Political instability and economic development in Sub-Saharan Africa: Some recent evidence

Political instability has become endemic to Sub-Saharan Africa. Since the early 1960s, when most of the African countries began to achieve independence, more than fifty coups have taken place in the continent. This rise in political decay has significantly affected economic development. This study examines the relationship between elite political instability and economic development in Sub-Saharan Africa. It concludes that lack of political stability has contributed significantly to economic stagnation in the continent of Africa.     

Tourism and welfare in Sub-Saharan Africa: a theoretical analysis

Using the standard theoretical model of trade, we study thewelfare effects of tourism for developing countries with particularreference to Sub-Saharan Africa. We show that tourism can reducewelfare for trade regimes dominated by export taxes or importsubsidies. In addition, we argue that tourist immiserisationis possible for Sub-Saharan Africa. Finally, we show that directforeign investment in tourism, is for the most part, beneficial.     

Africa's Debts and Economic Recovery

A substantial reduction of external debt burden of many African countries is needed, for four reasons. First, the present debt burden of Africa is extremely heavy. Africa's debts are equivalent to more than 100% of its GNP, compared to less than 50% in Latin America – another heavily indebted region – and even less elsewhere. The weight of Africa's burden is exacerbated by its lower per capita income than elsewhere in developing regions. Secondly, Africa is experiencing adverse effects of falling commodity prices more than any other region because of its greater dependence on primary products than other regions. Over the last forty years, export commodity prices other than oil have fallen by 50% in real terms, a staggering development with far-reaching adverse effects on many producers. Between May 1989 and January 1991, commodity prices other than oil fell 23% in SDR terms – speed of decline similar to that experienced in the great price fall 1980-82 which marked the beginning of the debt crisis of the 1980s. Cocoa and coffee, two major exports of Sub-Saharan Africa, were particularly badly hurt. Thirdly, while debt in other debt-affected areas has stabilized in recent years, that of Africa has continued to grow as interest is charged on interest and capitalized. Many African countries have been compelled to suspend their debt service payments; according to World Bank calculations, less than one half of Africa's debt service due is now being paid. Even so, debt service which is still being paid absorbs 27% of Africa's shrunken exports – a proportion which severely curtails Africa's capacity to import and to grow. Fourthly, debt settlement is needed to clear the way for resumption of Africa's economic development, now virtually stagnant for a decade in aggregate terms and falling in per capita terms. Africa has the capacity to modernize and grow, and this has been proven in one critical area and against all odds. Between 1980 and 1987, exports of manufactures from Sub-Saharan African countries rose 42% in U.S. dollar terms or 5.7% per year. In 1988, out of 33 countries for which data are available, exports of manufactures rose in 28, and the overall increase for the 33 was 15.8 %. In 1988, eleven Sub-Saharan countries exported manufactures in excess of US $100 million each, compared to seven countries in 1980; and in 1989, there was none. There also have been setbacks, for various reasons. But taking Sub-Saharan as a whole, to achieve a 60% increase in exports of manufactures to US $4 billion on a non-negligible base of US $2.5 billion in 1980, over an eight-year period marked by a commodity collapse, droughts, debt crisis, wars and policy disasters, is a remarkable achievement by any standard. In North Africa, exports of manufactures more than doubled between 1980 and 1987, and then accelerated at 18% per year in 1988-89. North African exports of manufactures are now running at US $5 billion per year. This diversification and growth of African exports must be sustained. For this purpose, African countries must have realistic exchange rates, undistorted product prices across the economy, sufficient supply of industrial inputs and hence adequate growth of agricultural and mineral output, and they must reconstruct the existing capital stock, in many places obsolete, and add new facilities. Their investment, a crucial element for further growth, has fallen sharply in the last decade of the debt crisis in Sub-Saharan Africa: the fall has been so severe that some countries have not even been able to fully replace depreciating capital. At the present level of domestic savings and international commodity prices, most of Africa cannot undertake the reconstruction, modernization and expansion out of domestic ressources to any significant extent. Foreign capital inflow is needed to initiate the recovery and to help sustain it thereafter. But such capital inflow will not take place until the present debt situation is cleared up. This is a necessary condition, even though it is not sufficient: it must be supported by domestic efforts single-mindedly dedicated to economic recovery and social justice. Past efforts at the solution of the debt problem, some of them imaginative and generous, have proven insufficient and uncoordinated. A new deal is needed, attacking the core of the Sub-Saharan problem: debts held by some multilateral financial institutions and debts held by the private sector, in addition to a further shrinking down of service on official bilateral debt or its total cancellation in an imaginative proposal. In North Africa, the acute liquidity squeeze of Algeria – debt service absorbing almost 70% of exports of goods and services per year – needs to be alleviated through debt rescheduling over the long term, thus releasing resources for needed economic recovery. Algeria's debt outstanding is relatively low; it is the service structure which needs radical change. While Africa's commodity problem is not on the agenda of the Abidjan Roundtable, one specific commodity situation can perhaps be handled: the cocoa crisis which affects severely a large part of West Africa and for which remedy seems relatively easily in hand. It is proposed that a consortium of international financial institutions be organized to finance, through loans of, say, 15 years duration, the sale of surplus cocoa stocks to Eastern Europe, thus contributing to cocoa price recovery and hopefully stabilization, and improvement of food supply in Eastern Europe. The operation would be no more risky than other balance-of-payments structural adjustment lending. Cocoa producing countries in parts of Latin America, the Caribbean and Asia would be also beneficiaries. Adjustment and development programmes should be prepared, and seen to be prepared, by national authorities of African countries rather than by foreign advisers and international organizations. Otherwise commitment will be lacking.     

