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22. Who Lends to Africa and How? Introducing the Africa Debt Database
- Author:
- David Mihalyi and Christoph Trebesch
- Publication Date:
- 03-2022
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- Africa’s sovereign debt markets are not well understood, partly due to a lack of data. This paper introduces the Africa Debt Database (ADD), the most granular and comprehensive dataset on external borrowing by African governments thus far. Our project moves beyond existing aggregate datasets and instead releases information on individual loans and bonds, in particular on the financial terms of each instrument. Taken together, we cover nearly 7000 loans and bonds between 2000 and 2020, with a total volume of 644 billion USD. Using this data, we study Africa’s record lending boom of the 2010s in detail. The debt boom was mainly driven by large sovereign bond issuances in London and New York, as well as growing lending by Chinese state-owned banks. The micro data also reveal a large variation in lending terms across countries, time, and creditors. Sovereign external bonds have interest rates of 6 percent, on average, Chinese banks charge 2-4 percent, and multilateral organizations just 1 percent. Strikingly, many governments in Africa simultaneously borrow large amounts from both private and official creditors, at vastly different rates. The large differences in debt servicing costs are indicative of a cross-creditor subsidy, as cheap concessional loans can be used to pay the high interest to private or Chinese creditors.
- Topic:
- Economics, Foreign Aid, Credit, and Influence
- Political Geography:
- Africa, China, and Asia
23. Unravelling Africa’s raw material footprints and their drivers
- Author:
- Albert Kwame Osei-Owusu, Michael Danquah, and Edgar Towa
- Publication Date:
- 10-2022
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper applies an environmentally extended input–output analysis, leveraging the Eora database, to estimate the global raw material footprints of 51 African nations from 1995 to 2015. It employs least absolute shrinkage and selection operator and panel regression models to quantify the effects of diverse variables on Africa’s raw material footprints. The findings show that the raw material footprints of Africa’s production and consumption soared by 41 per cent and 38 per cent, respectively, from 1995 to 2015, mainly driven by biomass and construction materials. They show that Africa outsources 25 per cent of its raw material footprints from consumption, while over 60 per cent of its footprints from production arise from its exports. Our findings beckon African governments to reduce the excessive focus on exploitation and concentrate on combatting corruption and extreme rent-seeking while decoupling Africa’s raw material footprints from rising public debt, carbon emissions, income levels, and population.
- Topic:
- Economics, Carbon Emissions, Public Debt, Income, Raw Materials, and Input-Output Analysis
- Political Geography:
- Africa
24. Determinants of corporate cash holdings in South Africa
- Author:
- Ewa Karwowski, Hanna Szymborska, Keagile Lesame, and Tlhologelo Thoka
- Publication Date:
- 08-2022
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- Globally, corporate cash holdings have risen since the 1980s. In South Africa, some commentators have accused corporations of engaging in an ‘investment strike’, while others see corporate liquidity as a precaution against systemic uncertainty. We use the unique South African Revenue Service/National Treasury firm-level dataset to scrutinize corporate liquidity, using panel analysis. Relative to GDP, corporate cash and liquidity holdings have not increased between 2010 and 2017. However, corporate cash is high in international comparison and has grown at the firm level. We do not find evidence for the hypothesis that companies are engaging in an investment strike. Cash and liquidity are shaped by idiosyncratic and sectoral risk factors. In the short run, heightened uncertainty might reduce corporate cash and liquidity as firms struggle to adjust to an unexpected economic situation. In the medium run, we find a strong association between political uncertainty and corporate cash and liquidity holdings.
