A free human mind - the ultimate capital

The African economies have been growing at a remarkable rate. Between 2001 and 2010, six of the world’s ten fastest-growing economies were in sub-Saharan Africa. Even in the wake of the crisis, Africa has been growing at 5% every year, almost twice the global rate (2.7%). Despite the slowdown in North African countries following last year's Arab spring, we expect growth across the continent to reach 4.8% in 2013, and 5.4% for sub-Saharan economies alone.

However, in many countries growth has not translated into sufficient jobs and a significant improvement of quality of life. Between 2000 and 2008, Africa’s working-age population grew by 107 million, but the number of jobs grew only by 73 million.

Also, in spite of recent progress in poverty reduction, the current pace is too slow for the continent to achieve the United Nation’s Millennium Development Goals by 2015. Extreme poverty is expected to affect nearly 36% of the African population (excluding North Africa) in 2015, against the previous forecast of 38% (UN, 2011).

These numbers show that policymakers should pursue strategies to ensure that growth is not only strong, but also equitable and inclusive. Making growth inclusive is indeed possible. Botswana’s development demonstrates that mineral riches can be used in a beneficial and transparent way. Mauritius has improved on both access to and the quality of its higher education – this has been a major source of the country’s average annual growth rate of 5.1% between 1977 and 2009.

And this takes me to the next point I want to make: education plays a crucial role in promoting inclusive growth.

High-quality education and skills is one of the most efficient ways to promote inclusive growth.It is crucial that we help African countries to empower their people with the best possible skills. Africa has a young, growing and increasingly better educated population. The continent’s working-age population grew by 25% from 2000 to 2008, reaching 550 million people. If current trends continue Africa’s labour force will reach 1 billion strong by 2040, making it the largest in the world, surpassing both China and India.

This new generation will be more educated than their parents and grandparents. Based on current trends, 60% of 20-24 year-olds will have completed secondary education in 2030, compared to about 40% today. And education must not only provide knowledge but also the skills needed to adapt to changing employment circumstances.

Employment opportunities are not favourable for the young. With 10 to 12 million young people entering the African labour market every year, job creation must be much stronger to keep up with population  growth.Productivity also remains low. Many of the new jobs are precarious and in low-productivity sectors. As a result, overall productivity growth was less than 1% every year between 1990 and 2005 compared to 1.4% in Latin America and 4% in Asia.

To improve productivity and employment, effective training and skills policies are needed. This requires more cooperation between education systems and industry to identify skills in demand. Policy makers have to set-up responsive and quality-conscious education systems.  Employers, too, have to be willing to invest in further training for their employees. These policy elements will ensure Africa’s increasing reservoir of human capital is well used.

The region’s natural resources can also drive growth

Across OECD countries, known reserves of subsoil resources amount to USD 114 thousand per square km. In Africa this ratio is at USD 23 thousand per square km. This disparity suggests that there are many more resources that Africa can develop. Exploration costs and inadequate investment incentives contribute to underdevelopment.

Resource-led growth is a risky proposition. Too often countries have witnessed the destructive impact of oil and minerals. Focusing on only one type of resource can quickly crowd out other parts of the economy which will suffer from exchange rate movements and volatile government spending. As a whole, the economy sheds jobs and becomes less diversified and less competitive. Thus many might suffer while only few gain.

Increased transparency and accountability, anchored in appropriate institutions can advance development and counter rent seeking. We see in Botswana how strong institutions and good governance help in harnessing resources for broadly shared economic and social development.

Not only do minerals and oil remain largely untapped. Renewable and agricultural resources have the potential to create jobs and opportunities more broadly; agro-industry, for example, holds significant promise in Eastern Africa. Per capita agricultural output and productivity are still low compared to the global average. But agricultural productivity must grow to make good use of this potential.

The African Development Bank estimates that Africa’s per capita agricultural output is about 56% of the global average. Its growth has been driven largely by expansion of crop area, rather than increasing productivity. The scope for productivity growth is immense.

The OECD can support African reforms

Our new Strategy on Development provides innovative dialogue instruments to forge new ideas, new partnerships, and help our partners meet the challenge of structural transformation. This strategy places particular emphasis on mutual learning. We want to develop policy options collaboratively and produce tailored solutions that are effective in a broader range of countries and work in different environments.

For example, we are working to strengthen dialogue between developing and more advanced countries on common challenges associated with natural resource based economies, There is growing interest from resource-rich developing countries for programmes such as the Norwegian “oil for development” or the Australian and Canadian “mining for development.”

For this reason the OECD is designing – in the framework of our Strategy on Development – a network of policy makers from OECD and non-OECD countries that rely on natural resources. We are also developing a methodology for carrying out multidimensional country reviews to complement OECD’s other sectoral or country reviews. We are consulting with developing countries to see how our instruments for measuring well-being or education are relevant for different contexts.

As full members of the OECD Development Centre, several African countries are already at home in this learning space. Many are engaged in our work with the African Tax Administration Forum, which supports the exchange of fiscal information and helps to avoid the abuse of transfer pricing regimes. This can help African governments avoid the loss of revenues and invest more in their economies and in their people.

In addition, the OECD encourages private sector actors to use responsible supply chains, respect human rights and purchase resources without enticing conflict. A number of countries have already committed to our Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. I am also glad that Peter Eigen is here with us today. He played a leading role in these efforts to bring transparency and good governance to the extractive sector.

Let me close with a remark from Minister Ngozi Okonjo Iweala, who knows a few things about steering economies to prosperity: “…the world needs to look towards the growth and development of the continent and not towards the statistics of the past.”

This is what we are committed to do with you all so that, together, we can put in place better policies for better lives in Africa.

By Angel Gurría,
OECD Secretary-General.