general policy, and trade-related variables have been identified as important drivers of diversification. This article reviews the literature on the determinants of export diversification and applies Bayesian Model Averaging (BMA) to empirically tackle model uncertainty stemming from many possible determinants. It assesses the relevance and impact of up to 46 drivers of export diversification for up to 47 African countries and 123 trading partners from 1995 to 2018. It finds that African countries’ structural features are especially influential in determining export diversification, a potential explanation for Africa’s more concentrated export baskets compared to other world regions. Furthermore, trade policies, like tariffs and regional integration, are critical in promoting export diversification. These findings underscore the AfCFTA’s potential to foster export diversification across African economies. A diverse set of non-trade-related policy variables also significantly affect export diversification. Factors such as institutions, education, service sector, resource rents, financial development, FDI and exchange rate stability are relevant determinants in different settings. Moreover, the analysis shows that whom you trade with is also important for diversification, and that context-specific differences, such as specific regional integration contexts or type of commodity-dependence, matter. The results suggest that the goals to diversify exports at the extensive margin for structural change and the intensive margin to tackle volatility, seem often not achievable via the same policies.

Visions of sustainable development and the future of smallholder farmers in sub-Saharan Africa (and beyond)

Smallholder farmers are widely touted as essential to sustainable agricultural development in sub-Saharan Africa and beyond. But what exactly is meant by sustainable development, and how are smallholder farmers expected to contribute to it? In this perspective, we describe and assess two competing visions of sustainable development, namely Capital Theory and the Capabilities approach, paying special attention to the major yet divergent repercussions each approach implies for the future of smallholder farmers and the activities of their representative organizations. We present the core concepts, tools and practices stemming from each sustainable development perspective, and from a critique of these motivate the superiority of a capabilities approach as more conducive to smallholder farmers wellbeing now and in the future. In doing so, we bring to the fore the pivotal role smallholder farmer organizations and rural social movements, as collective vehicles for smallholder political agency, play in strategically advocating for the conditions that support sustainable and just smallholder agriculture in sub-Saharan Africa and beyond.

The relationship between government expenditure on agriculture and agriculture production

PurposeThe impact of government expenditure on economic performance has been a topic of discussion at both the sectoral and aggregate national levels. Despite its theoretical importance, evidence from literature indicates that this relationship has not been universally accepted across different countries and sectors. Given the significance of agriculture in African economies, particularly in Ghana, and the role of government in this sector, this study examines the impact of government expenditure on agricultural productivity in Ghana from 2000Q1 to 2022Q4.Design/methodology/approachSpecification of the model was done based on the Autoregressive Distributed Lag (ARDL) cointegration bound test approach.FindingsThe results revealed that the studied variables cointegrated in the long run. Government expenditure was found to induce agriculture production both for the long run and short run within the period of the study, implying that government expenditure matters in inducing agriculture productivity in Ghana.Originality/valueThe study employed the ARDL methodology to investigate government expenditure and agriculture production contagion in Ghana, which has been specifically overlooked by previous studies. It is suggested that the Government of Ghana as well as others in similar environment should increase investment into the agriculture to boost the productivity of the sector.

African Sovereign Risk Premia and International Market Assets: A Relook Under The COVID-19 Outbreak

Using the wavelet multiscale coherence technique, the paper examines the interdependences between global market assets, sovereign credit default swap (CDS) and yield-to-maturity on bond spread for African economies from January 2019 to March 2023. The empirical results primarily reveal a high level of coherence between global market assets and Africa’s sovereign CDS and yield-to-maturity, although varying across countries and time-frequency domain. Notably, the high degree of coherence and the positive co-movement between sovereign CDS and global market assets are more concentrated at the medium and upper frequency bands. The observed intensity of co-movements between global market assets and sovereign CDS/yield-to-maturity (YTM) of bond spread, with global market assets broadly serving as leading variables, suggests that an increased global investor’s risk aversion positively affects the yields on Africa market bonds. Among the global market assets, we identified that VIX (which is implied volatility of S&P500) has the dominant influence on Africa sovereign CDS/YTM compared to that emanating from Bitcoin and Godman Sachs Commodity Index. This is highly conceivable as VIX gauges bubbling global risks and uncertainties which considerably influences investor’s risk aversion. The heterogeneous lead/lag dynamics also provide useful information to global investors, including by utilizing African markets to rebalance their portfolios for risk management purposes. The empirical findings thus provide further critical information to investors for hedging purposes, and to policymakers in formulating sovereign risk management policies oriented towards minimizing sovereign default risks.

The Impact of Trade Liberalization on Economic Growth in South Africa

The failure of the South African economy to achieve the desired economic expansion raised a serious concern to investigate the potency of trade liberalization policy adopted in the country. This is evidence in macroeconomic indices such as high level of unemployment, poverty and most importantly sluggish economic growth. It is against this back drop that this study was spurred to conduct an analysis of the impact of trade liberalization on economic growth in South Africa covering the period of 1986-2022. The mixed order of integration revealed by the unit root test informed the decision to adopt the ARDL method of estimation. The main findings of interest in this study is the existence of a strong positive relationship between trade liberalization and economic growth in South Africa. Thus, the study concludes that economic integration is healthy for the national economy and hence more liberalization policies should be strategically embrace. The study recommends that the African governments especially South Africa should further open it economic border to allow for free trade with other economies of the world.

