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The Palgrave Handbook of Africa’s Economic Sectors

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This handbook provides a reference resource to showcase insightful and nuanced perspectives on Africa’s agriculture, industry, services, and manufacturing sectors; factors affecting the sectors’ competitiveness; and the sectors’ contribution to employment, economic growth, and sustainable development. It also addresses the potential benefits that the sectors could harness from the planned Continental Free Trade Area (CFTA), and in particular how CFTA could increase the efficiency and competitiveness of these sectors.
This book provides evidence-based holistic analyses of the past and current state of Africa’s economic sectors, with a strong emphasis on tangible and specific policy recommendations for the purpose of enhancing future economic growth, employment, and sustainable development of the continent. It also assesses the impact of the first-ever Continental Free Trade Area in Africa, and its potential implications for Africa’s integration into regional and global economy and competitiveness relative to other fast developing economies (such as those in Asia). This handbook gives an in-depth analysis of fundamental domestic factors that have relevance on the sectors’ expansion and growth and their contributions to employment, economic growth, and sustainable development in Africa with differential effects across the continent.

Inhaltsverzeichnis

Frontmatter

Introduction

Frontmatter
The Question of Africa’s Economic Sectors and Development

This handbook provides an analysis of Africa’s economic sectors, contemporary opportunities impacting their competitiveness, and their contribution to sustainable economic growth and development of African countries. It also explores the potential benefits that the sectors [broadly defined as agriculture, industry, and services] could harness from the Continental Free Trade Area (CFTA) agreement that African countries signed in Rwanda on the 21st of March 2018. Particularly, how CFTA could increase the efficiency and competitiveness of these sectors and enhance Africa’s participation in the global value chain. It offers evidence-based holistic analyses of the past and current state of Africa’s economic sectors, with a strong emphasis on tangible and specific policy recommendations for the purpose of enhancing future economic growth and sustainable development. Contributing authors are multidisciplinary with expertise in their respective fields.

Evelyn F. Wamboye

Agriculture Sector

Frontmatter
The African Cotton Sector: Old and New Conundrums

This chapter focuses on the African cotton sector, namely on a sector in which Africa has a comparative advantage. The objective is to provide an overview of the sector, setting off with a critical illustration of the cotton value chain to allow for the key factors and frailties of the African sector to emerge. In light of these, old and new hurdles to the flourishing of the sector are unfolded: starting from the evolution of its industrial organization through reforms and relative short runs, to the current pressing issues related to sustainability and climate change. These are seen as policy action areas where opportunities for development emerge.

Lorenza Alexandra Lorenzetti
The Political Economy of Fisheries Reform in Senegal

Since Senegal’s independence in 1960, successive governments’ policies have tried to expand the fisheries sector through massive investments in capacity, subsidies, and tax exemptions. This has resulted in unprecedent rise in fishing efforts and catches, which has led to overfishing, stock depletion, and rent dissipation. This article examines the reform efforts initiated since the early 2000s and their associated outcomes from a political economy perspective. We describe and analyze the various dimensions of the reform with a focus on the small-scale/artisanal subsector and shed light on the constraints and shortcomings that continue to hamper the effectiveness of the reform.

Mare Sarr, Mumbi E. Kimani, Sisamkele Jobo
Are Large-Scale Land Acquisitions in Africa Pro-development? A Network Analysis of FDI in Land and Agro-industry

This chapter investigates whether large-scale land acquisitions (LSLA) in Africa are associated with agro-industry investments and if this association impacts growth. We first review the geographic pattern of land investments across the continent and the transmission channels between LSLA and growth. Secondly, we use network analysis to test whether the network of LSLA is correlated to that of agro-investments. We find a moderate and significant positive correlation between LSLA and agro-industry investments. This correlation is mostly driven by central investor countries (USA, Saudi Arabia, and Great Britain) who systematically couple LSLA with agro-investments. All other countries, by contrast, follow a decoupled strategy where LSLA is not associated with any productive investments. Finally, only a few African countries attract both LSLA and agro-investments.

