Booming Economies Are Not Boosting Employment in Africa, Why?
The author of a new African economic development report explains how smarter investment can create more jobs
Holly Young
Guardian Professional, Thursday 3 July 2014 13.36 EDT
Unctad's Economic Development in Africa report 2014 launches today. What are its key insights?
The report is primarily about recognising that while Africa has maintained high growth rates over the past decade – presently higher than the world average – it has failed to translate this into inclusive growth. Africa lacks growth that creates jobs, builds infrastructure and lowers poverty.
Addressing this is not just about increasing the volume of investment but rethinking the quality of investment and where it is directed.
We're hoping these insights reach a global audience but they are aimed primarily at African policymakers, those at the African Union and the New Partnership for Africa's Development (Nepad).
Why has Africa's growth failed to translate into adequate job creation?
Africa has a huge problem with unemployment, particularly youth unemployment. It has experienced a high rate of population growth, which has the potential to be a demographic dividend but only if there is sufficient investment in jobs, skills and education.
Essentially, the continent hasn't produced enough investment and growth in the domestic economy. Public sector investment has been low, and foreign direct investment has largely been channelled into the sectors where the big returns are – oil, gas and minerals.
The difficulty is that these sectors are not very good at generating economic benefits outside a very small enclave. They are not labour intensive so they don't create large numbers of jobs and benefit the wider economy. Investment needs to support sectors such as agriculture, manufacturing and industry that have the potential for higher growth and job creation. This type of employment creation will be key to the future of the continent's growth.
What lies behind this failed investment strategy?
Partly it is the advice many African countries have had from Bretton Woods Institutions [World Bank and International Monetary Fund]. It is also partly a risk-averse strategy so they don't find themselves in a terrible situation should another global financial crisis arise. But it is also fundamentally about a lack of political focus on building capacity, diversifying economies and recognising the need to create more employment.
What does the report have to say about the sectors where employment has declined, and risen?
Broadly speaking, because in Africa we've seen both population growth and a failure to upgrade traditional sectors like agriculture there's been a high degree of rural-urban migration. Lots of people are moving from subsistence agriculture into urban activities which are largely informal and survivalist. This tends to be low-paid, vulnerable employment. This type of work makes up about 80% of total employment in many African countries.
The report highlights the unusually high level of employment and growth in the services sector in Africa, relative to its stage of development. However for this sector to see long-term growth and adequate job creation, there needs to be big leaps in investment in basic infrastructure. There are opportunities in agriculture too. While in the long run many people will still move from rural to urban areas, if we invest and raise productivity we can raise the incomes for those in the sector.
Are there any misunderstandings about the relationship between growth, investment and employment in Africa?
Often this relationship is understood as being a virtuous circle. We argue that growth in Africa has failed to translate into broader development gains such as employment.
What is key to this nexus is the role of the state. Governments have to be more aware that different types of economic activity involve different types of employment intensity. While the services sector is producing more job opportunities than the extractive sectors there still needs to be more investment directed towards industries such as manufacturing and agriculture. Africa has a relatively weak private sector so the state needs to have a much more prominent role in mobilising investment into job-rich sectors.
Junior Davies is an economist at the division on Africa, least developed countries and special programmes of Unctad. Follow @UNCTAD on Twitter.
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| Gas pipeline in Egypt. |
Holly Young
Guardian Professional, Thursday 3 July 2014 13.36 EDT
Unctad's Economic Development in Africa report 2014 launches today. What are its key insights?
The report is primarily about recognising that while Africa has maintained high growth rates over the past decade – presently higher than the world average – it has failed to translate this into inclusive growth. Africa lacks growth that creates jobs, builds infrastructure and lowers poverty.
Addressing this is not just about increasing the volume of investment but rethinking the quality of investment and where it is directed.
We're hoping these insights reach a global audience but they are aimed primarily at African policymakers, those at the African Union and the New Partnership for Africa's Development (Nepad).
Why has Africa's growth failed to translate into adequate job creation?
Africa has a huge problem with unemployment, particularly youth unemployment. It has experienced a high rate of population growth, which has the potential to be a demographic dividend but only if there is sufficient investment in jobs, skills and education.
Essentially, the continent hasn't produced enough investment and growth in the domestic economy. Public sector investment has been low, and foreign direct investment has largely been channelled into the sectors where the big returns are – oil, gas and minerals.
The difficulty is that these sectors are not very good at generating economic benefits outside a very small enclave. They are not labour intensive so they don't create large numbers of jobs and benefit the wider economy. Investment needs to support sectors such as agriculture, manufacturing and industry that have the potential for higher growth and job creation. This type of employment creation will be key to the future of the continent's growth.
What lies behind this failed investment strategy?
Partly it is the advice many African countries have had from Bretton Woods Institutions [World Bank and International Monetary Fund]. It is also partly a risk-averse strategy so they don't find themselves in a terrible situation should another global financial crisis arise. But it is also fundamentally about a lack of political focus on building capacity, diversifying economies and recognising the need to create more employment.
What does the report have to say about the sectors where employment has declined, and risen?
Broadly speaking, because in Africa we've seen both population growth and a failure to upgrade traditional sectors like agriculture there's been a high degree of rural-urban migration. Lots of people are moving from subsistence agriculture into urban activities which are largely informal and survivalist. This tends to be low-paid, vulnerable employment. This type of work makes up about 80% of total employment in many African countries.
The report highlights the unusually high level of employment and growth in the services sector in Africa, relative to its stage of development. However for this sector to see long-term growth and adequate job creation, there needs to be big leaps in investment in basic infrastructure. There are opportunities in agriculture too. While in the long run many people will still move from rural to urban areas, if we invest and raise productivity we can raise the incomes for those in the sector.
Are there any misunderstandings about the relationship between growth, investment and employment in Africa?
Often this relationship is understood as being a virtuous circle. We argue that growth in Africa has failed to translate into broader development gains such as employment.
What is key to this nexus is the role of the state. Governments have to be more aware that different types of economic activity involve different types of employment intensity. While the services sector is producing more job opportunities than the extractive sectors there still needs to be more investment directed towards industries such as manufacturing and agriculture. Africa has a relatively weak private sector so the state needs to have a much more prominent role in mobilising investment into job-rich sectors.
Junior Davies is an economist at the division on Africa, least developed countries and special programmes of Unctad. Follow @UNCTAD on Twitter.
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