NEA Presidential Address: Gender Inequality and Human Development in Sub- Saharan Africa

This Presidential Address considers the effects of gender inequality on human development in Sub-Saharan Africa. Parameter estimates from quantile and ordinal categorical latent variable specifications of the relationship between components of the Human Development Index and measures of gender inequality suggests that human development in Sub-Saharan Africa increases with respect to improvements in several measures of gender inequality. The results suggest that inegalitarian laws, norms, traditions and codes of conduct toward women constrain both human and economic development in Sub-Saharan Africa.     

ARE AFRICAN CENTRAL BANKS SUFFICIENTLY INDEPENDENT FOR MONETARY CONVERGENCE?

Central bank independence (CBI) is currently a widely debated and topical issue commanding the centre point of many economical and political debates, filling the pages of many scholarly journals. Both central bank independence and accountability are currently regarded as necessary best practices for achieving price stability. The importance of CBI rests on the premise that inflation is primarily a monetary phenomenon, and that the cost of reducing inflation can be lowered by an independent central bank with credibility. Support for CBI also stems from the argument that the power to create money should generally be separated from the power to spend it. This is even more relevant for countries with weak political institutions. However, various studies (cited below) detected lower inflation in those countries where independence of their central banks is the strongest. Countries all over – including some on the African continent – have increased the independence of their central banks accordingly.     

Foreign direct investment and country risk: Further empirical evidence

Global political and economic changes over the last decade have resulted into massive capital inflows to developing countries, most of these flows are foreign direct investments. In light of threats of political instability in the forms of civil wars, illegal capital flight, financial market instability, and political corruption, etc., further assessment of country risk is warranted. We examine the relationship between FDI and political and economic risks for 26 countries for the years 1992, 1993, and 1994 by using regression analysis and cross section data. The results indicate a significant relationship between FDI and these risks. This study provides more reliable estimates by using a current and eclectic measurement of risks represented by Euromoney indexes of political and economic risks. In the previous studies the perception of risk was narrowly defined and also political instability events were mistakenly interpreted as political risks.     

Political instability, investment and economic growth in Sub-Saharan Africa

This paper explores the relationship between political instabilityand economic growth in Sub-Saharan African nations. A more comprehensivemeasure of political instability than has previously been developedis used in combination with a simultaneous equations model anddynamic panel estimation approach to produce several interestinginferences. First, the statistically significant inverse relationshipbetween political instability and economic growth identifiedby earlier studies is confirmed by the estimates presented here.Second, the estimated system of equations indicates that economicgrowth and political instability are jointly endogenous. Third,in addition to the direct impact that political instabilityhas upon growth, estimates confirm the hypothesis that politicalinstability indirectly decreases economic growth by decreasinglong-run capital accumulation. Fourth, failure to account forthe dynamic nature of growth equations as well as the endogeneityof explanatory variables may produce biased effects of politicalinstability on growth. Fifth, the broad measure of politicalinstability we use in this study can better capture the effectsof political instability on economic growth than 'elite' instabilitythat has been used by earlier researchers. Finally, principalcomponents estimation is used to develop a measure of politicalinstability that can serve as an alternative to the arbitraryweighting scheme used in previous research.     

Do authoritarian regimes receive more Chinese development finance than democratic ones? Empirical evidence for Africa

This study is part of an emerging literature that aims to shed light on China's development finance activities in Africa using quantitative estimation techniques. This paper empirically investigates whether African authoritarian regimes receive more Chinese development finance than democratic ones. I use four different measures of democracy/autocracy which allows me to check whether my results depend on the specific indicator chosen. The OLS results suggest that Chinese development finance does not systematically flow to more authoritarian countries, controlling for strategic, economic, political, institutional and geographic confounding factors. The results are not driven by the specific democracy indicator used in the analysis. The findings remain virtually unchanged if I reduce the sample to Sub-Saharan Africa only. Furthermore, the results stand up to several robustness checks, including FE, RE and instrumental variable estimation.     