Nadia Cuffaro, Laura Prota, Raffaele Bertini
The Contribution of the Small-Scale Agricultural Sector into South Africa’s Food Value Addition Agenda

The South African Government National Development Plan (NDP) adopted the agro-processing strategy in the national food security agenda. Despite these efforts, agricultural production and agro-processing, are sluggish and accompanied by job losses. The chapter unearths factors driving these developments and what can be done to reverse them. Two key themes are discussed: (a) The prevailing food value addition policies implemented in South Africa and how they relate to the agro-food processed output; and (b) Challenges inhibiting the South Africa small-scale farming sector from achieving the food value addition objective. Like overall agriculture growth, food value addition is hampered mostly by chronic under-funding of the sector that has affected vital support functions. The South African government needs to re-think its funding policy for agriculture and agro-processing to prioritize programs that enhance farmers’ access to information about technology and markets, improve the knowledge and skills of farmers to undertake agro-processing, and raise awareness of food quality standards and customer preferences.

Adrino Mazenda, Ajuruchukwu Obi, Tyanai Masiya
Agricultural Credit Guarantee Scheme Fund in Historical Context: Evidence from Nigeria

This chapter adopts a historical analysis with a focus on Agricultural Credit Guarantee Scheme in Nigeria since 1977. The basic argument is that lack of well-functioning agricultural programs is a major obstacle to the achievement of agricultural development in Nigeria. The study reveals that several credit schemes have been put in place to finance agricultural production. However, these schemes have not been able to provide adequate loans to farmers. Thus, this chapter aims to unearth the reasons for inadequacies in resolving the poor performance of the scheme. It recommends among other things that farmers should be granted opportunities to have cooperative societies in order to easily obtain funds without the usual stringent conditions.

Muhammed Sani Dangusau
Toward Industrialization in Tanzania: What Is the Role of the Agricultural Sector?

This chapter examines the role of the agricultural sector in Tanzania’s industrialization. The sector provides labor and raw materials needed for industrialization especially for agro-processing industries, and can be a source of capital needed for industrialization. The latter is through profit accruing from the agriculture sector that is invested in the industrial sector. Its role in industrialization notwithstanding, the agricultural sector faces some challenges that negatively impact the industrial sector. These challenges include: inadequate investment climate, small farm sizes, low productivity, low growth rate, inadequate access to finance, post-harvest losses, low mechanization and commercialization among others. Unless these challenges are properly addressed, the sector will fail to play its rightful role in the industrialization drive in Tanzania.

Honest Prosper Ngowi
An Analysis of the Importance of Oil Palm Tree in Central and Southern Nigeria

The oil palm tree (Elaeisguineensis) is widely grown in Nigeria and much of West and Central Africa. Aside from its edibility which enhances the body's immune system, its by-products are useful for a variety of purposes well beyond what was known in previous centuries. These by-products also serve as raw materials for the pharmaceutical and transportation industries. The massive production of oil palm trees also enhances green belt vegetation and therefore it is relevant for climate change mitigation. This chapter examines the modern economic potential of this plant and its prospect in the global sustainable development project. Data is drawn from the archives and other primary sources as well as necessary secondary materials that were reconstructed to fit into modern sustainable economic development.

Fidelis Achoba

Services Sector

Frontmatter
Entrepreneurial Literacy as a Pathway to Economic Empowerment of Rural Women in Uganda

Micro and small enterprises, mainly operated by women are the engine of economic growth in developing countries. However, most women who start enterprises lack the requisite entrepreneurial skills. This paper analyses the impact of entrepreneurial literacy of selected businesswomen in Uganda. The study followed an action research methodology of conducting a baseline, implementing interventions, and undertaking an endline study. The need for entrepreneurial literacy prominently featured in the baseline which was undertaken through training and mentoring businesswomen. The trained women were able to adopt appropriate business practices such as record-keeping, development of work plans, and involvement in value-addition processes. The study showed that training and mentorship are important strategies for enhancing women’s business potential.

Susan Namirembe Kavuma, Florence Kyoheirwe Muhanguzi, George Bogere, Kiran Cunningham
The Impact of Education on Household Decision-Making Among Women in Sierra Leone

The large and growing literature on the impact of education is partly due to the unprecedented rise in primary schooling in developing countries. Although increases in education for women are particularly important from a policy perspective in developing economies, causal studies on the non-pecuniary benefits of increased schooling for women are still in their infancy. We analyze the effect of education on the extent of household decision-making among married women in Sierra Leone using a set of household decision-making variables from a nationally representative survey. Controlling for endogeneity of education using an instrumental variables approach, we find that more educated married women are more likely to have the final say in making household decisions. Our findings show that primary education for girls can have an empowering effect in the household.

