Equitable Policy Reforms in Sub-Saharan Africa's Energy, Finance, and Artificial Intelligence Contexts
Paper Session
Sunday, Jan. 5, 2025 8:00 AM - 10:00 AM (PST)
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Chairs:
Fafanyo Asiseh, North Carolina A&T State University - Gbadebo Odularu, President, African Finance and Economics Association, Howard University
Pricing of Climate Risks in the Capital Market of South Africa
Abstract
Climate risk represents an increasingly vital issue to countries, companies, and institutionalinvestors, making it a reality but not a distant threat to humanity. Considering the effects of climate risks on firms’ financial indices and financing options, the study investigates whether climate risk is priced by the capital markets of South Africa. The study used reported carbon emissions as a measure of climate risk of 81 listed companies in the Johannesburg Stock Exchange from 2011 to 2020 to examine whether climate risk is considered and priced by the South Africa capital market. Data was sourced from DataStream database- a global financial and macroeconomic time-series database providing data on equities, stock market indices, currencies, company fundamentals, fixed income securities, and key economic indicators. We used the two-step system Generalized Method of Moments estimation technique that copes with endogeneity concerns to corroborate the effects of climate risk on cost of capital and capital structure. We find that climate risk is priced in both cost of debt capital and cost of equity capital. Specifically, we find that an increase in a firm’s exposure to climate risk increases the cost associated with issuing debt and equity capital. We also find that climate risk exposure decreases the debt-equity ratio. Additionally, the study showed that firm size, leverage ratio, capitalization, profitability, and turnover affect both cost of capital and capital structure of listed firms. The study concludes that climate risk is priced in cost of financing in the capital market of South Africa. The study recommends that firms should invest in installing eco-friendly machinery that aligns with changing market expectations in order to reduce their carbon emissions. The study therefore highlights the need for companies to proactively assess and manage climate risks, incorporate climate considerations into their strategic decision-making, and enhance their resilience to climate-related challenges.
Cooking up Change: Unveiling Household Cooking Energy Preferences in Ghana
Abstract
Despite growing global efforts towards sustainable energy adoption, the overreliance on solidfuels for cooking in developing nations poses adverse environmental, health, and economic risks.
Using a large dataset of 40,470 households from a recent survey in Ghana, this study seeks to
understand the choice of cooking energy by households in Ghana. A multinomial logistic
regression is estimated for the three main sources of cooking energy: LPG, charcoal, and wood.
Results reveal ethnic variations in the adoption of cleaner fuels with only the largest ethnic
group, Akan, more likely to adopt LPG. Female-headed households, large household sizes,
households with many dependents, as well as those practicing traditional religions or nonreligious,
were less likely to use LPG compared to more polluting fuel sources. Factors that
contribute positively to the adoption of LPG include being married, residing in houses with more
rooms, living in urban areas, and being residents of Greater Accra. Strikingly, the majority of
urban households used polluting fuels as their main source of energy for cooking. To reduce
dependency on forest resources, we provide policy prescriptions to increase the adoption of clean
cooking fuel in developing countries particularly Africa.
Artificial Intelligence and Hidden Harms among U.S. and African Minority Businesses
Abstract
This research analyzes the drivers of annual review growth of minority SMEs in the U.S. andSouth Africa, focusing on the challenges and contributions of AI-based adoption. These
challenges include data privacy, cyber fraud, limited IT infrastructure, attitude towards AI,
perceived usefulness, trust, unjust enrichment, and hidden harm. Using respective nationally
representative datasets on 600 SMEs, multiple statistical and machine learning models, including
multilayer perceptrons and gradient boosting machines, will be deployed to analyze the nexus
between AI adoption, revenue growth, and expansion in the U.S. and South Africa. Other
variables of interest are business age, owner’s experience, education, gender, and government
policies. Though AI is still in its nascent phase and is rapidly undergoing systemic
transformation, broader economic and operational implications for SMEs may be algorithmic reprogramming
to enhance investment in minority business-driven AI technologies. This research
will represent a pioneering effort to explore the contributions and potential challenges in
adopting AI technology among U.S. and African minority businesses.
The Quality of Governance and Youth Employment in Africa
Abstract
Youth unemployment in Africa is a major challenge for policymakers. We investigate whether the quality of governance plays a role in the persistence of youth unemployment in this region. We use a dataset for 48 African countries, covering the period from 1996 to 2022 and examine the effects of government effectiveness, political stability, voice and accountability, the rule of law, control of corruption and regulatory quality on youth employment. We control for the effects of several other variables, including education, income, fertility, urbanization, and trade openness. Preliminary results from system generalized method of moments (GMM-SYS) estimates suggest that the estimated effect of government effectiveness is positive and statistically significant. In contrast, the effect of regulatory quality is negative, while the effects of the other indicators of governance are generally nonsignificant. We discuss the policy implications of these findings.Investigating the Corruption-Exchange Rate Nexus in Ghana: A Focus on the GHS/$ USD
Abstract
Corruption and currency depreciation are critical challenges of development in West Africa (WA). While corruption is blamed for all WA’s problems, a rapidly depreciation currency makes long-term planning difficult, and undermines the purchasing power of West African countries. Corruption is blamed for causing currency depreciation in Anglophone WA countries, because unlike their francophone counterparts, these countries do not belong to the WA Monetary Union consisting of francophone countries whose currencies are issued by the Central Bank of West African States (BCEAO). Depreciation in the currency is therefore a hot topic in discussing the performance of anglophone WA governments. During the run up to the 2016 presidential elections in Ghana, Dr. Bawumia, vice presidential candidate of the New Patriotic Party accused the ruling National Democratic Congress (NDC) of corruption that was so severe that it had led to consistent devaluation of the Ghana Cedi as it had depreciated under the NDC from 1 GHS /USD in 2008 to 3.9GHC/USD in 2016.According to Bawumia “if the fundamentals are weak, the exchange rate will expose you” To wit corrupt practices that lead to overborrowing and inflation but are not reported by official Ghana Statistical Service data will be captured by the exchange rate depreciation. Interestingly under Bawumia’s stewardship as vice president and head of the economic management planning committee, the Cedi depreciated from 3.9GHC/$ in 2016 to 16 GHS/$ by 2022. Using an NARDL model and quarterly data from 2003 to 2023, we will verify Bawumia’s claim that corruption undermines the Ghana cedi by investigating the corruption- exchange rate nexus for Ghana.
JEL Classifications
- O1 - Economic Development
- Q5 - Environmental Economics