Enhancing Employment in Africa
 |
| Unemployed people advertise their services Photo courtesy |
It is therefore legitimate to ask the question: why is it that rapid growth has not created as many jobs and poverty decline has not been commensurate with strong economic performance? Indeed in some countries large sections of the population feel excluded from the benefits. This is a source of socio-political tension and a seed of unsustainability.
The new dynamism of African economies is now a well-established fact. Contrary to what is often suggested, this is not simply about commodities. It is also about internal demand, driven by demographics and urbanisation.
That is why you will find that the fastest growing sectors outside the extractive industry are construction and services, to respond to Africa’s need for infrastructure and the demands of the fast urbanising population. A contrario, growth in manufacturing is still limited by poor infrastructure, logistics, lack of cluster industries, although that is slowly changing.
Therefore, to answer the question as to why job growth is not commensurate with economic growth, there are two related reasons: limited economic transformation and lack of active inclusive policies – and the two are somehow related. I will in turn want to stress the role of agriculture and education.
The decade of the 1960s, the period of independence which many countries in Africa are now celebrating, was one of: High Hopes High Expectations.
A generally bullish period in Africa.
Those hopes were however soon dashed by worsening socioeconomic conditions, military take overs and political upheavals. I need not to mention the horrendous Civil Wars in the Congo and Nigeria.
By the 1970’s, the crisis had deepened, worsened by successive external shocks, two oil shocks in particular, debt accumulation, macro-economic policies that defied common sense and to cap it all, confiscation policies by a “predatory state” - what in Uganda they called “Mafuta Mingi,” its equivalent in the Congo “Zairanization” and lesser versions of the same in other countries.
By the 1980s, prodded along by the Bretton Woods Institutions, the process of economic reform began. This process anchored in neoliberal policies was to take about a decade and a half. Steadily, macroeconomic stability was restored, so was the balance between the state and the markets. I will leave aside for the moment, the argument that there might even have been a period of “over correction” in the enthusiastic pursuit of the neo-liberal agenda.
By the mid-1990s, those reforms were beginning to yield results. The international initiatives to cancel debt came to complete the process. It had been two decades of tough structural adjustment – indeed “sweat and tears.”
As the new Millennium was ushered in, the growth pulses across Africa picked up quite rapidly; spurred by favourable commodity prices; and internal dynamics; the 21st century opened with promise.
While progress has not been universal or linear: Millions of Africans are being lifted out of poverty, Large gains have been made in the human development area; of which the most dramatic has been:
• Reduction in infant mortality
• Progress vis à vis HIV/AIDS, TB, and Malaria
• School enrollment of both genders.
By the time of the 2009 financial crisis, the lexicon about Africa had changed dramatically. From a “hopeless” continent it was now broadly labeled a continent of the future. The McKinsey Report – “African Lions on the Move” – came to complete this seal of approval.
Needless to say, the mayhem on Wall Street and its global repercussions was a source of apprehension: was the African momentum to be reversed?
In the event of the first round effects turned out to be minimal;
• Our banks had limited exposure to toxic products and there was limited integration into the global financial system.
• Macroeconomic foundations were relatively good.
• Regulators (Central Banks, that is) had done a good job on the prudential side, on such issues as capital adequacy, etc.
In short, as far as African banking systems were concerned, regulations were in place, supervision was robust, sanctions regime applied when necessary and resolution mechanisms in place if things went wrong, which could not be said for Wall Street. There was however that lingering view that the second round effects were likely to be quite severe on exports, investment flows and remittances, among others.
In the event, Sub-Saharan Africa, to use the now commonly accepted terminology, emerged with minimal damage, and it resumed its growth path. Obviously, while the shock absorbing capacity was weakened, counter cyclical measures adopted in different countries had been reasonably effective. In the words of the IMF “The impact of the global economic crisis on Africa was brutal but mercifully brief.”
In short, as far as “crisis management” is concerned, our economic managers can be said to have scored a credible B +! However, having demonstrated strong reform credentials, correcting the errors of the first 25 years of independence, a credible crisis management record, and a certain resilience to external shocks: three big interrelated questions remain;
• First, how sustainable the momentum was.
• Second, whether the strong growth was inclusive enough.
• Third, how and under what conditions economic transformation would take place.