Colin Cannonier, Monica Galloway Burke
A Critical Evaluation of Tanzania’s Tourism Sector

This chapter critically evaluates how Tanzania could increase the number of international tourists’ arrivals, and in turn, enhance the sector’s effectiveness in contributing to the country’s second 5-year development plan. It empirically investigates the relevant determinants of international tourism demand for Tanzania and uses the findings to inform evidence-driven policies. Results indicate that income of tourists and infrastructure development are the two main determinants of international tourism demand for Tanzania. Taking into consideration these findings; the government of Tanzania and stakeholders should work toward making Tanzania tourism products more competitive by developing/improving infrastructure in the country. Moreover, there should be a policy that encourages developing tourism products that fit the demands of tourists from relatively high-income countries, and also make conscious efforts to market these products in the target countries. Lowering the cost of living and improving the exchange rate are also some of the areas that the government could work on to help grow the tourism industry.

Evelyn F. Wamboye
Banking Services and Inclusive Development in Sub-Saharan Africa

This chapter seeks to investigate the inclusive development implications of banking services in Sub-Saharan Africa; employing panel data for 47 economies over the period 2000–2017. Using a suite of panel estimation strategies, the study tests the hypothesis that the banking sector promotes inclusive development especially in economies where corruption levels are low. The evidence reveals that banking services and corruption controls are citadels of inclusive development in Africa. However, banking sector development and control of corruption do not produce positive synergy effects on inclusive development. The results remain robust to the inclusion of important control variables and different measures of inclusive development. These findings imply that the promotion of banking sector development and control of corruption are important strategies for attaining inclusive development in Africa.

Haruna Issahaku, Mohammed Amidu, Aisha Mohammed Sissy
Finance-Growth Nexus: Evidence from a Dynamic Panel Model on ECOWAS Countries

This chapter evaluates the effect of financial development (as a credit to the private sector) on economic growth in the Economic Community of West African States (ECOWAS) member countries and assesses whether belonging to a monetary union makes a difference. It uses panel data over the period 1960–2018 and applies a generalized method of moments (GMM) model as the econometric technique. The findings indicate that credit to the private sector has a positive impact on economic growth and that there is no specific effect of monetary union. The chapter adds to the slim body of empirical studies on West Africa.

Toussaint Houeninvo, Germain Lankoande
The Impact of COVID-19 on Africa: Health and Economic Implications

The novel coronavirus (2019-nCoV) presents a difficult journey ahead for public health sectors and economies of African. This chapter analyses Africa’s public service infrastructure deficits while considering the health and macroeconomic implications of coronavirus for the continent. To assess Africa’s national and continental disease outbreak preparedness, the available COVID-19 data is analyzed against several risk factors like physician availability, access to basic sanitation, and drinking water services derived from the World Health Organization and World Bank. The macroeconomic impact of the pandemic on the economies of African countries is explored with a focus on sectors such as merchandise trade, agriculture, tourism, and oil with current data. The analysis indicates serious gaps in access to adequate public health and how this has negative implications for economic stability.

Marcus Hollington, Monique Bennett
Does Increased Government Spending on Additional Teachers Improve Education Quality?

Teacher’s salaries make up a significant portion of government spending on education in most of sub-Saharan Africa. We examine the relationship between increased spending on additional teachers and education quality, as measured, respectively, by lower pupil-teacher ratios and educational attainment using South Africa as a case study. In the apartheid era, most Black South Africans were disadvantaged and their schools were poorly resourced. To deal with this issue, post-apartheid governments have, among other things, increased their spending on basic education, mainly through increases in government-employed teachers to reduce the pupil-teacher ratio. Using a reduced form production function approach, we apply a partial proportional odds model to identify heterogeneous effects of the pupil-teacher ratio at different levels of education.

