Tackling Africa’s Employment Crisis in the Face of Jobless Economic Expansion
African nations frequently rank among the fastest-growing economies globally, with the African Development Bank (AfDB) estimating that by 2024, Africa will represent eleven out of the world’s twenty fastest-growing economies. The harsh reality, however, is that despite this remarkable growth, job creation continues to be a significant challenge. Each year, millions of young individuals enter the labor market, but finding opportunities that satisfy their needs and enable a decent quality of life remains incredibly tough.
The International Labour Organization warns of an impending “youthquake” in Africa unless the continent swiftly generates new employment opportunities, highlighting that sub-Saharan Africa will need approximately 72.6 million new jobs by 2050 for its youth. But which policies will effectively provide a sustainable solution?
Mavis Owusu-Gyamfi, president and CEO of the African Centre for Economic Transformation, asserts that economic transformation is crucial for generating the jobs Africa urgently needs. She emphasizes that transformation involves diversifying economies through value addition, enhancing export competitiveness, and increasing productivity levels. “While growth is essential, it is not enough. We are growing but failing to transform in a way that creates employment,” she states. She cautions that nations that neglect transformation are more susceptible to economic shocks, noting, “Our research shows that during the last financial crisis, African nations with the least transformed economies experienced quicker declines and slower recoveries.”
“The sole method for transformation is to enhance the value of what we are producing. This will diversify our economies and improve our export competitiveness,” she adds.
Skills Gap
However, Owusu-Gyamfi argues that achieving transformation depends on investing in initiatives aimed at increasing labor productivity. She identifies a significant gap between the skills imparted by the education system and those that the job market demands as a primary reason for Africa’s intractably low productivity. This discrepancy leads to diminished productivity since workers are inadequately equipped for the requirements of contemporary industries.
“When you hire someone, rather than spending the average three months to familiarize them with your company’s processes, you end up spending two years retraining them because they don’t meet the necessary standards. It’s costly,” she states.
Anthony Simpasa, director of macroeconomic policy, forecasting, and research at the African Development Bank, mentions that a recent study of the mining sector in South Africa found that companies invest nearly $2,000 annually per employee on retraining.
“While mining may be able to manage this expense, how many businesses in other sectors can? It’s not viable. The burden of retraining can be quite high and affect profitability,” he adds.
Simpasa emphasizes that policymakers must explore innovative methods to improve foundational sectors like education to prevent costly retraining in the future.
“As we transition towards a knowledge economy, technology is becoming increasingly pivotal, making the focus on STEM fields essential.”
Scaling the Informal Sector
Raymond Gilpin, chief economist and head of the strategy, analysis, and research team at UNDP’s regional bureau for Africa, believes that addressing jobless growth and skills must incorporate the informal sector. “Although it is often criticized as ‘informal’, this sector has been the backbone of the economy. It’s how school and university tuition is funded, and rents are paid,” he states. “We need to discover innovative ways to support those in the informal sector to grow and consolidate. Currently, they face numerous barriers related to taxation, regulations, and logistics.”
According to him, policymakers must pivot from a public sector-driven approach to prioritize fostering small businesses and the private sector to enhance employment opportunities. “That is where jobs will originate. We must recognize that the future does not lie in continued government funding and public sector job creation. That era has passed. There must be a shift in awareness.”