This piece originally appeared on The CEO Zimbabwe: Back to
Work Exclusive with H.E.Dr. Ambassador Edgars
Africa
economies are on the move and the continent has the second fastest growing
economy in the world in the past decade. The acceleration in Africa’s growth
over the past ten years reflects fundamental improvements in in the overall
macroeconomic landscape, country political stability, and the business
environment. Africa is beginning to harness its natural wealth and sectors
growing rapidly include local services such as retail, banking, transport and
communications, manufacturing and agriculture.
Poverty is on
the decline with around 90 million African households having joined the
consuming classes by 2011. Income inequality however remains unacceptably high
and although it is falling in only about half of African countries. Africa has
a workforce of 382 million with 42 % of the workforce being employed outside
agriculture and 28% earning a wage versus a 24% margin in the year 2000.
Africa’s
growth needs to be inclusive if it
is to improve human welfare and ensure increasing social and political
stability. In most countries economic growth reaches most people through
employment income, so the challenge is to ensure
that the economic growth translates into stable wage-paying jobs.
Most countries in Africa have the potential to create stable employment to absorb
the growing potential labour force
Depending on
the source, Zimbabwe’s unemployment rate has been estimated as low as 4% and as
high as 95%. The real level of unemployment is almost impossible to gauge as
countless Zimbabweans are making a living in the informal sector and outside
the country. This shows that the government needs to step up processes and
policies that can create more jobs and more so create a labour force that can
contribute to the country’s GDP.
WHAT
ARE THE BARRIERS TO JOB CREATION?
For most
businesses the barriers to job creation revolve around macroeconomic or
political instability conditions. Notwithstanding the improved and faster
economic growth within the region, businesses still show concern about
;insufficient demand, potential threat of inflation, access to finance,
shortcomings in infrastructure like electricity, transportation and internet.
There
is no simple solution to boosting job growth in Africa. I believe with targeted
reform programmes, governments can eliminate these barriers and unleash private
sector growth.
A robust GDP
is a necessary condition for accelerating the creation of jobs. National
leaders on the continent need to ensure that the improved macroeconomic and
political stability of the past decade is maintained. They should also pursue
macroeconomic reforms that create a more attractive business environment.
However focusing on GDP growth alone, will not be able to transform Africa’s
employment landscape or ensure inclusive growth and wider opportunities for Africa’s
people.
To
harness growth for job creation, Africa’s leaders should focus on reforms to
the business environment in the labour-intensive sectors that have the
potential to create a large number of jobs.
A jobs
strategy is very far from the broad based industrial policies that have more
than often proved ineffective in countries around the world. Africa’s
development needs are vast and national economic plans can often be hundreds of
pages long. Many well-meant reform programmes enact numerous policy changes but
have limited practical success. I believe that a more pragmatic approach is to
remove all obstacles to growth end-to-end in specific industry value chains and
then build more broadly on this narrow head start theorem.
Examples that
have successful done this include;
Morocco which
consolidated its growth in 2013 with GDP rising 4.7% compared to 2.7% in 2012.
Sound macroeconomic and fiscal management has continued while a cautious
monetary policy held inflation at 1.9% and the current account deficit at 7.2%
of GDP, compared to 10% in 2012, while foreign exchange reserves reached 4.5
months of imports of goods and services. The new aeronautical and automobile
industries represent an important source of economic growth and innovation for
Morocco.
In India
there has been a huge growth of IT companies which have in the first instance
taken advantage of the growing Indian market and also exported there products
to overseas markets. Foreign owned companies were also allowed 100% ownership
to provide funding for the booming industries in the country and these
companies were critical part in providing capital and know-how in the earlier
days of India’s economic growth.
Mali’s
integrated investment in road, rail and other transportation to facilitate mango
exports and Morocco’s two free trade zones for automotive companies are
examples of targeted infrastructure tailored to specific industry
opportunities.
Nigeria’s
telecommunications sector is estimated to have generated up to 3 million jobs
in the absence of the state telecom monopoly.
In Angola,
Africa’s second largest oil producer, major investment is being made to expand
access to electricity, water and transport and infrastructure development,
leveraging off the oil revenues in the country. To boost business, financial
sector policies are being modernised with the introduction of a new foreign
exchange currency law for the oil sector and a mining law.
WHAT
ELEMENTS SHOULD AN END-TO-END STRATEGY HAVE?
In order to
boost grow and generate jobs, end to end strategies should have these six
elements:
A) Identify
one or more labour intensive sub sectors in which the country has a global
competitive advantage or enjoys strong domestic demand, and can create a large
number of jobs.
B) Improve
access to finance for businesses in those sub sectors by providing incentives
for the banking sector to increase lending, educating new borrowers and opening
access to foreign investors.
C) Build
suitable infrastructure to support economic activity in these subsectors and in
the geographic mosaic regions needed for success.
