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Priorities for Africa in 2014
 

By Roy Maurer  1/13/2014
 

Leveraging the continent’s growing working-age youth population, proactively engaging with large emerging economies such as India and China, and quashing myths about local industry are top priorities for Africa in 2014, according to experts.

Scholars from the Brookings Institution’s Africa Growth Initiative addressed these issues in a recently released report, Foresight Africa, and presented their thoughts at a Jan. 7, 2014, event held at Brookings in Washington, D.C.

Employing Youth

The private sector has been growing across Africa, but not enough to keep pace with sub-Saharan Africa’s working-age population, which is projected to increase by 14 million people in 2014, leaving many workers stranded in an increasingly difficult labor market, according to John W. McArthur, a visiting fellow at Brookings.

“African policymakers should make the creation and implementation of strategies to improve employment outcomes for its enormous youth cohorts a major priority in 2014,” he said. “As a general rule, successful approaches will include people-centric investments that help match vocational skills to the jobs of the future.” These include efforts to ease access to startup capital, to promote business growth and, in some cases, to launch labor-intensive government projects, McArthur said.

He provided several examples of macro investment measures aimed at boosting:

*Crops. Africa’s rural and mixed economies need an African green revolution to ramp up staple crop productivity, McArthur said. “This requires scaled support for irrigation, modern variety seeds and fertilizer in line with Asia’s 20th-century successes and Malawi’s approach since 2005.”

A green revolution can also advance a country’s overall competitiveness, he noted. Benefits include rural savings, diversification into higher-earning crops, free time for workers to launch service enterprises, local consumer demand for agricultural products, and a decline in the local price of food, “which helps promote competitive real wages for export-oriented industries, countering the high relative cost of African labor that currently hinders industrial job growth.”

*Girls education. McArthur explained that Africa needs to invest in universal access to secondary education for girls, which is crucial for developing their employment skills. Girls who complete secondary school are also much more likely to voluntarily delay having children, he added.

*Infrastructure. Africa urgently needs massive investment increases in reliable energy, to produce goods and services, and reliable roads, so that it can compete in product markets, McArthur said. The returns to both growth and employment can be extraordinary, he noted: “South Africa’s post-apartheid rural electrification program helped boost female employment alone by more than 9 percentage points. In Africa’s more remote rural economies, such huge leaps in economic connectivity can undoubtedly yield equal or greater employment gains for generations to come.”

*Data. Nearly half the low-income countries in sub-Saharan Africa have not published employment data over the 2000-10 period. “There is an urgent need to conduct regionwide labor-force surveys and industrial censuses that establish baseline assessments for all African countries. Measurement helps drive performance.”

Engaging with New Partners

Over the past 20 years emerging economies, such as Brazil, China, India and Russia, have ratcheted up trade, investment, and other types of commercial and strategic relations with Africa, significantly reducing the relative importance of traditional partnerships with the U.S. and Western Europe to Africa’s development agenda.

Developing partnerships have included trade and foreign direct investment in various sectors of several African economies, particularly natural resource exploitation, manufacturing, agriculture and construction. “Although these emerging partnerships have been very supportive of development efforts in African countries, there is concern that some of these new arrangements could actually be exploitative—in other words, they may not be mutually beneficial,” cautioned Mwangi Kimenyi, senior fellow and director of Brookings’ Africa Growth Initiative. “There are also many risks and challenges that come with these partnerships; in fact, if the challenges are not properly managed, the outcome could be exploitation and underdevelopment.”

According to Kimenyi, in recent years there has been a marked increase in foreign direct investment flows from emerging economies, indicating the growing importance of the continent to the global economy. Extractive industries, especially oil and natural gas, remain the most important for investments from both traditional and emerging partners, he said.

There has been an increased interest in land-for-agriculture deals, as well. “India and China are among the top 10 countries investing in the agricultural sectors of many African countries,” Kimenyi said, “and companies from both countries have significant investments in biofuels, soy and timber production at various stages of completion.”

He urged African leaders to understand the potential “negatives of Africa’s engagement with external actors”—traditional and emerging—and to demand clear strategies to confront them. “It is incumbent upon African policymakers and members of civil society to ensure that any engagement with external actors yields maximum possible benefits to the citizens of their countries.” He suggested actions including more openness and transparency in negotiations and contracting, especially in the natural resources sectors, as well as “significantly improving regulatory frameworks” to minimize activities that “degrade the environment, reduce opportunities for job creation and generally inhibit economic growth.”

Changing Misconceptions

There are numerous misconceptions about Africa, chiefly that the continent is too dangerous or unstable to invest in. Brookings Senior Fellow John Page addressed myths surrounding African industrial development. These are:

*African companies are uncompetitive. “One widely held myth is that, despite very low real wages, productivity in African firms is so low that unit-labor costs exceed those of competitors in the global market—not true,” Page said. Plant-level analysis from the World Bank shows that while manufacturing value added per worker in many light-manufacturing activities in sub-Saharan Africa is lower than in competing countries, unit-labor costs are largely the same. “Africa can compete on the shop floor,” he said.

*Deregulation is the answer. Why, then, hasn’t labor-intensive manufacturing moved to Africa? The easy answer—excessive regulation holds industry back—is a second myth, said Page. “As this myth goes, if only stroke-of-the-pen reforms such as reducing the time and cost of opening a business were pursued with vigor, Africa’s economies would be transformed. Also not true.” He pointed out that successfully industrializing economies in Southeast Asia and Central America score as badly on “the cost of doing business.”

*Small businesses are the job creators. Page explained that donors love small and midsize enterprises because they are seen as the job creators. Recent research, however, suggests that this isn’t true. “Not surprisingly, growing firms are the job creators. In Africa, although small firms employ a larger share of workers than large firms, they also fail at a much higher rate. When we take into account the significantly lower survival rates of small firms, expected job growth for large and small firms is essentially the same.”

Steps that African nations should take in 2014 to boost their industrial output include investing in infrastructure; educating Africa’s young people, to increase the continent’s global competitiveness; and shifting support to businesses that are succeeding, instead of prioritizing all small and midsize enterprises. “Policies and programs that reduce constraints to the growth of all firms, regardless of size, must be developed,” Page said.

Roy Maurer is an online editor/manager for SHRM.
Follow him at @SHRMRoy

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