- Topic:
- Economics, Corporations, Liquidity, and Cash
- Political Geography:
- Africa, South Africa, and Global Focus
25. A Survey of Importers: Results of a Survey Conducted in Collaboration with the Ethiopian Economics Association
- Author:
- Ricardo Hausmann, Tim O'Brien, Tim Cheston, Nikita Taniparti, and Ibrahim Worku Hassen
- Publication Date:
- 11-2022
- Content Type:
- Working Paper
- Institution:
- The John F. Kennedy School of Government at Harvard University
- Abstract:
- Ethiopia suffers from a chronic shortage of foreign exchange (forex).[1] The resulting lack of access to imports prevents firms from accessing imported inputs required for production. This creates a vicious cycle as exporters are constrained by this same problem, which further reduces overall supply of foreign exchange in the Ethiopian economy. The inability to reliably access foreign exchange for imports affects firm decisions on sourcing, capacity, and output. While the cost of this constraint is known to be high on the Ethiopian economy and firms are known to use a range of measures to attempt to bypass this constraint, quantitative assessments of the problem and response actions by firms are limited. It is in this context that an importer survey was conducted with the goal of informing policy decisions. A total of 202 firms with an active importing license were interviewed in March-April 2022. These firms were randomly sampled from firms registered with an importer license. All firms interviewed reported that they were operating below capacity, often well below capacity. Foreign exchange shortages were the main reason respondent firms cited for not operating at full capacity (63% of firms reporting this as their biggest constraint). Forex shortages far surpass the second and third reasons cited for not operating at full capacity — constraints due to the conflict (13%) and COVID-19 restrictions (11%). Firms operating below capacity cited forex shortages as the main constraint, regardless of whether they imported or not in the previous year. This was the most pressing constraint reported by firms of all sizes and sectors surveyed. It was the most pressing constraint faced by exporters and by foreign-owned firms as well as non-exporters and domestic firms. Amongst the total sample of firms with a renewed importer license, more than one-third of respondent firms (37%) had not imported in FY2020-21. Overall, 74% of firms reported experiencing challenges in accessing forex. Access to forex was reported as most challenging for manufacturing firms and smaller firms but impacted all sectors and firm sizes. The losses attributed to forex scarcity at the firm level were largest for agricultural firms, for micro-firms, and for firms that did not import at all in the previous year. In general, the larger the firm sales, the higher the likelihood that they were able import. The survey found different types of imports for different sectors. Manufacturing firms imported a large share semi-finished goods as imports as compared to agricultural firms that primarily imported finished goods. The survey results find that foreign exchange shortages and an inability to import are most severe for the manufacturing and agriculture sectors, small and micro-sized firms, and all non-exporters. However, the constraint is also the top problem facing all firm types in the survey, including exporters and foreign-owned firms. The primary means of accessing foreign exchange where it did occur was through specialized forex accounts or ‘diaspora’ accounts. The second most common means of accessing foreign exchange was through retention accounts available to exporters. The black market featured in many responses, but questions across the survey suggest that self-reported use of the black market by survey participants is underreported versus actual usage. The ability to source foreign exchange differed significantly by firm size. Exporting firms primarily used retention account earnings, as compared to non-exporters, which relied more on forex accounts. For faster access to forex, most firms reported that they approach banks, followed by turning to the black market. Friends and family abroad also served as a source of forex for one-quarter of firm respondents, and that foreign exchange was often used immediately. Foreign exchange access from banks is nevertheless a major pain point for firms. Most firms (55%) requested forex from a bank in the past year. On average, fulfilled forex requests took three months to be processed when they were fulfilled, but many firms reported that they have an unfulfilled request that has been in the system for more than a year. These firms are especially likely to report foreign exchange access as their top challenge. The survey finds that individual firms do not tend to use both official and black-market foreign exchange sources but rather tend to access all their forex at the (lower) official rate or all at the (higher) black-market. Large firms import most of their products at the official rate. By contrast, most small and micro firms import through other means. Manufacturing firms are also more likely to import all their production through other means and outside of the banking system. Non-exporting firms tended to import through other means than the official rate and outside of the banking system at a higher prevalence than exporting firms. The survey gleaned new insights on the implicit exchange rate that firms face as they navigate official and black-market channels of foreign exchange access. The survey does not allow for a precise estimate of the transaction-weighted exchange rate facing the economy but finds firm-level estimates align with previous macro-level estimates. The implicit exchange rate was higher for non-exporting firms, which show a greater willingness to pay a higher exchange rate to access imports. This signals the importance of the retention account for exporters to guarantee an import price closer to the official exchange rate. When asked about the maximum rate firms would pay to guarantee access to forex, some groups of firms were willing to pay higher amounts, including all non-exporters, firms that imported in the past year, and those that declared forex access a challenge. When compared to the implied rate they paid in the past year, many firms are willing to pay more than the implied rate to guarantee access to forex. Firm perspectives on policy changes to the exchange rate underscored challenges faced by policymakers. Current policy has been one of a crawling peg, with changes within the last several years to increase the rate of devaluation. The survey asked respondents about their support for faster devaluation, for a one-off movement to unify the official rate with the black-market rate, or about alternative exchange rate systems such as a floating exchange rate. Most respondents (71%) opposed maintaining the current regime, yet no option received majority support. Most firms appear to want both a stronger exchange rate and easier access to foreign exchange despite a tradeoff between these two priorities. The largest share of support for policy change was to adjust the exchange rate such that the official rate matches the black-market rate.
