Working Paper 93 - The Impact of High Oil Prices on African Economies

On the one hand the high price of oil is a unique opportunity for African oil producers to use the windfall gains to speed up their development. On the other hand, it is having adverse effects on net-oil importing countries, in particular those which cannot access international capital markets to smooth out the shock. We construct a dynamic stochastic general equilibrium model, which is tailored to reflect the characteristics of African economies, to quantify the effect of the increase in the price of oil on the main macro economic aggregates. The model is general enough that it imbeds both oil producing and oil importing countries. Our results indicate that a doubling of the price of oil on world markets with complete pass through to oil consumers would lead to a 6 per cent contraction of the median net-oil importing African country in the first year. If that country were to adopt a no-pass through strategy, output would not be significantly affected but its budget deficit would increase by 6 per cent. As for the median net oil exporting country, a doubling in the price of oil would mean that its gross domestic product would increase by 4 percent under managed-float and by 9 percent under a fixed exchange rate regime. However, inflation would increase by a much greater magnitude under managed than a fixed exchange rate regime in a median net oil exporting country.

The effect of environmental variability on livestock and land-use management: the Borana Plateau, Southern Ethiopia

The Borana people are the predominant ethnic group on the Borana Plateau in southern Ethiopia, who have recently increased their reliance on crops. Rainfall in the region averages between 353 mm to 873 mm; variability is high, with coefficients of variation ranging from .21 to .68. Anectdotal evidence implies that the vulnerability of pastoralist households to drought is increasing; stock levels increase dramatically during good rainfall years but plummet when rainfall is poor, indicating that the drought cycle is becoming more pronounced. In recent years, there has also been a dramatic increase in land allocated to crops, and land allocated to pastures that are either privatized or accessible to only a small sub-group of people. It is hypothesized that one of the key determinants of the productivity and sustainability of the systems is the ability of community members to cooperate over the use and maintenance of these resources. In this paper, we develop indicators of cooperation and examine factors affecting these indicators. We then use these indicators to determine the impact of cooperation on stock densities and land allocation patterns. Results indicate that cooperation is positively related to factors that increase the profitability of livestock, but negatively related to the total number of households, the use of community pastures by non-community members, and heterogeneity of wealth within the community.Ethiopia., Pastoral systems Environmental aspects Africa., Land use Ethiopia., Livestock., Crops.,

Working Paper 105 - Smallholder Agriculture in East Africa: Trends, Constraints and Opportunities

Smallholder agriculture continues to play akey role in African agriculture. This paperinvestigates trends, challenges andopportunities of this sub-sector in EastAfrica through case studies of Kenya,Ethiopia, Uganda and Tanzania. In theseagriculture-based economies, smallholderfarming accounts for about 75 percent ofagricultural production and over 75 percentof employment. However, contributions ofsmallholder farming, and agriculture ingeneral, to the region’s recent rapid growthduring 2005 - 08 have remained limited.Instead, growth was driven by services, inparticular trade. This paper finds that at thenational level, weak institutions, restrictedaccess to markets and credit. These factors,including inadequate infrastructure, haveconstrained productivity growth ofsmallholder farming. Measures needed toimprove productivity of smallholder farmersinclude ease of access to land, training toenhance skills and encourage technologyadoption and innovation, and removal ofobstacles to trade. At the regional and globallevels, international trade barriers need to beaddressed.