African countries are often recognized as some of the fastest-growing economies in the world, with the African Development Bank (AfDB) projecting that by 2024, Africa will account for eleven of the planet’s twenty fastest-growing economies. Nevertheless, the sobering truth is that despite this impressive growth, job creation remains a formidable challenge. Each year, millions of young people enter the workforce, yet securing positions that meet their needs and provide a decent living continues to be extremely difficult.
The International Labour Organization warns of a looming “youthquake” in Africa if the continent does not rapidly create new job opportunities, indicating that sub-Saharan Africa will require around 72.6 million new jobs by 2050 for its youth. But which policies could offer a sustainable solution?
Mavis Owusu-Gyamfi, the president and CEO of the African Centre for Economic Transformation, argues that economic transformation is vital for generating the jobs that Africa desperately requires. She highlights that transformation entails diversifying economies by adding value, improving export competitiveness, and raising productivity levels. “While growth is important, it alone is insufficient. We are experiencing growth but failing to transform in a manner that creates employment,” she points out. She warns that countries that overlook transformation are more vulnerable to economic shocks, stating, “Our research indicates that during the last financial crisis, African countries with less transformed economies saw faster declines and slower recoveries.”
“The only way to achieve transformation is by enhancing the value of our production. This will diversify our economies and boost our export competitiveness,” she further explains.
Skills Gap
Nevertheless, Owusu-Gyamfi contends that realizing transformation necessitates investment in initiatives designed to increase labor productivity. She identifies the significant disparity between the skills provided by the educational system and those demanded by the job market as a primary factor contributing to Africa’s persistently low productivity. This gap results in reduced productivity as workers are not adequately prepared for the demands of modern industries.
“When hiring someone, instead of spending the average three months acclimating them to your company’s processes, you may find yourself spending two years retraining them because they don’t meet the essential standards. This is expensive,” she comments.
Anthony Simpasa, director of macroeconomic policy, forecasting, and research at the African Development Bank, notes that a recent study of South Africa’s mining industry revealed that companies invest nearly $2,000 per employee annually on retraining.
“While the mining sector might manage this expenditure, how many businesses in other industries can? It’s not sustainable. The burden of retraining can be significant and impact profitability,” he states.
Simpasa urges policymakers to seek innovative strategies to enhance foundational sectors such as education in order to avoid costly retraining in the future.
“As we move towards a knowledge-based economy, technology is becoming increasingly crucial, making a focus on STEM fields essential,” he adds.
Scaling the Informal Sector
Raymond Gilpin, chief economist and head of strategy, analysis, and research at UNDP’s regional bureau for Africa, asserts that tackling jobless growth and skill gaps must include the informal sector. “Although often deemed ‘informal,’ this sector has been the backbone of the economy. It’s how education and university tuition are funded, and rents are paid,” he explains. “We need to find innovative ways to assist those in the informal sector to grow and consolidate. At present, they encounter numerous hurdles related to taxation, regulations, and logistics.”
According to him, policymakers should shift from a public sector-driven model to one that promotes small businesses and the private sector to increase employment opportunities. “That’s where jobs will be created. We must acknowledge that the future does not depend on ongoing government funding and public sector job creation. That time has ended. A change in mindset is necessary.”