Aid and economic growth in LDCs: Evidence from Sub-Saharan Africa

This paper uses a disaggregated cross-national time-series aid data and a Least Squares Dummy Variables (LSDV) model to investigate the effects of aid on economic growth in Sub-Saharan Africa. We find that, contrary to what some critics of aid argue, aid has a small but positive and significant effect on economic growth in Sub-Saharan Africa. A simultaneous equation specification of the model shows that aid affects economic growth in Sub-Saharan Africa directly and indirectly through increased domestic savings and investment.     

Land Transport for Export: The Effects of Cost, Time, and Uncertainty in Sub-Saharan Africa

In Sub-Saharan Africa (SSA), inland export transport costs and time delays are much higher for landlocked countries, vary substantially between different geographic corridors, and exhibit substantial uncertainty. Unit costs and costs of time for land transport of exports are high for many agricultural products relative to metals and other high-value products. We illustrate systemic uncertainty in land and maritime transport for exporting by use of simulation. Relationships among uncertainty, infrastructure quality, and other features of logistics systems are highly non-linear, and can be potentially used to identify priorities for trade facilitation.     

Political instability, policy uncertainty, and economic growth: An empirical investigation

This paper elaborates upon the effect of political stability on economic growth using a novel approach. Unlike the literature on growth that emphasizes the turnover of decision makers, this paper focuses on the volatility of economic policies as the relevant indicator of stability. The literature on growth ignores the microeconomic instability associated with frequent changes of government policies. The empirical results of this paper indicate that the effect of political instability on economic growth is not conclusive. Most of the commonly used proxies for political instability have failed to explain growth differences across countries. The political instability indices have no significant effect on growth when a reasonable set of core variables is also included in the regression equation. The results also show that almost all of the policy uncertainty variables are significantly and negatively correlated with economic growth. However, the instability of economic policies has no significant impact on the accumulation of capital.     

The role of politics in the migration of Zimbabwean teachers to South Africa

This paper contributes to the debate on the role played by the political crisis in Zimbabwe in causing teacher migration to South Africa in the presence of other social and economic drivers. The paper uses data collected through a questionnaire self-administered by 100 Zimbabwean teachers in South Africa (migrants) and another 100 in Zimbabwe (non-migrants). In-depth interviews with a few migrant teachers were used to supplement these data. Although it was the second most mentioned reason for the teachers' migration to South Africa, the role played by political violence or repression in Zimbabwe in causing this migration should not be downplayed. Most migrant teachers came from Zimbabwean schools affected by political violence to a large extent before or after the 2008 presidential elections, especially rural areas. Teachers that held positions or distributed opposition party regalia were mostly displaced by violence. There is an urgent need for political transformation to more democratic rule in Zimbabwe.     

The Impact of Political Instability on Inflation Volatility in Africa

This paper investigates whether political instability leads to volatile inflation using a panel of 49 African countries. The study uses novel measures of political instability, particularly the state failure index and state fragility index. In the field of political instability and inflation volatility, this is the first study to measure inflation volatility as the conditional variance of inflation estimated from GARCH (1, 1) model. Adopting the system‐generalized method of moments estimator for linear dynamic panel models for the sample period 1985‐2009, the study documents a positive statistically significant effect of political instability on inflation volatility.     

Terrorism and its Determinants in the Sub‐Saharan Africa Region: Some New Insights

Terrorism is undesirable as it adversely affects the economic development of countries. This study explores the determinants of terrorism in 29 countries of sub‐Saharan Africa (SSA). The data is extracted from reliable sources spanning over 2005 to 2016. Econometric techniques relevant for panel data that control for unobserved heterogeneity (fixed effects) and endogeneity (generalized method of moment) are employed to estimate the specified models. The results indicated that low growth in per capita incomes along with political instability are the main driving forces responsible for terrorism. Similarly, military expenditures are influencing terrorism positively whereas corruption has impacted terrorism negatively in the SSA region. Further, the growth of both physical as well as human capital reduces terrorism. The paper suggests that the region should take appropriate steps for increasing income of the population, education and capital stock, along with ensuring political stability to eradicate terrorism from the region.     

