Despite recovery, Africa needs more jobs, says ECA

Harvesting sorghum in Sudan Harvesting sorghum in Sudan: By investing in labour-intensive sectors like agriculture and agro-industries, African countries could better tap the potential of their large work forces, says the UN Economic Commission for Africa.
Photograph: UN / Fred Noy

This year Africa’s economies will generally perform better than in 2009. According to the just-published Economic Report on Africa, the continent’s average growth rate will reach 4.3 per cent, up from less than 2 per cent last year — a period marked by devastatingly bad performances worldwide following the global economic slowdown. Within the continent, adds the report by the UN Economic Commission for Africa (ECA), oil-exporting countries in sub-Saharan Africa, including Nigeria and Angola, are expected to benefit from an increased demand from Asia, although world oil prices dropped sharply in May. They are expected to lead the continent with 5.1 per cent average growth.

The ECA report confirms an evident trend in recent months, as signs of Africa’s faster-than-expected economic recovery in 2010 have become increasingly common. Shortly after optimistic predictions by the UN Department of Economic and Social Affairs were made public in January, forecasts by the World Bank, the International Monetary Fund and the African Development Bank indicated that the continent will bounce back faster and better than most other world regions, lagging only behind East and South Asia. There is general agreement that the continent’s growth is set to surpass 4 per cent this year.

Much like other analyses, the ECA attributes the rebound in Africa mainly to external factors. These include increased demand for its main export products and higher inflows from official development assistance (ODA), foreign direct investment (FDI) and remittances from Africans employed outside the continent.

However, the Africa’s improved performance in the near future will not eliminate its many challenges. “The expected economic growth falls short of the 7 per cent pace required for achieving the Millennium Development Goals,” the ECA report observes. Those goals, adopted by world leaders in 2000, include cutting in half global poverty and hunger, achieving universal primary school enrolment and significantly reducing infant and maternal mortality.

Diversification and jobs needed

In addition, adds the ECA, there is no sign of a decline in unemployment rates or of a fall in the rate of “vulnerable employment” (the activities of self-employed workers and unpaid family workers). Already very high in the years before the crises ― with the two categories accounting for around 80 per cent of the workforce ― these rates climbed even higher in 2009, ECA analysts say.

Yet according to the commission, the recent crisis and its negative impact on Africa may offer an opportunity for a much-needed shift in policy. So far, the authors of the report argue, the continent’s growth has mostly relied on foreign financial inflows (ODA and FDI) and earnings from raw commodity exports. These are subject to significant fluctuations, and sharp declines in the recent past have had devastating consequences on African economies. Even in countries with strong growth, such as Rwanda and Ghana, unemployment and poverty rates have remained high before, during and since the global crisis.

The ECA affirms that African vulnerability to external shocks and cases of strong growth with limited social benefits (also known as “jobless growth”) will persist unless “an alternative growth strategy . . . more sustainable and pro-poor” is adopted. New economic policies, the commission says, should aim for growth that reduces poverty.

Towards that end, the report indicates, African countries should limit dependence on natural resources by diversifying their economies. Across the continent, investments and growth so far have been concentrated in the extractive sector (oil and minerals). Unfortunately, that sector provides few jobs. While two out of every three people in sub-Saharan Africa have some sort of work ― one of the highest labour force participation ratios in the world ― up to 80 per cent of Africans with a job still live on no more than US$2 a day. They are mostly employed in low-paying professions such as agriculture and the informal sector.

The report affirms that by investing in labour-intensive sectors, such as agriculture and agro-industries, African countries could better tap the potential of their large work forces and also be in a much stronger position to weather external shocks. The authors note that 60 per cent of Africans are less than 25 years old. Investing in the skills of these young people, they maintain, is a necessary step.

Along with job creation and economic diversification, the report recommends investment in infrastructure and human capital, renewed efforts to mobilize domestic resources for development, improvements in the business climate, better incentives to support private-sector employment and efforts to increase productivity and incomes in the informal sector.

– Africa Renewal online

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