Journal of Economic Policy and Management Issues (ISSN: 2958-6313)

The effects of foreign direct investment on start-ups in sub-Saharan Africa: A dynamic panel model approach

R. Ochen — 2024-08-29

Start-ups play a crucial role in developing and emerging economies' growth and development, and foreign direct investment is key to their success. In this study, using data from 2006 to 2018, we employed a system GMM model to examine the impact of foreign direct investment on business start-ups in Sub- Saharan Africa. The findings of this study clearly show that foreign direct investment has a significant and positive effect on business start-ups in the region. Additionally, this study shows that domestic credit to the private sector positively affects business start-ups while high lending interest rates impede business start-ups. Also, business regulations positively impact business start-ups. Based on these compelling findings, we recommend increasing foreign direct investment flows targeting the private sector to encourage more start-up businesses. We also suggest that governments should further reduce the cost of new business procedures to create a favourable environment for start- ups to enter the markets and compete equitably. Furthermore, we assert that Central Banks should stabilize monetary policy to encourage banks to reduce lending interest rates, making it easier for the populace to access low-cost credit for starting new businesses.

The impact of petroleum production on economic growth in South Africa

M. Kobokana — 2024-08-29

The petroleum industry in South Africa, marked by a historical dependence on imported crude oil and recent challenges faced by local refineries, is a critical concern for the nation's economic growth and energy security. The absence of significant domestic oil reserves maintained South Africa's status as a net importer, accentuated by the recent closure of refineries and a subsequent reduction in refining capacity, has cast doubts on the sustainability of the energy sector. Against this backdrop, this study aimed to investigate the short- and long-term impact of petroleum production on economic growth. The overarching concern is whether focusing on improving petroleum production would stimulate economic growth. Employing a quantitative approach, an autoregressive distributed lag (ARDL) model was used to estimate the dynamic relationship between petroleum production and economic growth, using data for the period spanning from 1980 to 2022. The results of the study revealed that petroleum production has both short- and long-term impact on economic growth in South Africa. The findings underscore the responsiveness of the economy to changes in refinery capacity. Furthermore, the long-term association emphasised the sustained positive contributions of an expansion of refinery capacity to the country’s economy. Based on the results, the study recommends substantial investments in refinery infrastructure to enhance the petroleum industry. This study provided an understanding of the complex interactions within the petroleum industry, offering key insights for informed decision-making by policymakers and stakeholders.

Regional economic communities and labour market outcomes: The case of Africa

M.I. Okumu — 2024-08-29

We examine the differences in employment and wage outcomes among firms from countries with membership in at least two Regional Economic Communities (RECs) in comparison to firms from countries with membership in one REC. We use a pooled OLS estimation strategy on the World Bank Enterprise Survey dataset of manufacturing firms in Africa. The results indicate that firms from countries with membership in at least two RECs are associated with higher wages and lower employment growth in comparison to firms from countries with membership in one REC. Further, firms from countries with membership in Common Market for Eastern and Southern Africa (COMESA) and Economic Community of West African States (ECOWAS) are associated with an increase in both wages and employment growth. With the recent ratification of the African Continental Free Trade Area (AfCFTA), our results show that AfCFTA should draw key facets of COMESA and ECOWAS in order to induce an increase in both wages and employment growth in Africa.

Global oil prices and exchange rate in Zimbabwe: An ARDL approach

T. Zibizapanzi — 2024-08-29

This study aims to investigate the nexus between the Zimbabwean dollar exchange rate against the United States Dollar (USD) and global oil prices from 1991 to 2021. Secondary time series dataset from 1991 to 2021 was extracted from the World Bank, ZIMSTATS, and Global Macro Trends. The study employed an autoregressive distributed lag (ARDL) bounds testing approach to test for the existence of a long-run relationship between the ZWL/USD exchange rate and global oil price. The ARDL results confirmed that global oil prices are significant in explaining long-run variations in the value of the Zimbabwean currency. The results of the study show that higher and increasing global oil prices are associated with lower and depreciating local currency. Conversely, lower and decreasing global oil prices are associated with higher and appreciating currency. The policy recommendation from the study is that policymakers should reduce overreliance on oil usage by reducing its consumption. Zimbabwe should also switch to alternative sources of energy, particularly solar energy. This helps to reduce the adverse impacts of increasing global oil prices on the exchange rate through the reduction in oil importation.