Analysing Real Exchange Rate Effects on the Trade Balance in South Africa

For years, policymakers and economists have been researching the significance of the native currency value versus other currencies in favouring the country’s trade balance and total. Therefore, this study investigates the impact of the real exchange rate change on the trade balance in South Africa. The study used annual time series data from 1980 through 2022. This study used the ARDL technique to analyse data. Variables used in this study include the trade balance, real exchange rate, terms of trade, money supply, South Africa’s gross domestic product, and the Chinese gross domestic product. Bounds tests showed that the variables are cointegrated. According to the empirical findings, the real exchange rates have significantly influenced the trade balance positively in the short run but in the long run, have a negative significant influence on the trade balance. The terms of trade have a positive significant influence on the trade balance in the short run, but it appears to be positively significant in the long run. The money supply in the short run has an insignificant negative relationship with the trade balance but in the long run, has a significant positive relationship with the trade balance. The SA gross domestic product has a significant negative impact on the trade balance both in the short and long run. Lastly, the Chinese gross domestic product has a negative insignificant relationship with the trade balance in the short. However, in the long run, it has a positive significant relationship with the trade balance. This proves that a rise in Chinese GDP, as a proxy for foreign economic activity, boosts South African exports to the rest of the world in the long term. As a result, the trade balance improves as China imports minerals from South Africa for production purposes. The dependence on currency depreciation to enhance trade in South Africa can improve its trade balance, but it may also damage the economy due to the country’s reliance on imports. However, the advice to weaken the South African currency should not be so harsh as to have a negative impact on the importation of key capital goods critical to the growth and development of the South African economy. It is recommended that the government reduce demand for imported products and boost domestic manufacturing, which might lead to domestic products being exported. The central bank must also stabilize the currency to increase competitiveness by decreasing the overseas price of exports and increasing the cost of imports.

Do digitalization and green innovation limit carbon emissions? Evidences from BRICS economies

Rapidly evolving innovation and digitalization have captured the focus of policymakers and scholars regarding their potent role in influencing environmental quality. The present research analyzes the impact of these variables on the carbon emissions of Brazil, Russia, India, China, and South Africa economies from 1990 to 2021. This research also explores the impact of economic growth, quadratic green innovation, and green energy on carbon emissions. Using several panel diagnostic tests, this research validates heterogeneous slopes, the presence of cross-sectional dependence, and significant cointegration. Due to the mixed integration order, this research uses a cross-sectional augmented autoregressive distributed lag model, and the results show that economic expansion and green innovation are significant drivers of emissions in both the short and long run. However, digitalization, quadratic green innovation, environmental policy stringency, and green energy are significant in improving environmental quality and sustainability. The long-term results are tested by employing a series of parametric and nonparametric regressions. This research recommends further investment in environmental research and development, digital technologies, green innovation, and the strengthening of environmental policies to attain sustainable development.

Industrialization, decarbonization, and sustainability: The role of development finance and implications for inequality

ABSTRACT Post-apartheid, the South African economy remains characterised by persistent unemployment and world-leading inequality. Transitioning towards more equal and inclusive economic outcomes is hampered by an industrial base concentrated in powerful firms in upstream resource-based carbon-intensive sectors. Pursuing industrialisation in the context of the push towards decarbonisation and sustainability by significant trading partners depends on a massive investment programme in renewable energy and specific high-emitting sectors and developing linkages between sectors to target a just, equitable, and inclusive transition that tackles the country’s deep-rooted inequalities. This paper evaluates South Africa’s main development finance institution, the Industrial Development Corporation’s role in green industrialisation in South Africa. It investigates whether the investments made and the orientation of the IDC positively impacts the structural transformation of the economy, using disclosed and publicly available data. It suggests a set of criteria with which the IDC can assess the transformational impacts of its climate change funding.

Macroeconomic volatility and terrorism incidents in Africa

AbstractThis article investigates the impact of macroeconomic volatility on terrorism in 38 African economies spanning the period from 1980 to 2012, using available data. It examines four categories of terrorism markers: domestic, transnational, uncertain, and total, and their correlation with the volatility of four macroeconomic indicators—inflation, output growth, domestic credit to the private sector, and government expenditures. The study employs the negative binomial regression estimator on both the conditional variance structures of the generalized autoregressive conditional heteroskedasticity (GARCH) and exponential GARCH (EGARCH) and the unconditional measure of a 3‐year interval time varying of measuring macroeconomic variables' volatilities on other regressors. I find, first, that inflation volatility is a significant predictor of all terrorism markers, except for transnational terrorism. This implies that high inflation volatility is linked to increased domestic terrorism. Second, the role of domestic credit to the private sector in mitigating transnational terrorist activities highlights the importance of stable private sector access to credit in reducing such incidents. Third, government consumption expenditure volatility has a dual effect on terrorism: it amplifies domestic terrorism but serves as a mitigating factor for total terrorism. This indicates that stable government expenditure can reduce overall terrorism, but might increase domestic terrorism. Last, other variables—such as population, ethnicity, conflicts, surface areas, and lagged terrorism values—are also found to influence the examined terrorism measures. For robustness, I employ alternative statistical techniques, including Poisson Pseudo‐maximum likelihood (PPML) estimation with multiple high‐dimensional fixed effects (HDFE). In summary, this study emphasizes the critical role of addressing inflation volatility in macroeconomic policies as a primary measure to counter terrorism. Stable economic conditions, particularly in relation to inflation, can significantly contribute to reducing terrorism in African economies.

