Finding solutions to Africa’s jobless growth

African countries routinely feature in the list of the world’s fastest-growing economies, with the African Development Bank (AfDB) projecting that Africa will account for eleven of the world’s twenty fastest-growing economies in 2024. The cruel irony, however, is that despite this heady growth, job creation remains elusive. Millions of youth are entering the labour force each year, but securing opportunities that can help them meet their needs and have a good quality of life remain notoriously difficult.

The International Labour Organization warns of an African “youthquake” unless the continent rapidly creates new jobs, noting that sub-Saharan Africa will require about 72.6m new jobs by 2050 for its young people. But what policies will prove effective in providing a lasting solution?

Economic transformation holds the key to creating the jobs Africa desperately needs, argues Mavis Owusu-Gyamfi, president and CEO of the African Centre for Economic Transformation. She says that transformation entails diversifying economies through value addition, boosting export competitiveness, and raising the level of productivity. “Growth is necessary but not sufficient. We’re growing but not transforming to create jobs,” she says. She warns that countries that do not prioritise transformation are more vulnerable to shocks. “Our studies indicate that in the last financial crisis, African countries with the least transformed economies buckled faster and rebounded slower.”

“The only way in which we can transform is to add value to what we’re producing. This will diversify our economies and boost export competitiveness,” she says.

Skills failure

However, Owusu-Gyamfi says that transformation hinges on investing in initiatives to boost labour productivity. She contends that one of the main reasons for Africa’s persistently low productivity is the significant gap between the skills taught in the education system and those demanded by the job market. This mismatch results in lower productivity as workers are not adequately prepared for the needs of modern industries.

“You employ somebody and, instead of taking the average three months to bring them up to speed on your company’s processes, you’re actually spending two years retraining them because they are not up to task. It’s expensive.”

Anthony Simpasa, director of macroeconomics policy, forecasting and research at the African Development Bank, says that a recent study of South Africa’s mining sector revealed that companies spend close to $2000 annually per employee to retrain them.

“Mining may afford this, but how many companies in other sectors can? It’s not sustainable. The cost of retraining can be very high and impact the bottom line,” he says.

Simpasa says policymakers need to consider innovative ways to boost foundational sectors such as education to avoid expensive retraining later on in employees’ lives. 

“We’re moving towards the knowledge economy and technology is playing an increasingly central role, so the emphasis on STEM is important.”

Informal sector must scale up

Raymond Gilpin, chief economist and head of the strategy, analysis, and research team at UNDP’s regional bureau for Africa, says that solutions to jobless growth and skills must keep the informal sector in mind. “It is much maligned as being ‘informal’, but this has been the backbone of the economy. This is how school and university fees are paid, this is how house rent is paid,” he says. “We have to find creative ways to support people who are in the informal sector to scale up and aggregate. The reason they are not doing it at the moment is that there are so many hurdles in terms of taxation, regulations, and logistics.”

Policymakers must shift their focus from public sector-led growth to fostering small businesses and the private sector to boost jobs, he says. “That is where employment is going to come from. We have to realise that the future is not throwing money into the public sector and the government providing jobs. Those days are gone. There has to be that realisation.”