According to the African Development Bank’s new report on jobs, there is no shortage of employment in Africa. The problem is that the jobs, in subsistence agriculture and the informal sector, are very poorly paid. But how can Africa create decent jobs? Shoshana Kadem reports.
It may perhaps comes as a surprise to learn that Africa’s labour market is actually booming, with one of the lowest unemployment rates in the world. At just 3%, it sits smugly with European and Asian powerhouses, Germany and Hong Kong.
Yet if so many Africans are employed, why are one in three living below the global poverty line? This is one of the questions some of the world’s leading labour and development economists set out to address in a recent jobs report published by the African Development Bank (AfDB) on the quandary of “Creating Decent Jobs.”
Researchers found that a lack of jobs in Africa isn’t the problem. With agriculture forming the backbone of the continent’s economy, around 70% of Africans live in rural areas toiling family farms for their livelihood. Yet with an undeveloped agri-processing sector that lacks access to the big market, many of these jobs are unproductive and poorly paid.
At the same time, in urban areas more than 66% of Africans are casual workers in the informal economy, plying their trade in transport and vending services, the International Labour Organization estimates. This means that while employment rates hold steady, they obfuscate the real problem – a lack of decently paid jobs in Africa – and policy solutions designed to address it.
“In Africa you have this coexistence of people who think they are employed but are very poor. That means the time they spend and whatever they do is not enough to bring income to lead a good life,” one of the report’s authors Dr. Abebe Shimeles told New African.
“In this report we try to decouple employment from under employment. If we want decent jobs then the African economic structure, labor market structure has to change. This is one of the messages,“ says Shimeles, who manages AfDB’s development research division.
Using a combination of labour surveys on a country and corporate level and case studies on countries with similar labour structures such as Asia and Latin America considered through the lens of global trends affecting Africa’s labour market, researchers concluded that you can’t lay all the blame for a lack of decent jobs at the door of governments.
“Jobs are created by citizens themselves. One becomes a business owner and employs others, or external businesses come and employ people. How do you create demand? How do you nurture a private sector that is strong, starts small and then grows, and is able to create more and more decent jobs?” Shimeles asks.
Research and recommendations
According to the bank’s researchers, many traditional approaches to labour market solutions, like providing better training to employees, simply don’t work on the continent.
“They help but they cost a lot,” Shimeles says. According to the report, setting the right working conditions for employees and providing the private sector with access to finance and infrastructure, are key to helping the job market to flourish.
Policymakers need to be more strategic about reforms and fund allocation by investing their meagre resources and administrative capacity not in “generic, broad-based reforms or vaguely defined “priority sectors,” but a small number of strategically targeted programs, reforms, and industries in which private firms can emerge and become competitive domestically and internationally and create strong demand for formal sector employment.”
The cost of red-tape can also be dear for the continent’s budding labour markets, especially those with limited access to finance, the report says. Although labour-market regulation in Africa is no more intensive than elsewhere, heavy regulation that over-protects corruption and unionisation can make African firms reluctant employers.
“Access to finance is a very, very crucial aspect of this policy. The third one is, make it easier for businesses to hire and fire,” Shimeles says.
“The main focus is really economic transformation, and allowing the private sector to emerge, to grow, provide for citizens to create their own jobs, be very good entrepreneurs, and improve infrastructure,” Shimeles says.
One way governments can transform their agricultural and boost productivity and wages in the informal economy, is by connecting them to the formal economy. In the case of modern agriculture, the report recommends connecting producers with distributors who are supplying the market.
“We have very good experiments in western Africa, this region, where farmers were linked with processing factories. Then the agreement is the factories would buy all of their crops at pre-agreed price, help them provide something for dispatching, including storage. The farmers who are linked with the factories have done extremely well.”
Filling the gap
Another key ingredient for job creation is infrastructure, Shimeles says. One solution that solves the problems of infrastructure, access to finance, red-tape and even low productivity in the informal sector, is for countries to develop industrial parks, agri-processing zones, or special economic zones as their counterparts in China have, he advises.
Any business operating in Africa has first-hand experience navigating the continent’s gaping infrastructure deficits. For instance, companies looking to develop agri-processing plants outside cities must rely on their own transit routes, while others face the costs of generator electricity supply.
Regional spending on basic infrastructure such as transport, power, water and communications ought to be around $170 billion a year, based on AfDB estimates. This is about $68 billion less than governments have to fund infrastructure projects – a figure roughly the size of Zambia’s GDP.
African countries such as Kenya, Rwanda and Senegal are thinking creatively about ways to lure investment and businesses, not aid, by following in the footsteps of China in developing world-class industrial parks. These not only guarantee 24-hour electricity and stable broadband, but cut the red tape for foreign firms, and provide extra government support.
“So many African countries are now using this model which is borrowed mainly from China and other Asian countries. You cannot do everything at the same time so why not start somewhere,” he says.
The future of young Africans also depends on careful and targeted government investment in education and reforming education systems on the continent, the report finds.
“One thing this report recognizes, even though the numbers are good in terms of labor force, the quality of our labor force is not good. Our young people don’t get good education even from the early years. Our primary education, secondary education, tertiary education, they’re all below the world standard. Our teachers are not paid well, schools are not very well run.
With the Africa’s booming youth population predicted to grow from 250 million today to nearly 840 million in 2063, the continent needs to generate around 1.7 million jobs a month.
“Africa is nowhere near that number,” the report says.
The report highlights how manufacturing can help provide better prospects for long-term economic growth than other options, by generating economies of scale, and encouraging industrial and technological innovation – all of which have big multiplier effects.
As African countries gear up to embrace the opportunities of the global digital economy, new technological developments combined with human creativity can give policymakers new possibilities to address pervasive problems of unemployment, underemployment, irregular migration, and environmental degradation, the report says.
AfDB is currently working on a strategy that aims to lift 80–90 % of Africans in low-productivity or subsistence work into industry, including industrial agribusiness. According to the bank’s president, Dr. Akinwumi Adesina the plan aims ensure that African economies grow more rapidly and in ways that create quality jobs for its teeming youth.
“Africa must arise and pull itself up and develop with pride. For there is no pride in the massive unemployment of youths. There is no pride in seeing thousands drown on turbulent waters of the Mediterranean. That is why the African Development Bank is pursuing a major Jobs for Youth in Africa initiative to help African countries create 25 million jobs for its youth.”