Mumbi E. Kimani
The Impact of Social Media Marketing on the Performance of SMEs: The Case of Retailing Business in Tanzania

The goal of this chapter is to investigate the impact of Social media marketing on the performance of small and medium sized establishments. It adopts an explorative research method and uses online focus group discussions conducted through Instagram, Facebook, and WhatsApp platforms to collect data on Social media application and Small and Medium Sized Enterprises (SMEs) performance for SMEs in Tanzania during the months of March and April, 2018. The findings reveal that businesses engaging in social-media marketing tend to perform well compared to those that do not. The findings for the current study provide a parameter of how SME owners could use social media marketing to enhance the performance of their businesses. The chapter also analyzes the challenges facing these establishments in adapting digital marketing initiatives in Tanzania.

Omary Swallehe
Addressing Quality Issues in African Higher Education: A Focus on Ghana’s Emerging Private, Graduate, Business Higher Education Sector

The chapter addresses supply, demand, and policy-related challenges faced by private, graduate business universities in Ghana to obtain strategies to improve the quality standard. Reviews of literature and published documents as well as lessons learned from the history of Ghana’s public graduate education sector reveals that major challenges include the profit motive of universities’ founders, inadequate funding of universities, as well as moral hazard and adverse selection problems related to the pool of available graduate students and graduate schools. The National Accreditation Board (NAB), now Ghana Tertiary Education Commission (GTEC) is resource-challenged and struggles to keep up with the numerous private universities springing up.

Stephen Armah

Industry Sector

Frontmatter
Industrial Similarity, Diversification, and the Promotion of Intra-African Trade

Recent research indicates that the level of intra-African trade is low relative to what is observed in other continents and relative to the potential of African economies. The continent’s weak regional trade performance has been ascribed to factors ranging from limited supply capacities and multiple non-convertible national currencies to high trade barriers and infrastructural bottlenecks. While the impacts of these factors have been studied in the literature, the roles of product concentration and similarities in industrial structures across countries in explaining intra-African trade have not been addressed using a suitable econometric methodology. The present paper fills this gap. It finds that product concentration impedes intra-African trade while similarities in industrial structures between country pairs enhance it.

Patrick N. Osakwe, Jean-Marc M. Kilolo
The Untapped Resource: Engaging Men in Supporting Women in Business in Uganda

Worldwide there is increasing acknowledgment of the importance of engaging men in the promotion of gender equality and women’s empowerment. Drawing on an action research that engaged men in supporting rural women in business, the article examines the extent to which involving men in projects focused on increasing women’s economic empowerment shifts attitudes and gender dynamics that inhibit women’s success in business. The findings show that the intervention led to more collaboration and accountability within the households, and women felt more respected as entrepreneurs and better able to make their businesses a success. Further, the findings illustrate the need for involving men in programmes that empower women with the aim of getting “buy-in” to sustain the benefits of the programmes.

Susan Namirembe Kavuma, Florence Kyoheirwe Muhanguzi, George Bogere, Kiran Cunningham
Aid for Trade and Sustainable Development in Least-Developed African Countries

Both neoclassical economic theory and the economics of industrial development praise the export sector due to its positive effects on industrial development. While neoclassical economic theory favors international trade because it facilitates productivity improvement, knowledge diffusion, and higher R&D investment, industrial economists stress the importance of export-led growth for its contribution to generating a more diversified industrial base. In accordance with these insights, Aid-for-Trade (AfT) promotes less-developed countries’ integration into the global economy through supporting their trade-related infrastructure investments. Against this backdrop, this chapter shows that AfT can be instrumental in facilitating industrial development and building export capacity; thereby contributing to sustainable development in least-developed African countries.

Mete Han Yağmur, Murat Yülek, Mahmut Sami Güngör
Trade Credit Financing and Firm Growth: A Panel Study of Listed Firms in Africa

Globally, trade credit is an important element of interfirm trade among non-financial firms. In response to the limited empirical evidence on trade credit financing and firm growth nexus, especially in Africa, this chapter examines the effects of trade credit financing on firm growth in African countries. It employs a panel of publicly listed firms in nineteen African countries for the period 1998–2016 from COMPUSTAT. Due to endogeneity and non-separability concerns, the chapter employs three stage least squares estimation procedure. Trade credit financing is found to have a statistically and economically significant positive impact on firm growth in Africa. The findings are robust to different measures of firm growth and trade credit financing. Therefore, policies that facilitate trade credit activity can spur firm growth in Africa.

