El Serafy User costs and their implications for macroeconomic policy in Africa's mineral rich economies

Many of Africa’s economies are mineral based. Their sustainability and their macroeconomic vulnerability to market fluctuations are accordingly matters of direct concern. This thesis asks how much of the proceeds of mining in such countries can be safely spent each year. Using El Serafy’s approach to the ‘proper’ definition of National Income, it recomputes Net Domestic Product in 11 mineral-based African economies and tests for their macroeconomic sustainability. The study finds a disturbingly poor level of sustainability in several of them; with aggregate expenditures in excess of the levels posited under efficient resource rent management given the El Serafy User cost approach. The study estimates the budget deficit and national debt as a proportion of net national product adjusted for mineral resource depletion in each country and evaluates the outcome by comparison with standard ‘rules of thumb’ concerning ‘acceptable’ fiscal deficits and national debt levels. The outcome reveals that using GDP as an anchor as opposed to an ‘appropriate’ measure that adjust for mineral resource depletion by policy-makers may lead to the implementation of sub-optimal economic policies which are detrimental for sustainable income growth and development. The findings from the study therefore highlight the need for more efficient resource management as well as the development of a ’properly defined‘ national income which corrects for resource depletion to inform sustainable fiscal policy.

Grantor dc:publisher.institution

School of Economics

Year dc:date.issued

2018

Author dc:creator

• Moussi, Sopp Louis Romain

Advisor dc:contributor.advisor

• Leiman, Anthony

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/29720

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/29720