Economic incentives, natural resources and conflict in Africa

This paper reviews how rebel leaders motivate followers to fightin wars in Sub-Saharan Africa. Almost all rebel leaders do useeconomic incentives, but they also avail themselves of otherstrategies to motivate their soldiers, including political indoctrination,ethnic mobilisation and coercion. The type of incentive employedwill depend primarily on the nature of the state confronted.In particular, those movements that face competent nationalmilitaries will have to evolve into viable armies while rebelsfighting states that are weak and corrupt can afford to leadmovements that employ coercion and pursue economic agendas.     

Quality of Institutions and Violence Incidence: a Cross-Country Analysis

This paper utilizes two alternative econometric strategies to test the hypothesis that countries with poor institutional arrangements create an environment with increased impunity, thus providing incentives for potential law-breakers to engage in criminal activities that lead to rapid contagion of violence. Several measures of institutions including legal, political, market, government, and sociocultural institutions are considered in the paper. The empirical analysis provides evidence that the impact of institutional quality on violence is important regardless of income levels. This finding implies that differences in quality of institutions explain why countries with similar levels of income per capita may have different rates of violence and crime. In addition, the results show that quality of institutions matter for a successful long-term strategy to reduce violence.     

Promoting of Investment in Africa*

Abstract: This paper examines the trend, constraints, promotion, and prospects of investment – domestic investment, foreign direct investment, and private portfolio investment – in Africa. After identifying the importance of investment in Africa's economic development, it was shown that all forms of investment are low in Africa and hence inadequate for the attainment of the MDGs and poverty reduction in the continent. The constraining factors include: low resources mobilization; high degree of uncertainty; poor governance, corruption, and low human capital development; unfavorable regulatory environment and poor infrastructure, small individual country sizes; high dependence on primary commodities exports and increased competition; poor image abroad; shortage of foreign exchange and the burden of huge domestic and external debt; and undeveloped capital markets, their high volatility, and home bias by foreign investors. The paper recommends that successful promotion of both domestic, foreign direct and portfolio investment in Africa will require actions and measures at the national, regional, and international levels. It concludes that the prospects are bright. New and attractive investment opportunities are emerging in infrastructure, particularly as most African countries now encourage public/private partnerships for investments in this sector. In addition to privatization, renewed interest within Africa in undertaking regionally based projects and joint exploitation of natural resources is creating other investment opportunities. Apart from the fact that investment in Africa yields the highest returns, investment risk in the continent is declining. In addition, much progress has been made in recent years to improve the investment climate in Africa. All this is of course is not to deny that obstacles do remain hence economic reforms to enhance domestic investment would need to be complemented by measures to attract increased foreign capital. Critical in such endeavors must be efforts to improve governance in some countries as well as to eliminate socio‐political violence in others and development of domestic capital markets, while government institutions must be modernized and upgraded.     

中国在非跨国公司与国家形象

一些国家对中国在非洲投资及援助的关注,为中国在非跨国公司贴上了政治标签,从而渲染了中国对非洲战略的负面国家形象。与非洲国家经济发展利益相关的中国跨国公司,应成为塑造中国良好国家形象的重要载体。中国跨国公司积极履行企业社会责任,既有助于建构良好企业形象,也有利于形成中国尊重人权,是一个负责任大国的国际形象,进而促进中非传统友谊关系的发展与深化。     

Expropriation of church wealth and political conflict in 19th century Colombia

The redefinition of Catholic Church property rights was common in Europe and the Americas during late eighteenth- and nineteenth-centuries. Given the Church’s power and the level of political violence after independence, these reforms were influential in Latin America. This paper focuses on Colombia after 1850 and measures the impact of the expropriation of Church’s assets on political violence. With yearly data on the number of battles per municipality, archival information on the reform, and difference-in-differences, the paper documents a reduction of political violence in places where the Church’s assets were expropriated. The paper contests the traditional idea of the expropriation of Church’s real estate as a source of political violence. It highlights changes in political competition after the alliance between Conservative factions and the Church was weakened. Specifically, it shows the reduction in political violence was concentrated in municipalities with high political competition and where the Conservative Party was relatively weak.     

Time-Consistent Polities and Growth in Developing Countries: An Empirical Analysis

This paper investigates whether stable political regimes develop stable systems of rules that are conducive to growth, similar to property rights. New measures of political stability indicate that stable political systems stimulate growth in developing autocratic countries. Contrarily, political instability significantly reduces growth in autocracies, as instability creates a time-consistency problem. In some specifications, an instability measure has significant negative growth effects in democracies, and may be an alternative to measures of property rights. Similarly, ethnic fractionalization reduces growth in autocracies, but not developing democracies. Tests indicate that these results are not sensitive to extreme values in the data. JEL no. O40, H11