Lack of jobs militates against poverty reduction. The UN 2013 Economic Report on Africa recognizes the problems with the current lopsided growth pattern – it is presented under the heading ‘Making the Most of Africa’s Commodities: Industrializing for Growth, Jobs and Economic Transformation’. It points out that the employment problem remains unsolved in most African countries.
Millions of young Africans clamoring to migrate to Europe, Asia and the Americas means simply that growth in many African countries have not been translated into the broad-based economic and social development needed to lift millions out of poverty and reduce the wide inequalities seen in most countries. This is because Africa’s recent growth, driven by primary commodities, has low employment intensity – that is, the ability to generate jobs.
Thus the continent continues to suffer from high unemployment, particularly for youth and female populations, with too few opportunities to absorb new labour market entrants, with the proportion of people living in extreme poverty (below $2 a day) remaining high.
More than 70 per cent of Africans earn their living from vulnerable employment as economies continue to depend heavily on production and export of primary commodities.
Investments remain concentrated in capital-intensive extractive industries, with few forward and backward linkages with the rest of the economy.
With such a bleak reality for most young Africans, experts have recommended five elements that they say are absolutely essential for development:
1. A high rate of savings and investments
2. A first stage of import substitution increasingly to be combined with expansion of exports
3. Absorbing technological knowledge from abroad
4. Focusing upon expanding the manufacturing sector
5. An active role for the state in guiding the direction of development.
It is interesting to note that in the countries that were the most successful and competitive entrants in the world economy, Japan, Korea and China, all the five elements were present.
But it is also true that in other parts of the world the attempts to combine import substitution with learning from abroad were much less successful in developing self-propelling industrial growth – at least in the long term.
The less successful examples were often countries in Latin America and Africa with higher degrees of inequality and with political systems that invested less in building the domestic knowledge base necessary to learn from abroad.
Therefore accelerating growth in the currently dominating sectors – such as agriculture or the urban informal service sector in Africa – is an obvious way to raise income per capita in the short to medium term.
A typical pattern of growth for the rich countries has been to raise productivity in agriculture while workers have moved from agriculture to manufacturing.
In Africa, raising the productivity in the informal sector and to create demand for labor outside the informal sector is a major challenge.
This is important since the informal sector remains a significant and even expanding economic force in sub-Saharan Africa. The sector is estimated to account for more than 65 percent of non-farm employment in sub-Saharan Africa.
Thus, it is obvious that a successful industrialization strategy would reduce the relative weight of the informal sector in the long term.
Given its current weight in the sub-Saharan economies, measures to upgrade workers’ skills and the technologies used in the informal sector would give substantial contributions to growth and welfare.
The same is of course true for agriculture, which is the other major sector in terms of employment in most of the least developed economies.
This is why we believe that unless the new government provides thousands of new jobs for the unemployed youths across the country, the agenda of the New direction is likely to fail.