Resource productivity and determinants of technical efficiency among cassava farmers’ in north central, Nigeria

This research analyzed resource productivity and determinants of technical efficiency among cassava farmers in North Central, Nigeria. This research employed a multi-stage sampling technique. Primary data were used based on a well-designed questionnaire. Inferential and descriptive statistics were employed for data analysis. The results of resource productivity of inputs show that cassava cuttings and fertilizer have the highest and lowest elasticities, respectively. The mean-TE (Technical Efficiency) score of 74% (0.74) indicates that an average smallholder cassava producer in the sample needs about 26% (0.26) additional inputs to get to the frontier. In the TE components, the coefficients of labour, and fertilizers are significant different from zero at 1% probability level. The coefficients of agrochemicals, land inputs are significantly different from zero at 5% probability level, while the coefficient of cassava cuttings are significant different from zero at 10% probability level. In the TIE (technical inefficiency), component the coefficients of age, credit received, members of cooperatives are significant different from zero at 1% probability level. The policy formulations should be directed towards considering technological substitutions and mechanized agriculture. Excessive labour supply, characteristics of the developing agriculture in sub-Saharan Africa, could be pushed into the secondary sector of the Nigerian economy such as the cassava processing industry, therefore generating income, employment and maintaining Nigeria in the first (1st) position in the world ranking in term of cassava output. Also, it is recommended that improved cuttings, agrochemicals, and fertilizers should be made available to cassava farmers at appropriate time to increase productivity. Furthermore, credit should be made available to cassava farmers at a single digit interest rate, devoid of cumbersome administrative procedures. Keywords: Resource productivity, technical efficiency, cassava farmers, stochastic frontier model, Nigeria

Agriculture and the youth population in Africa: An under-tapped resource for inclusive development

Several countries in Africa and other developing nations have grown, not only astronomically in terms of population, but also economically over the past two to three decades. However, available evidence has shown that economic growth alone does not guarantee inclusivity, a precondition for development. While some economic growth initiatives are pro-poor leading to some form of segregation, others are overtly sectoral, discriminatory, and sometimes unsustainable. Meanwhile, agricultural development through a conscious and committed investment portends a good deal for inclusive transformation considering the pivotal place of agriculture in the economic fabric of these countries. Again, with the rising population of young people in the continent with no appreciable investment in new skills and technologies to catch up with the demand of 21st century labour markets, agriculture remains the only sector capable of absorbing the burgeoning demographic. The youth population in Africa represents a dynamic and transformative force for the continent's socioeconomic landscape. With over 60% of the population under the age of 25, this group can significantly drive inclusive development, particularly through agriculture. Agriculture, as a primary sector, not only supports livelihoods but also fosters innovation, job creation, and food security. Agriculture, no doubt has always provided the necessary impetus required to drive the engine of industrialisation in Africa despite the many challenges facing the sector. It is against this backdrop that this paper explores the intersection of youth engagement in agriculture and inclusive development in Africa. It highlights how empowering young people with access to education, resources, and critical technology can lead to sustainable agricultural practices and enhanced productivity. By highlighting some important initiatives, the paper illustrate how youth-led initiatives in agriculture can address critical challenges such as unemployment, rural-urban migration, and food insecurity. Key words: Africa, Agriculture, Human resource, Inclusive development, Youth population

Digital Dissemination of African Films in China: A Case Study of the Bilibili Platform

Cultural communication is of great significance to countries in shaping their national image and enhancing their national soft power. However, due to the influence of African politics and economy, African films always face the situation of insufficient production capacity in the film industry, internationalization experience, and film professionals. As a result, its culture has been discounted in the process of dissemination. In particular, African films have for many years relied only on video and other channels of dissemination, making it difficult to compete with the production and wide dissemination of films from Europe and the United States. Therefore, African films have only accounted for 4% of the African film market share in their home countries.

Digital Dissemination of African Films in China: A Case Study of the Bilibili Platform

Cultural communication is of great significance to countries in shaping their national image and enhancing their national soft power. However, due to the influence of African politics and economy, African films always face the situation of insufficient production capacity in the film industry, internationalization experience, and film professionals. As a result, its culture has been discounted in the process of dissemination. In particular, African films have for many years relied only on video and other channels of dissemination, making it difficult to compete with the production and wide dissemination of films from Europe and the United States. Therefore, African films have only accounted for 4% of the African film market share in their home countries.