TIPS - 2004

Export processing zone expansion in an African country: What are the labour market and gender impacts?

2007-04-16T04:00:00+02:00

This study seeks to understand the labor market (employment and earnings) and gender impacts of the dramatic recent expansion of the export processing zone (the Zone Franche) in urban Madagascar. It is distinguished from most earlier empirical analysis of this subject by its use of micro data collected annually over the 1995-2002 period, and by its focus on a setting in Africa, where export processing manufacturing generally has yet to make significant inroads. As in other EPZs, workers in the Zone Franche are predominantly female, semi-skilled, and young. Controlling for worker characteristics, earnings in the Zone Franche are comparable to the private formal employment, lower than in the public sector, but much higher than in informal wage employment. By disproportionately drawing women from the low wage informal sector (where gender pay gaps are very large) to relatively well paid export processing jobs (where pay is not only higher but also similar for men and women), Zone Franche growth has the potential to contribute substantially to improved overall gender equity in earnings in the urban economy. Still, it is too early to judge whether the sector will be a source a source of long term employment characterized by continued investments in worker human capital and job advancement, or instead will conform more to the stereotypical negative picture of offering only short term jobs providing few transferable skills.

Credit Demand and Credit Rationing in the Informal Financial Sector in Uganda

2004-06-15T04:00:00+02:00

Uganda is one of the few African countries which has experienced quite substantial growth in the period since 1990. Growth of GDP has been estimated at 6.9% per annum for the period 1990-2002, compared to only 2.6% for all African countries and Ugandas own far weaker performance of 2.9% in the 1980s (World Bank 2004: 183) This paper focuses on identifying the factors that influence credit demand and also those that result in the poor being credit rationed by lenders. An understanding of both these sets of determinants could assist policy formulation to enhance the welfare of the poor through improvedcredit access. In this respect we were fortunate in having a dataset that contains questions not only on actual credit given, but also on loans applied for.This allows us to investigate both credit demand and credit supply, and to model these using observed household and individual characteristics.

Capital Flight from South Africa, 1980 to 2000

2004-06-15T04:00:00+02:00

Capital flight is a serious problem for South Africa, which if not addressed will continue to impede its ability to deal with structural issues such as high unemployment and concentration of wealth. This paper presents an estimate of the wealth that left South Africa in the form of capital flight during the period 1980 to 2000. We find that from 1980 to 2000 average capital flight as a percentage of GDP was 6.6 percent a year. In this paper, we deviate from the existing literature on capital flight from South Africa by suggesting that the motivation of people involved in capital flight before and after the fall of apartheid may have changed. We find that capital flight as a percentage of GDP was higher after the democratic elections in 1994, even though, there was much more political and economic instability during the period investigated before the democratic elections. The increase in capital flight as a percentage of GDP may reflect the discomfort of those involved in capital flight in the post-apartheid democratic process. We also consider how international capital flows and structural weaknesses in the economy have influenced capital flight.

Have Labour Market Outcomes Affected Household Structure in South Africa? A Preliminary Descriptive Analysis of Households

2004-06-15T04:00:00+02:00

Recent studies using South African household survey data have questioned the exogeneity of household size and composition from income flows and labour market outcomes. (Maitra and Ray, 2001, and Klasen and Woolard, 2000). Research on unemployment in South Africa has occasionally viewed the household as either an important source of labour market information, as providing incentives or disincentives to participate, and its composition at a point in time as outcome of members' labour market possibilities. It has been proposed that household structure and a household's location in South Africa has a major impact on an individual's decision to participate in the labour market and their success in looking for work. In the absence of long-term unemployment insurance in South Africa, jobless people have been found to live in households where they can share in wage income or other income, i.e. make use of a private safety net (Klasen and Woolard, 2000). The relatively large state old age pension may further have led to larger pensioner-headed households and larger households when a pensioner is present (Case and Deaton, 1998; Edmonds, Mammen and Miller, 2002). The above-mentioned studies employ household survey data collected in 1993 and 1998, and the Census 1996 but neither use more recent datasets nor compare trends across them.

Trade Liberalisation and Regional Integration in SADC: Policy Synergies Assessed in an Industrial Organisation Framework

2004-06-15T04:00:00+02:00

Trade liberalisation has a significant impact on firm-market dynamics in a regional context. The purpose of this paper is to use an industrial organisation framework, focusing on the analytical units, the firm and the market, to assess the impact of trade liberalisation within the Southern African region, SADC. It is specifically the firm-level responses to various policies that will provide insight into changes in national industrial configurations, regional patterns of industrialisation and the potential for sustainable supply chain development in Southern Africa.

The purpose of intra-regional trade liberalisation is to facilitate trade within a regional economic space, and through enhanced trade opportunities to elicit firm-level decisions to expand productive capacity. Such expansion of productive capacity, through various modalities of investment, can have important implications for the development of markets and market processes, resulting in robust, sustainable regional development.