- Topic:
- Development, Economics, Imports, and Collaboration
- Political Geography:
- Africa and Ethiopia
26. Africa and the 'Globalization Bargain': Towards a Collective Economic Sovereignty
- Author:
- Al-Chukwuma Okoli and Atelhe George Atelhe
- Publication Date:
- 01-2021
- Content Type:
- Journal Article
- Journal:
- AUSTRAL: Brazilian Journal of Strategy International Relations
- Institution:
- Postgraduate Program in International Strategic Studies, Universidade Federal do Rio Grande do Sul
- Abstract:
- Africa’s existential situation in the prevailing global order is such that no state thereof can afford to take national sovereignty too seriously. Apart from the myriad of structural challenges imposed on the continent by globalization, Africa is faced with a gamut of political and economic problems that can only be meaningfully addressed through some form of strategic multilateral collaboration. Africa’s aspiration to economic sovereignty has been constrained by the structural conditionalities of globalization, which have kept the continent overly weak, dependent and underdeveloped. The constraint is so immanent that individual African states can hardly afford even the relative sovereignty to harness a strategic balance in the fast ossifying asymmetries of interdependence that characterize the contemporary global political economy. It is posited in this paper that the remedy for Africa lies in the ability of her states to transcend their disempowering territorial-cum-nationalistic divides and capitalize on the existing continental multilateral mechanisms towards mainstreaming collective sovereignty, based on the principle of pan-African supranationalism. To that end, leveraging and maximizing the gains and prospects of extant regional and continental supranational organisms would become both salient and expedient.
- Topic:
- Economics, Globalization, Sovereignty, and Collective Bargaining
- Political Geography:
- Africa
27. A Visualization of Egypt’s Economic Performance During COVID-19
- Author:
- Omar Auf
- Publication Date:
- 02-2021
- Content Type:
- Journal Article
- Journal:
- Cairo Review of Global Affairs
- Institution:
- School of Global Affairs and Public Policy, American University in Cairo
- Abstract:
- In this infographic article, we illustrate Egypt’s economic performance, pandemic response, and future based on commentary from IMF economist Said Bakhache.
- Topic:
- Economics, Public Health, Pandemic, and COVID-19
- Political Geography:
- Africa and Egypt
28. More than a Monolith
- Author:
- Ariana Bennett
- Publication Date:
- 08-2021
- Content Type:
- Journal Article
- Journal:
- Cairo Review of Global Affairs
- Institution:
- School of Global Affairs and Public Policy, American University in Cairo
- Abstract:
- Home to 54 unique countries, ancient civilizations and cultures, Africa is much more than meets the world’s eye.
- Topic:
- Civil Society, Economics, Environment, Culture, Social Policy, and Regionalism
- Political Geography:
- Africa
29. Africa is Climbing the Prosperity Ladder but Some Rungs are Broken
- Author:
- Musaazi Namiti
- Publication Date:
- 08-2021
- Content Type:
- Journal Article
- Journal:
- Cairo Review of Global Affairs
- Institution:
- School of Global Affairs and Public Policy, American University in Cairo
- Abstract:
- Africa is a continent with six of the world’s ten fastest-growing economies, but can it overcome its major challenges?
- Topic:
- Economics, Inequality, Economic Growth, and Prosperity
- Political Geography:
- Africa
30. In Malawi, the battle to save mangoes
- Author:
- Charles Mkoka
- Publication Date:
- 08-2021
- Content Type:
- Journal Article
- Journal:
- Cairo Review of Global Affairs
- Institution:
- School of Global Affairs and Public Policy, American University in Cairo
- Abstract:
- Malawi, like other African fruit producers, is drawing on local and global resources to combat a pest which threatens vital fruit exports.
- Topic:
- Agriculture, Economics, Exports, Farming, and Crops
- Political Geography:
- Africa and Malawi