Browsing by Author "Sunga, Chalwe"

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    An analysis of spatial market integration: a case of Zambian dry bean markets connected by informal trade to Tanzania and the Democratic Republic of Congo
    (Stellenbosch : Stellenbosch University, 2017-03) Sunga, Chalwe; Punt, Cecilia; Traub, Lulama Ndibongo; Stellenbosch University. Faculty of AgriSciences. Agricultural Economics.
    ENGLISH SUMMARY : Intra regional trade has the potential to contribute to food supply balance between surplus and deficit countries. However, this critical role can only be accomplished if surplus and deficit zones across countries are integrated. Most previous studies examining integration in food markets in Eastern and Southern Africa (ESA), partly attribute weak inter country market integration to restrictive trade policies and transfer costs. Yet, little evidence has been gathered to examine how international markets free from direct political influence may perform. This thesis examines spatial integration between ESA dry bean markets where inter-market trade is predominantly conducted through informal channels. By focusing on a pair of markets in Zambia and Tanzania, and a pair of markets in Zambia and the Democratic republic of Congo (DRC), the study employed the Myers and Jayne (2012) extension of the Threshold Autoregressive (TAR) model, which explicitly incorporates transfer costs and allows the long run price equilibrium relationship to vary depending on the magnitude of inter-market bean trade. The analysis also adopted the Gonzalo and Pitarakis (2002) approach in locating the value and number of trade based thresholds. The study combined bean prices, transfer cost and trade volume data covering the period January 2006 to June 2016, for Kitwe, in Zambia and Lubumbashi, in the DRC; and Kasama, in Zambia and Mbeya, in Tanzania. The empirical results revealed significant variations between the studied market pairs. Firstly, the study found no evidence to support informal trade based threshold effects in either market pairing, suggesting that the functioning of informal markets is independent of exogenous limitation to trade. Secondly, results indicated that there is a long run price equilibrium relationship between Kasama and Mbeya, implying that the two markets are integrated. In the case of Lubumbashi and Kitwe however, results indicated that the two markets are segmented. The latter finding implies that any significant price deviations above transfer cost between Lubumbashi and Kitwe may continue to grow without any tendency to equilibrium. Lastly, the adjustment process to price shocks, as measured by the speed of price transmission, is more rapid between Kasama and Mbeya markets (1.72 months) than Lubumbashi and Kitwe markets (5.3 months) despite both markets being dominantly connected by informal trade. This study therefore concludes that unless other market operating environment aspects are improved, a policy focus on informal trade and intra-regional trade liberalization in Eastern and Southern Africa may not by itself always guarantee integrated intra-regional food markets. It is therefore recommended that the food market operating environment be improved beyond simply liberalising regional trade.