Stanley Kojo Dary, Haruna Issahaku, Benjamin Musah Abu
“Flying Geese” or False Promises: Assessing the Viability of Foreign Direct Investment-Driven Industrialization in Nigeria's Shoe Manufacturing Industry

Less developed economies generally industrialize through a regional pattern of knowledge and technology transfer. This sequence of structural transformation is often referred to as the “flying geese theory.” Nigeria's shoe manufacturing sector provides a case study to investigate claims identifying Chinese industrialists as “leading geese.” An ethnographic survey of a private Chinese firm in Lagos and public Chinese partnership on technical vocational training in Aba support reasons to believe that skilled Nigerian shoemakers, rather than Chinese industrialists, are facilitating knowledge and technology transfer within the local economy via imu-ahia, an indigenous apprenticeship system that teaches an artisanal process to shoe cobbling in lieu of an industrial method.

Aisha C. Udochi
Chinese Foreign Direct Investment in Africa: Its Motivations, Determinants, and Impact on the African Economies

China’s foreign direct investment (FDI) in Africa in the twenty-first century has increased significantly. This chapter provides comprehensive and comparative analyses of major features of China’s FDI in Africa, including its motivations, determinants, position in the world, and impact on African economies. We find that (a) the Chinese investment has risen substantially in recent years, but remains small relative to the traditional investors from Europe and the US; (b) sectoral distribution and motivations of the China’s FDI are similar to those from traditional investors (OECD member countries); and (c) special benefits of China’s FDI to Africa include investment in construction-infrastructure and suitable technologies in labor-intensive projects; while potential problems are related to the debt trap and lack of job creation.

Kevin Honglin Zhang

Trade and African Continental Free Trade Area

Frontmatter
What Can Trade Tell Us About Economic Transformation? Composition of Trade and Structural Transformation in African Countries

In this chapter, we explore the effects of exporting manufactures, primary commodities, and food and agricultural products, as well as examine the impact of importing capital and semi-capital goods, on structural transformation in a group of 21 sub-Saharan African countries that were covered in the inaugural African Transformation Report (ACET, 2014). The empirical results suggest that the import of capital and semi-capital goods can be a good predictor of structural transformation while concentration of exports in primary commodities, and food and agricultural products seems to predict weak structural transformation. In addition, we obtain evidence suggesting that higher shares of capital goods in total imports seem to have a greater positive influence in resource (primary commodity) rich economies.

Mina Baliamoune-Lutz, Abdoul’ Ganiou Mijiyawa
Tax Structure, Competitiveness of Firms, and International Trade in Africa: Lessons from WAEMU and CEMAC for CFTA

The success of a trade agreement highly depends on improving the structure and coordination of taxes, especially the ones affecting firms which create jobs and support higher welfare gains and trade. In this chapter, the tax structure of Africa’s recently created Continental Free Trade Area (CFTA) is evaluated to understand its possible impacts on member countries’ international competitiveness and the future success of the agreement in light of lessons from two smaller trade regions in Africa (Central African Economic and Monetary Community (CEMAC) and West African Economic and Monetary Union (WAEMU)). Their experiences show that the development of the CFTA process may not be easy and full of serious challenges.

Nihal Bayraktar
An Assessment of the Potential Challenges of the African Continental Free Trade Agreement on Nigeria’s Textile Industry

This chapter assesses the potential challenges of the African Continental Free Trade Agreement (AfCFTA) on Nigeria’s textile industry. It adopts a qualitative case study and documentary research approaches. Findings reveal that AfCFTA is an opportunity for Nigeria to gain access to Africa’s market of 1.2 billion people, with little or no restriction. However, Nigeria’s textile industry stands at the risk of total collapse. A study of two major textile firms (Sunflag and United Textile Companies) shows that the industry is struggling to survive due to the influx of cheap fabrics from China, smuggling of used clothes from neighboring States, infrastructural deficit such as power supply, and poor access to finance to procure new types of machinery. Thus, Nigeria’s implementation of AfCFTA will add to the woes of the industry.