D) Cut
unnecessary bottlenecks in regulation, corruption and bureaucracy, all of which
raise the cost of doing business and limit growth and investment.
E)
Public-Private Partnerships: Strong collaboration through the public and
private sectors, to ensure a steady pool of workers with the education and
skills needed in those targeted subsectors.
F) Execution.
Another
country that has successfully created an enabling environment for job creation
is China which has added well over 300 million jobs predating to 1980. Several
factors have assisted in this development including rapid growth in
manufacturing, increased urbanisation, and improving education and skills
attainment that has prepared children for non-farm work. Over the past decade,
close to one quarter of China’s employment growth (33 million jobs) was in the
manufacturing industry. Many of the jobs were labour intensive. China migrated
into the production of higher value-added and knowledge - intensive goods and
have become the biggest producer, and consumer of high value technologies. The
country invested heavily in primary and secondary education, including in the
rural areas, preparing its children to join the modern workforce. By 2010, 60%
of the workforce had at least a secondary education.
India created
67 million non-farm jobs over the past decade, just over half the tally in
China. Gross exports in India amount to 22% of the GDP, compared with 30% in
China.
The lesson
from China is simply that to create jobs, countries should focus on
labour-intensive export sectors and from India, the lesson is to create
products firstly for domestic demand and then export.
For these
countries and other growing economies, the SME sector has played a major role
in creating jobs. Governments that have supported the Small and Medium sectors
have reaped enormous rewards in terms of innovations and job creation as well
as positive contributions to the GDP.
The
policies to grow the SME sector must be able to create a conducive business environment
for them to thrive. These are generally reflected in; Strategic support to the
SME sector, Institutions supporting business development must be visible and
accessible in all areas, Support for beneficiation of SME products,
Simplification of labour laws for SMEs, Promotion of government SME support
programmes and Integration of SME roles into strategic thinking on trade and
industrial policy.
Youth unemployment is an emergent and perennial problem in many
countries in Africa and the increased internationalization of labour markets
and flexibility of labour relations, with the traditional cycle of
school-to-work-to-retirement giving way to more varied patterns of employment
provide a new context for this problem.
WHAT
ARE THE STRATEGIES TO DEAL WITH YOUTH UNEMPLOYMENT?
The best
approach to dealing with this challenge is to outline youth policies and
programmes that address:
A) Promotion
and introduction of the self-employment option,
B)Skills
training
C) Business
counselling
D) Mentor
support
E) Financing
of youth projects
F) Access to
work spaces
G) Business
expansion support
H) Creating
support networks and
I)
Multifunctional youth enterprise agencies.
In order to
generate more jobs in such sectors as agriculture, tourism, mining,
manufacturing, technology and retail, Africa should have clear policies that
encourage ease of investment in these sectors.
In order to
make agriculture more productive, there should be expansion of large scale
commercial farming on uncultivated land, shifting from low-value grain
production to more labour-intensive and higher-value-added horticultural and
biofuel crops. Growth in agriculture should be used to develop downstream
agro-processing industries.
To grow the
manufacturing sector the country needs to understand the sources of potential
comparative advantage it holds in the global market, identify the specific
manufacturing subsectors in which it can compete, and then begin to remove the
blockages that have prevented these subsectors from reaching their potential.
The main
barrier to expanding wage-paying employment in retail is the prevalence of tiny
informal stores and cheap imports. Another major barrier to the expansion of
modern retail stores is a lack of or expensive commercial retail space.
Strategy to grow this sector include moving retail and consumer good companies
upstream for owners to become anchor stores or co-invest in formal retail
space. A perfect example is the South African grocery store Shoprite.
Africa needs
to overcome barriers to growth in the tourism industry including inadequate and
costly airfares, visa requirements, and unreliable local airlines, expensive
hotels compared to the region, poor surface transportation and poor
uncoordinated marketing of the country.
Construction of hotels is very costly
and even if the infrastructure is improved, the industry needs to explore how
it can boost the length of stay and spending per stay to increase revenue and
create more jobs.
To create
more jobs, Africa needs an innovation-led, knowledge-based approach to
improving the policy environment in the continent. Keeping in mind that there
is no “quick-fix” there are areas in which concerted action can generate forward
momentum, and overtime make a sizeable difference for growth and job creation.
They are deeply couched in the following areas:
- Encouraging Foreign Direct Investment
- Accelerating privatization of loss making public entities
- Targeted investment incentive schemes
- Development of the SMME market
- Labour market flexibility
- Education and training policies need to fill the growing “skills gap”.
- Targeted employment subsidies
- Accelerating rural development
The continent
needs to create a cross functional task force to create and execute the jobs
plan and strategies. Private sector business leaders can help identify the most
pressing blockages to growth in their sectors and to measure the success of
overcoming them. This should also be supported by broad civic engagement.
THE
BOTTOM-LINE IS WE CAN DO IT. AFRICA RISING.........
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