In the same period we are examining, that is, the 1980s and 1990s, another country was undergoing, perhaps the most dramatic transformation of our time which has transformed the whole landscape of employment, jobs and income – and that is China. For those who may be interested in that process, publications abound, but I would like to recommend one. This is Ezra Vogel’s excellent book “Deng Xiaoping and the Transformation of China.”
He recalls among other things that in 1980, 80% of China’s then 900 million people were peasants. There was not enough food to eat, not enough clothing and widespread poverty. That is only 30 years ago! The rest, as they say, is history.
It is still too early perhaps, to come to definitive conclusions, as to what worked so well for China. Many things were taking place at the same time including the special economic zones and the broad opening up of the economy.
However, there is no doubt that in term of lifting millions out of poverty in a short period of time, this must be one of the most radical and successful transformation of our time. So, what could be some of the elements of that successful process? I would like to pick up just three:
• Agriculture
• Education
• The role of the State, itself in the process of development and enterprise.
Let us look at agriculture first. Between 1980 and 1984, Deng and his colleagues began by a limited liberalization of agriculture, with farmers enjoying greater degree of freedom of exchange and ownership, fertilizer utilization doubled, so did farmer incomes. An irreversible process and a dynamic change process began.
This is exactly what had happened in Japan and Korea years before, confirming thereby what we have always known that no country has ever undergone such a process of transformation without beginning with agriculture which raises farm incomes , accelerates non-agricultural growth and eventually structural transformation.
The second major supporting element of transformation was the rapid spread of quality education at all levels. It is not surprising therefore that the first loan taken by China when it joined the World Bank in 1980 was for higher education. I am told that in the last 20 years alone, over 1 million Chinese have studied and graduated at foreign universities.
I am not by any means making a simplistic comparison between China and Africa. Remember China is an old empire dating back to the Roman times, which was economically powerful at some point. Along the way, it was weakened by successive civil wars, occupation and defective economic policies under Communist rule. I am only saying that transformation was possible within 30 years.
However, and this is the third point; all this process of change makes some assumptions about the nature of the State and its role. It is evident that the role of the State in the planning process, sequencing the investments needed to kick start the process such as removing the infrastructure, setting priorities, is fundamental.
If I am emphasizing the role of the State, it is not to ignore the damage done in Africa by the predatory State, nor its failures. To the contrary, the State I am referring to must have a number of characteristics that distinguish it from the predatory States Africa experienced in the 1970’s and 1980s.
The late Meles Zenawi, had spoken and written extensively on what he called the Developmental State.
I share that view. This is not to negate, aspects of the neoliberal agenda which are critical. This is only to posit that, at the base of the transformation process, there must be a state that sets priorities, acts as the guiding hand, that is not predatory, and to quote Meles Zenawi, state that is not simply “the night watchman”!
Someone has said that the two biggest events in world history in the last 50 years were the collapse of the Berlin Wall and the collapse of Lehman Brothers. The collapse of the Berlin Wall put to an end to the socialist path, which turned out to be a dead end.
Professor Fukuyama asserted that it was the end of history. On the other hand the collapse of Lehman brothers, brought to the fore the fact that the forces of capitalism themselves left on their own, unfettered, unregulated, would not provide the solution and would impose very high social costs, as they have done.
If you look at the G20, what do you see; countries that have made it through different routes and experience; from China, to Korea, to Turkey, to Brazil and Indonesia. While we know what can kill development, our knowledge of what makes development is less comprehensive.
For growth to translate into jobs and incomes, deliberate policies are needed such as targeted safety nets to ensure no one is left behind. I believe the discovery of natural resources, associated developments; strong urbanization and growth in services are all game changers in job creation provided the basics are in place.
Now as we enter the next decade, a decisive decade for Africa, The African Development Bank is going to place emphasis on promoting inclusive policies, creating jobs and bringing about shared prosperity. This is vital. Sustainable economic development is that which leaves no one behind. Otherwise as we saw in Tunisia, one is building a house of cards.
The second element of sustainability we are focusing on, relates to natural capital and opportunities offered by greening the economies. For a continent like Africa which is very much dependent on nature, our chances for development are diminished if that is not done.
After decades of stagnation, Africa is on the verge of a new era. Despite the dark clouds in the global economy, the internal and external dynamics contain elements favourable to transformation, provided we get it right.
Too much time was wasted on futile ideological economic battles, from Marxist economics, neo liberal paradigms and above all predatory States that led to dead ends. As a continent, we now know what to do. We know there is no model off the shelf, there is no escalator.
By Donald Kaberuka,
President of the African Development Bank.