Adaora Osondu-Oti
A Political Economy Assessment of the AfCFTA

The African Union agreed in March 2018 to form the African Continental Free Trade Area (AfCFTA), which became effective in April 2019 when 22 member countries ratified it. However, it will take some time until the agreement really works. To better understand potential failures and successes of the trade liberalization agenda set by the AfCFTA, this chapter assesses the motives and incentives of different actors including domestic businesses, multinational corporations, African and foreign governments, and the development community. Evidence shows that it is too early to have a clear picture of individual groups’ and actors’ interests as well as of winners and losers. It is, however, obvious that governments are restricted by political circumstances and, therefore, often deviate from first-best or textbook solutions.

Peter Draper, Habtamu Edjigu, Andreas Freytag
What Are the Potential Benefits of African Continental Free Trade Area to the Food and Beverage Sector in Africa?

This chapter uses the 2015 input–output Tables for 47 African countries to evaluate the trade capacity of the food and beverage sector to gauge its trade potential in the African Continental Free Trade Area (AfCFTA). It analyzes the real benefits of the sector within the context of environmental and import costs. Furthermore, it conducts simulation exercises to determine the effects of gradual and total removal of tariffs on the sector. The results show that AfCFTA could benefit the food and beverages sector in Africa in terms of reduction in import costs and prices. The sector is efficient and has further capacity to import more, taking into consideration environmental and import costs. Hence it can take advantage of the AfCFTA to boost trade in Africa.

Isaac Bentum-Ennin, Grace Darko Appiah-Kubi, Dennis Boahene Osei, Francis Kwaw Andoh
The AfCFTA: Trade and Investments Benefit for Nigeria

This chapter is part of wider efforts to explore the issues of economic growth and development within the context of the benefits of trade liberalization. It focuses on the trade and investment benefits of joining the AfCFTA for Nigeria by highlighting good practices from other successful economies, sectors, and institutional reforms that could improve competitiveness. Specifically, the chapter explores the extent to which the Continental Free Trade Agreement can improve the efficiency of Nigeria’s economy and how the capacity of domestic industries can be strengthened to compete favorably with competitors through government support.

Chinwe Christopher Obuaku-Igwe
The Impact of Regional Integration on Trade and Economic Development: A Tripartite FTA Gravity Model for the Future of the AfCFTA

The chapter assesses the impact of regional trade integration in the Common Market for Eastern and Southern Africa, the Southern African Development Community, and the East African Community on exports of goods and services of member countries. We have adapted the gravity model of trade using a cross-country regression approach and data for the period 2000–2017. The objective is to assess the manner in which trade among member countries has been facilitated since joining regional trade agreements. The results show that the success of the trade communities under review depends on initial economic performance—trade integration has a less pronounced effect. It could lead to a lower real growth in exports for countries with higher exports before entering, thus rendering them inefficient.

Eduard Marinov, Dimitar Zlatinov

Infrastructure

Frontmatter
Technological Progress via Imports and Economic Growth in Africa

The chapter investigates the effects of trade-induced technology progress (proxy by parts and components imports) on economic growth in Sub-Saharan Africa, using a panel system-GMM estimator for the 2010–2018 period. The findings suggest that imported parts and components (our first measure of technology progress) have some impact on economic growth in at least in the MIC sub-sample. However, the impact of technology-intensive imports (our second measure of technology progress) on economic growth is not clearly evidenced. Our results also reveal that, quite surprisingly, the link between trade-induced technology progress and growth in the context of African countries is conditional to the level of economic development. Particularly, the growth effects of trade-induced technology progress—as measured by imports of parts and components—is greater in Middle-income countries than in Low-income African countries.

Jean-Claude Maswana
Global Value Chain Participation and Inclusive Growth in Sub-Saharan Africa

Global value chain (GVC) participation has been identified as one of the means by which developing countries can attain inclusive growth. Yet little attention has been paid to it in Sub-Saharan Africa (SSA). Motivated by this, we investigated the effect of GVC participation on inclusive growth for 19 SSA countries for the period 1991–2017, using the system GMM pooled estimator. The results show that GVC participation drives inclusive growth through employment creation. We find that though the region’s foreign value addition is less than its domestic value addition, the former’s impact on inclusive growth is higher. We recommend that policymakers of SSA countries should support downstream industries to acquire technologies while incentivizing and attracting upstream industries into their countries.

