Sunday, May 27, 2012

Despite Past Success, Africa Faces Concerns for the Future

All Africa:  Nigeria: ILO - Macroeconomic Policies, Youth Employment Will Boost Economies
Ghana Business News:  Jobs, Justice and Equity in Africa
Reuters:  Rising Inequality Threatening African Growth - Report
WSJ:  Africa Growth Isn't Meeting Needs of Young, Poor: Report
During May 9 through the 11, the World Economic Forum held an event in Addis Ababa, Ethiopia, which brought together over 700 private and public sector leaders to comment on how to improve economic growth and human development in Africa. These leaders highlighted Africa’s recent growth as well as highlighted several key factors threatening future growth, which include youth unemployment, food scarcity, and poor governance.

During the past decade, sub-Saharan African economies experienced growth averaging 4% per year. According to a report issued by the Africa Progress Panel at the World Economic Forum event, several factors sparked the region’s growth. First, developing countries such as Brazil, Russia, India, and China (collectively called BRICs) increased investment into the continent as a way to diversify—diversification is a method of investing in a variety of assets to reduce one’s overall risk so that if one asset depreciates in value, the value of the remaining assets can offset the loss. Second, Africa experienced growth due to an increase in exports of agricultural goods and natural resources. Third, the region experienced political and social development. Africa underwent political development when democratic governments emerged after autocratic regimes ended, while social development occurred greatly due to the improvements in the population’s overall health. For instance, deaths due to malaria decreased by 33% since the 1990s—indicating an increase in overall health.

However, Africa’s past success was not felt evenly throughout the population. Only 4% of Africans are middle class—to be considered middle class, one must earn more than $10 per day. Also, more than half of the population lives in poverty—to be considered in poverty, one must earn less than $1.25 per day. According to the Africa Progress Panel, the ratio of Africa’s population in poverty compared to the world’s poverty population increased from 21% to 28% over the past decade. Likewise, the ratio of Africa’s middle class compared to the world’s middle class is 2%, which is quite small considering Africa’s population is over 850 million. Moreover, according to the International Labour Organisation (ILO), more than 70% of the working-age population in Africa do not have jobs or are have vulnerable jobs—employed workers that are statistically most likely to fall into unemployment, such as unpaid family workers and self-employed workers that have not hired employees to work for them on a continuous basis. This unemployment statistic is especially troubling as statisticians predict that the youth population will double within the next ten years, thus creating a demand for 74 million new jobs.

The Africa Progress Panel suggested three main factors to address Africa’s poverty conditions and continue growth in the future. The first factor is for African nations to address youth unemployment. Former Nigerian President Olusegun Obasanjo warned that civil uprisings would occur if African nations did not address youth unemployment. He based his warning on past civil uprisings in the Middle East, which occurred because of economic and demographic imbalances that were similar to Africa’s imbalanced success and high unemployment rate. The panel emphasized improving education and skills in the youth population to increase labor productivity as well as focusing on industries that have the highest potential to produce employment. These industries include small-scale farming as well as manufacturing. The panel also suggested investing more resources in developing infrastructure, such as access to electricity, to create employment opportunities.

The second factor for increasing growth in Africa is combating food scarcity in the region. This is especially concerning because some of Africa’s largest aid donors recently reduced their assistance. Countries like France and Italy decreased their donations to focus on their own domestic problems. Similar to the panel’s suggestions to reduce youth unemployment, the panel suggested that Africa focus on small-scale farming to reduce food scarcity. The panel suggested small-scale farming as a solution because of the potential for food productivity.

The third factor for future growth in Africa is continuing to improve governance and leadership. Due to Africa’s abundance of natural resources, the potential for corrupt practices exists in the region. For instance, some African governments take bribes from foreign investors in exchange for rights to the country’s natural resources. African governments also take bribes from foreign companies in exchange for exemptions from paying taxes. With greater governmental responsibility, Africa’s resources could be more effectively used to improve imbalances among the population as well as improve employment opportunities. By tackling these factors, Africa will hopefully continue on its past trend of growth and begin to balance its success throughout the entire population.

1 comment:

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