Financial Intermediation and Access to Finance in African Countries South of the Sahara

2004-06-15T04:00:00+02:00

This paper describes the status of financial systems for a number of African countries south of the Sahara, identifying various problems that hinder access to finance, especially for the poor, and subsequently those issues that deter economic performance and development. The countries surveyed were selected on the basis of a range of criteria including: geographical spread, economic size and development, level of financial market development and availability of information. Although Angola, Botswana, Gabon, Ethiopia, Kenya, Mauritius, Mozambique, Nigeria, Senegal and South Africa are the focus countries of this survey, many of the scenarios presented in this paper are applicable to other African countries south of the Sahara. Broad policy measures to tackle the bottlenecks that currently undermine financial systems' responsiveness to the needs of the real economic sector are recommended.

The broad structure of this paper is as follows. Section two discusses the nature of financial intermediation in Sub-Saharan countries, while section three presents the financial intermediation challenges that these and other African countries face, in both macro and micro terms. Section four proposes possible policy interventions and ongoing developments in financial intermediation and section five concludes by drawing attention to the key challenges to financial intermediation in Sub-Saharan countries and to the essential prerequisites for successful programmes to respond to these challenges.

The Road to Pro-Poor Growth in Zambia

2004-06-15T02:00:00+02:00

We thank the Department for International Development (DFID) for funding this research and for providing technical and logistical support during the project. We are grateful to Neil McCulloch from the Institute for Development Studies (IDS) at the University of Sussex for the providing us with the cleaned household surveys that helped us greatly with the poverty analysis. We thank the participants of seminars and workshops held at IFPRI, the World Bank, and the German Federal Ministry for Economic Cooperation and Development (BMZ). In particular we thank Manu Mathri and Christian Rogg (DFID), Derek Byerly, Louise Cord, Lionel Demery and Ignacio Fiestas (World Bank), Robert Kappel (University of Leipzig), Helmut Asche (GTZ), and James Garret, Sherman Robinson and Xinshen Diao (IFPRI). Bingxin Yu, Benjamin Schraven, and Holger Seebens provided valuable research assistance. Finally, the views expressed in this paper are our own and do not necessary reflect those of IFPRI or any of the organizations involved in the project.

Financial Services and the Informal Economy

2004-06-15T02:00:00+02:00

This paper examines the impact of formality of employment on the utilisation of financial services, using data from the October 2000 Income and Expenditure Survey and the September 2000 Labour Force Survey. The presence of an employed member in the household is seen to be important for the utilisation of both bank accounts and funeral insurance, even after controlling for income. Furthermore there are strong links between the nature of this employment and utilisation of financial services. Employees are more likely to utilise financial services than the self-employed. Among employees, the probability of utilising financial services increases with the degree of formality of employment. These effects are stronger for formal banking services than for funeral insurance which includes informal burial societies.

The Missing Links Uganda's Economic Reforms and Pro-Poor Growth

2004-06-15T02:00:00+02:00

This article illustrates changing growth regimes in Uganda from pro-poor growth in the 1990s to growth without poverty reduction, actually even a slight increase in poverty, after 2000. Not surprisingly, we find that good agricultural performance is the key determinant of direct pro-poor growth in the 1990s as well as lower agricultural growth is the root cause of the recent increase in poverty. Yet after 2000, low agricultural growth appears to have induced important employment shifts out of agriculture, which have dampened the increase in poverty. We also assess the indirect way of pro-poor growth by analysing the incidence of public spending and the tax system and find that indirect pro-poor growth has only been achieved to a limited extend.

Impact of HIV/AIDS on Saving Behaviour in South Africa

2004-06-15T02:00:00+02:00

The models measuring the macroeconomic impact of HIV/AIDS are heterogeneous : each one relies on a specific theoretical background. Nevertheless, there are, at least, three main common limits to those approaches : the authors concentrate on the impact on the labour market ; they neglect the potential implications on the capital market ; and they do not model some essential microeconomic impacts such as the change in the agents economic behaviour. More specifically, the analysis of the impact of HIV/AIDS on savings takes into account direct costs such as health expenditures, seldom indirect costs like the anticipation of funeral costs and they do not model differed indirect costs. The paper proposes an analysis of this last kind of implications through the impact of the epidemic on the saving behaviour. This paper focuses on the uncertainty of life expectancy and is based on two frameworks: the Gali (1990) model which considers the life cycle theory with a finite horizon at the aggregate level and the Moresi (1999) model which species a peculiar consumption utility function through uncertain lifetime. The calibration and simulations of our model reveal a significant drop in the future saving rate in South Africa under the hypothesis of a virus evolution similar to the one given by the UN Population Division: the saving rate in 2015, under those hypothesis, should be at least 5 percentage points inferior to the estimated saving rate that would then prevail in the absence of the epidemic.