Camara Kwasi Obeng, Peter Yeltulme Mwinlaaru, Isaac Kwesi Ofori
Infrastructure Development and Sectoral Growth Nexus: Evidence from Sub-Saharan Africa

Building on recent empirical evidence which mainly focused on infrastructure–aggregate growth nexus, this chapter examines the relationship between infrastructure development and sectoral growth in 29 Sub-Saharan Africa (SSA) countries during the 2000–2014 period. Evidence based on system Generalized Method of Moments (GMM) shows positive and significant impact of infrastructure development on both industry and services sectors’ growth. However, no relationship was established between infrastructure development and agriculture sector growth. From the policy perspective, our findings are informative and present crucial insights for policymakers and regulators in SSA to design and implement policies targeted at improving infrastructure to propel growth in the agriculture, industry, and service sectors.

Dennis Boahene Osei, Isaac Bentum-Ennin
Female Labor Force Participation, Infrastructure, and Sectoral Value Additions in Sub-Saharan Africa

The contribution of women to nation-building has been well-documented. However, existing studies have focused on the drivers of female labor force participation without examining how their participation in the labor market impacts various sectors of the economy. In addition to examining the unique effects of female labor force participation on sectoral value additions in Sub-Saharan Africa (SSA), this chapter investigates the role of domestic infrastructure in mediating the relationship between female labor force participation and sectoral growth. Utilizing annual panel data spanning from 1990 to 2017 for 33 countries in SSA, we find that, while female labor force participation positively affects sectoral value additions, its effect is only significant for the service sector, which is further magnified by well-developed infrastructure.

Thomas Yeboah, Emmanuel Kumi, Muazu Ibrahim

Governance

Frontmatter
Sectoral Growth and Income Inequality in Sub-Saharan Africa: The Role of Fiscal and Monetary Policies

Employing System Generalized Method of Moments, this chapter examines the interaction effects of sectoral value-added and fiscal and monetary policy on income inequality in 43 Sub-Saharan African countries during the 1996–2017 period. Results indicate that increased agricultural and industrial outputs reduce income inequality whereas increased service sector output increases inequality. However, an increase in taxes reduces the rate at which an increase in agricultural value-added reduces inequality while it increases the rate at which an increase in the industrial value-added reduces inequality. Similarly, an increase in money supply reduces the effect of an increase in agricultural and industrial value-added in reducing inequality. Thus, to reduce income inequality, policymakers should reduce taxes in the agricultural sector and compensate with an increase in taxes in the industrial sector.

William Godfred Cantah, Eric Amoo Bondzie, Joshua Sebu
Gender Wage and Employment Gaps in the Sub-Saharan Africa Economic Sectors

This chapter reviews empirical studies on the examination of wage inequality in Sub-Saharan Africa (SSA) and provides theoretical background on market discrimination. Besides, it presents descriptive statistics addressing disparities in the labor market and human development outcomes. The descriptive statistics indicate significant gaps in employment and human development achievements with a declining trend over the past years. Moreover, the empirical review shows a significant amount of wage gap, which is higher in the informal and self-employment sectors. A large proportion of the gap remained unexplained by worker and job characteristics, reflecting rampant labor market discrimination against women. Selection across sectors, occupations, and firms and human capital differences in education and experience account for the majority of the explained wage gaps.

Melaku Abegaz, Gibson Nene
The Impact of Aid for Trade on Trade Costs Facing African Economies

This chapter examines: (a) the impact of aid-for-trade (AFT) on trade costs borne by African countries and (b) the role that infrastructure plays in mediating the effects, and the differential impacts of AFT from bilateral (BLT) and multilateral (MLT) sources using comprehensive bilateral trade cost data and a new index of infrastructure over the 2004–2011 period. Our results from a multilevel mixed-effects model show that increased AFT disbursements to African economies (both at the aggregate level and across the sources) lead to significant reductions in the costs of trade in African countries. The findings of this study further demonstrate that the relative impact of AFT is typically more pronounced in recipients with improved infrastructure and the level of AFT disbursements received from bilateral, or multilateral sources, suggesting the need for targeting infrastructure investments for enhancing the effectiveness of aid for trade.

