By Aubrey Hruby, Jonathan Said
Emigration and extremism. When the rest of the world looks at Africa, it’s these big “E’s” that dominate the picture. And it’s no surprise: ask policymakers in the U.S. and Europe to list their greatest concerns in 2017 and you can bet the increasing numbers of African migrants and the spread of ISIS-inspired groups will take the top spots in terms of worries in African countries. Most leaders — across party lines and the public and private sectors — would agree that economic development underpins any successful solution to the twin challenges of emigration and extremism. And at the heart of economic development lies the job creation challenge.
We all know Africa’s population is rapidly expanding. The continent is growing at an extraordinary rate and will be home to more than 2 billion people by 2040. Young people today want the same things we want, starting with the opportunity to work hard and build a better life. But ensuring access to opportunity for an Africa of 2 billion people will require progress on an unprecedented level. Our analysis — published in the Tony Blair Institute’s Jobs Gap report — shows that Africa will face a shortfall of at least 50 million jobs by 2040 and will have hundreds of millions of underemployed workers in the informal and formal sectors. This job gap will contribute to the persistence of extreme poverty at around 440 million in 2040 and contribute to unease and unrest.
“Africa is creating new jobs, but it’s simply not enough.”
As always, analysis is easy — but answers are hard. Over the past 50 years, African governments, donors, and NGOs have been doing all they can to help spur local economies and create jobs. And let’s be clear, not without success. Africa is creating new jobs, but it’s simply not enough. Our work and research show that accelerating job creation in African countries in the 21st century requires: implementing a modern industrial strategy; investing in “islands of effectiveness” within the public sector; and diversified partner pools.
A modern industrial policy
Private sector development is the only sustainable way to create new and better jobs. For decades governments and donors have sought to foster a vibrant, dynamic economy by building the so-called “enabling environment” — a level playing field for business through governance reforms, improvements to infrastructure, openness to trade, and a reduction in red tape. In short, they have focused their efforts on getting the basics right across the economy and moving up the ranks of the World Bank’s ease of doing business index.
But does it pay off? Data and our experience working on the ground with governments across Africa from Liberia to Ethiopia show that this approach risks leading countries into the old trap; becoming a jack of all trades, but master of none.
Instead, governments that focus on a modern industrial policy — concentrating on trade-oriented sectors that can compete in the global marketplace and knocking down the barriers that can hold them back — tend to create more jobs. The word “modern” is deliberate. It means embracing — not shying away from — the globalized economy, technology, open trade, and markets. It means being politically savvy to foster a working partnership with the private sector that will form competitive industry clusters to create jobs at scale.
Investing in islands of effectiveness within government
However, even the best strategy will fail without effective implementation. In countries where government capacity is limited, partners should focus on working with and strengthening “islands of effectiveness,” or agencies staffed with technically competent employees who have sufficient authorization to develop strategies, coordinate players, execute directives, and implement, coordinate, and guide sector strategies.
“Private sector development is the only sustainable way to create new and better jobs.”
Examples include the Rwandan Development Board and Ethiopia’s Agricultural Transformation Agency. The ATA has been actively coordinating agricultural sector development across ministries and local governments, and attracting new investment capital. Productivity is up 7 percent from 2004 and agriculture accounts for almost 40 percent of the county’s gross domestic product.
African-led international partnership patterns
Diversified international partnerships have contributed to Ethiopia’s rapid growth over the past decade. No longer do African governments engage in international relations based solely on colonial legacy; they can pick from a diversified set of global players. From Chinese concessionary financing of infrastructure to Indian investments in agriculture, African countries have more opportunity to structure win-win relationships with nontraditional donor countries.
In this way, African countries can best match elements of their economic growth strategies to the country partner that is most competitive in the sector or puts the best deal on the table. Historically, donor country partners have complicated sectoral development by pursuing piecemeal, uncoordinated interventions that suck up a great deal of African government attention. But today, African countries are actively directing opportunities with partners that align with their development goals.
The African-led diversification in partners can be seen in the macro data. No single export partner represented more than 10 percent of total African exports and the International Monetary Fund has noted increased alignment between business cycles in African markets and those in large emerging markets such as Brazil, India, Russia, China, and Turkey. Access to large deals has become more competitive for U.S. and European firms over the past decade. Chinese, Indian, and North African firms can often more easily navigate governments with limited institutional capacity, poor infrastructure, and a heavy need for political engagement as they face similar challenges in their home markets. It is no surprise that China has also become the third-largest investor in Africa by projects and continues to pour billions of dollars of new investments into the continent each year.
By choosing among partners, African governments are able to match technology and capital to their strategies and capacity. This approach won’t be easy but the prize is great: a 21st century Africa known not for poverty, emigration, and extremism, but instead for prosperity, enterprise, and opportunity. That future is possible — and the way to lay its foundations is to start by filling the jobs gap.