Decent Work and Economic Growth

Imagine a world in which the entire population of the UK were made of young people who had jobs but still couldn’t escape poverty. No politician would allow that… but that’s what is happening right now to 64 million young Africans who work, but still don’t earn enough to cover basic essentials.

Working poverty is the daily reality for more than two-thirds of workers under 25 years of age in sub-Saharan Africa. Young people could be an invaluable strength for an economy. If productively employed in wage jobs, informal farms, or household micro-enterprises, they could drive Africa’s much-needed economic transformation. An education and employment revolution is needed to make sure that every single young person, especially young girls in rural areas, can productively contribute to enhancing development and the economy in their countries.

The Challenge

By 2050, Africa’s population will double to 2.5 billion people. It’ll also be home to 38 of the 40 youngest countries in the world. To harness the benefits of a growing youth population, Africa will need to create 22.5 million new jobs every year. However, Africa is only creating 10 million jobs a year, which would leave more than half of the new entrants into the labour market unemployed.

African leaders’ must empower these young people to change the continent with their wit and work. This would require quantity and quality investments in education programmes that equip youth with the skills that employers need, a focus on job creation , especially rural youth employment strategies — ensuring that land, credit, and relevant technology are made available to youth-led informal farmers and household enterprises, and the fostering of youth engagement in governance.

The Opportunity

We know that when a government invests in its poorest citizens, they in turn spend more on food and education, generating a cycle of growth and development in the country. Healthier and better educated young people also are more productive, helping contribute to economic growth.

With the right investments in education, health and the creation of job opportunities, countries in sub-Saharan Africa would harness the potential demographic dividend. The resulting returns to the economy could be as much as $500 billion a year for the next 30 years!

Dive Deeper

The 21st century could – and should – be Africa’s century.

At the turn of the millennium, optimism about Africa’s growth was strong. However, this was soon put to the test when the fall in commodity prices and the Arab Spring curbed Africa’s growth rate significantly. Steadily, skepticism replaced optimism when talking about Africa’s future.

We believe that there are fundamental reasons for renewed optimism. This does not mean we should underestimate the challenges the continent will continue to face, such as the very low labour productivity and predominance of informal jobs, but this can be countered by strong political commitment to reforms backed by appropriate resources.

Technological advances, such as the increasing penetration of smartphones, micro-renewables – like micro-wind turbine, off-grid photovoltaic electrification and water purification systems for households – suggest that innovation might at least partially bypass the limitations of infrastructure. Moreover, the continent remains rich in natural resources from agricultural land to metals, potential fuels of economic prosperity. Opportunities will also stem from Africa’s growing middle-class and the ensuing boost to the domestic demand for products and services, which is set reach over USD 5.5 trillion by 2025.

Most importantly, the continent will be able to benefit from its young people.

By 2035, Africa will have a larger working-age population than either India or China, meaning that every year until 2035, an additional 22.5 million young people will be ready for work. For Africa to maximise the potential of this demographic opportunity – and reap the profits of the so-called “demographic dividend” – these new workers need to be occupied with productive employment.

Accelerating industrialisation will certainly facilitate job creation, but since its growth starts from very low, jobs there will not be enough to absorb 450 million new workers. It has been estimated that in the coming years, only 1 in 4 newcomers will find a wage job, while the remaining 3 will end up working where their parents do: in family farms and household enterprises in the informal sector. The norm for young Africans is in fact underemployment and working poverty: youth work in part-time, seasonal and low-skilled jobs. They have what is referred to as “portfolios of work” or “mixed-livelihoods”, hidden by official employment statistics because working poor are still considered employed!

A comprehensive approach is needed to make sure that young girls and boys will be able to contribute to the economic transformation of their countries through their work. Short-term measures, such as access to land, credits and training will improve the productivity of the underemployed working in informal agriculture and household enterprises; while long-term investments in industrialisation, such as infrastructure investments and better business climate, will create wage jobs in the longer run.

Agriculture is the uncontested winner when it comes to eradicating poverty. We know that in sub-Saharan Africa, growth in agriculture is 11 times more effective for economic growth than growth in any other sector. For this reason, African governments should focus their efforts on rural youth employment with the long term objective of making their their farmers produce more and better, while creating opportunities for off-farm enterprises to grow – the latter comprising all those jobs in the food industry excepted for the mere agricultural ones. The off-farm food system is growing rapidly and will offer significant employment opportunities, although employment created in this area will not match those created in agriculture for at least the next 10 years. Hence, it is key that during this transition period governments ramp up investments in labour productivity with dedicated vocational training weaving together soft skills and job-specific skills that can be delivered by local private sector actors, according to the needs of the market. Labour productivity can also be increased by improving the access to productive inputs, especially for young women: strengthening women’s tenure rights, improving their access to credit to finance new hires and tailoring extension services to the needs of young mothers have proven to be successful interventions to decrease the gender productivity gap in agriculture.

Once agricultural productivity has increased, farmers will be able to produce the same amount of goods in less time or with less money. Time and money savings will slowly change their needs, making them want to buy food and services from other farmers or local entrepreneurs. This will translate into new market opportunities for the myriad of informal household entrepreneurs, who are as vital to growth as farmers, and like them need their voice and labour recognised by their governments. A way to help these informal entrepreneurs would be through progressive formalisation which should start focusing on those more established household enterprises that already resemble the formal sector, to avoid discouraging the creation of new micro businesses. Moreover, since new jobs in this sector are mostly new enterprises, governments should help the middle-scale household enterprises scale and employ, by improving the local regulatory environment and access to credit.

Improving the business climate will in turn attract foreign investors, who can play a key role in providing better infrastructure (water, transport and energy) and market-driven training vital for the survival of household enterprises. To this end, bold industrial policies need to be implemented to overcome economic nationalism and fragmentation, provide investors with market information and transparent feedback mechanisms and coordinate cross-country transport infrastructure projects with neighbouring countries to create regional production networks. Finally, tax incentive policies must be fully transparent and contain a zero tolerance against corruption.

The African continent is full of potential and offers a plethora of opportunities for growth and employment. Governments have to make sure to put this potential to full use, through smart reforms and smart investments. If this can be managed, optimism about Africa’s future will not only be warranted, but realistic.