Bedassa Tadesse, Bichaka Fayissa, Elias Shukralla
Market Governance and Emerging Economies in Africa: A Dynamic Panel Analysis

In the 1980s several African countries embarked on economic liberalization programs based on empirical evidence suggesting that liberalization promoted growth, and in the early 1990s they followed these programs with political liberalization. The programs yielded mixed results. This chapter contributes to the non-ideological debate on the appropriate development model by investigating the role of market governance in driving rapid growth and thereby positioning African countries on an emerging path. It uses fixed effects two-stage least squares analysis in a dynamic panel of 12 Sub-Saharan countries over 2003–18. The findings show that the total effect of the cost of doing business on economic growth is negative, unlike net foreign direct investment and population growth, which have positive and significant effects.

Toussaint Houeninvo, Germain Lankoande
Africa Should Discard Mainstream Economic Theory

Economists in developing countries should abandon the ideas enshrined in the Washington consensus, and resist teaching mainstream economic theory, because the idealized markets of mainstream economic theory differ greatly from real markets in ways that disadvantages those who are at the lower end of the global income distribution. The inconvenient truth is that real markets have numerous Achilles heels that prevent them working as described within the neoliberal framework. Real markets reduce the chances of those born into poverty to succeed in today’s complex global economy. These intrinsic imperfections, generally overlooked or trivialized by mainstream economists, are discussed in this essay. They include such factors as the costs associated with acquiring reliable information about market conditions, the myriad of problems associated with bounded rationality, manipulation of utility function of market participants.

John Komlos
Sustainable Economic Growth

The prevailing model for economic growth ascribes the value of individuals and environmental resources to their market value. However, quantitative measurements are not able to include qualitative and non-market-based costs and benefits, which may lead to understatement of some values and overstatement of others. Further, the adoption of market-based values, while promoting cultural convergence, may be incongruous with the economic framework of developing countries and may in fact create unanticipated outcomes with respect to unpaid labor. In effect, an increase in measurable economic growth may disproportionately penalize non-wage subsistence workers. This chapter addresses the relationship between GDP-focused growth, unpaid work, and gender with respect to sustainable economic growth in Africa and highlights the opportunity to establish value for work independent of a market-based wage.

Madhavi Venkatesan
Exchange Rate Volatility and Tax Revenue Performance in Sub-Saharan Africa

Efforts to spur growth in sub-Sahara Africa have been intensified amid structural and institutional constraints. Tax revenue, the chief source of funding for developmental purposes in SSA remains low and unstable. In fact, the SSA sub-region finds it difficult generating tax revenue up to 20% of GDP. One factor that has not caught the attention of policymakers in terms of its impact on tax revenue performance is exchange rate volatility. Using macrodata spanning 1984–2017 for 21 countries, we provide empirical evidence from the panel autoregressive distributed lag technique to show that exchange rate volatility is directly harmful to tax revenue performance, and indirectly through trade openness.

Isaac Kwesi Ofori, Camara Kwasi Obeng, Peter Yeltulme Mwinlaaru
The Effects of Conflict on Trade: Do Internal Conflicts Impede Shifts to Manufacturing and Technology Transfer?

This chapter adds to the literature on the relationship between trade and conflict by examining the impact of internal conflicts on trade structure. Two hypotheses are tested: (1) internal conflicts impede a shift to manufacturing (as measured by higher technology exports) and (2) internal conflicts reduce the willingness to send complex goods to countries experiencing conflict. The analysis uses geo-referenced conflict data for over 100 developing countries during the period 1989–2014. A subsample is then used to investigate the African continent. Internal conflicts are found to reduce exports and impede shifts to manufacturing in Africa. Evidence that internal conflicts reduce imports is strong and suggest conflicts impede technology transfer in developing countries. The results suggest achieving domestic stability would boost development.

John Verner, Matthew Clance
Backmatter
Metadaten
Titel
The Palgrave Handbook of Africa’s Economic Sectors
herausgegeben von
Dr. Evelyn F. Wamboye
Prof. Bichaka Fayissa
Copyright-Jahr
2022
Electronic ISBN
978-3-030-75556-0
Print ISBN
978-3-030-75555-3
DOI
https://doi.org/10.1007/978-3-030-75556-0

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