Jobs, technology and private sector investment – ingredients for economic transformation in Africa

As the global focus on jobs, technology and private sector investment sharpens, it is important to understand the drivers and perception of work-related supply and demand in Africa. 

by | Dec 22, 2017

Back in October the development community gathered for the 2017 World Bank/IMF Annual Meetings in Washington, D.C. There were numerous agenda items that are getting more attention – and can spur economic transformation in Africa – as was evidenced during the Annual Meetings. But big challenges remain. Africa’s annual growth rate approached 3% in per capita terms after 2000, but poor economic performance prior to the 2000’s means that most African countries have not transformed their economies, and doing so is complex and difficult. Some countries have shown great strides in certain sectors or around a few policy areas, but not in broad economic transformation.

The Annual Meetings are often an opportunity to jumpstart agendas or kick off new initiatives. This year’s meetings had a strong focus on jobs, technology and private sector investment – all key drivers of transformation.

The Annual Meetings are often an opportunityto jumpstart agendas or kick off new initiatives. This year’s meetings had a strong focus on jobs, technology and private sector investment – all key drivers of transformation.

Demographics provide possible dividends but also dangers if young people do not have jobs. During the Annual Meetings, there were numerous events and seminars to address the jobs agenda, including one on “A World Without Work?”, with interesting research from the Pew Research Center on the impact of the internet and technology; as well as other sessions on the Future of Work moderated by IMF Managing Director Christine Lagarde. Likewise, the IFC hosted an event on Creating Markets through Entrepreneurship and the World Bank organized a seminar on Skills for Success in a Transforming Africa.

“Demographics provide possible dividends but also dangers if young people do not have jobs.”– Rob Floyd Click To Tweet

The World Bank indicates that 600 million jobs will be needed over the next 15 years globally, but mostly to respond to populations in Africa and South Asia. And already today, more than 600 million people in developing countries are neither employed nor studying. The supply and demand for work is not fully understood in most countries. ACET is starting important pilot work to understand the drivers – and perception – of supply and demand in Africa. Likewise, ACET is undertaking groundbreaking work on the “Future of Work”, as well as the demand side drivers for secondary education needs in Africa.

As is evident by the focus of skills-related events, technology as a driver of change and transformation is also getting more attention. IFC hosted a session on the Unrealized Promise of Technological Catch-Up, while there were seminars on the Digital Economy for Development and Future of Manufacturing. Additionally, there were sessions on Technology and Civic Engagement; Fintech; and How Technology Can Improve Growth in MENA. Finally, there was a seminar on Leapfrogging Development: Innovation and Growth in sub-Saharan Africa.

Of course, there have already been great leaps forward with technology in Africa. Mobile phones have changed the ways people across Africa conduct business, study and stay engaged. According to Ericsson, by 2019 Africans will have 930 million phones – nearly a phone for every person.

But, the technology revolution is narrow in Africa. There is now greater mobile penetration than electricity penetration or paved road access or availability of medical care. ACET’s recent report, “Agriculture Powering Africa’s Economic Transformation”, points to this disparity. While technology is rapidly evolving in services, IT and finance, its impact on African agriculture has been relatively limited. The majority of farmers in Africa are smallholders without access to agricultural innovations, and uptake of technology is often slow. The report was launched at the World Bank Annual Meetings, and was recently highlighted at the African Development Bank.

“ACET is undertaking groundbreaking work on the “Future of Work”, as well as the demand side drivers for secondary education needs in Africa.”– Rob Floyd Click To Tweet

As in the past few years, there was heightened focus on the role of the private sector during the World Bank and IMF Annual Meetings. There were sessions on Harnessing the Power of the Private Sector in Support of Sustainable Development, Crowding in the Private Sector, Mobilizing the Private Sector for Development; and Creating Markets. Likewise, there were numerous side events on the G20 Compact with Africa, which is centered on increasing private sector investment in Africa. ACET is playing a key facilitation role to support implementation of the Compact with Africa, including a number of events planned in 2018.

While it is evident that infrastructure investment is needed to achieve the 2030 Agenda for Sustainable Development, Africa’s infrastructure development since 2010 has been uneven and has not progressed much overall. What private investment does exist is heavily concentrated in sectors such as energy, on a very limited number of projects and in just a few countries such as Morocco and South Africa.

Africa also continues to suffer from a severe lack of institutional investor funding stemming from a poor local project knowledge and few regulatory incentives. Additionally, illiquid domestic debt markets, and concerns about rule of law or fragility, restrict investment. On the project side, risks surrounding construction, foreign exchange, and maintenance and operations are not mitigated with appropriate mechanisms.

The efforts of IFIs have been well intentioned, but cannot meet the infrastructure investment needs of Africa. Despite ramped-up efforts to “crowd in” private sector funding, only 1.6% of total gross capital flows are the result of guarantees or syndicated loans. Of this, only 5% of IFI mobilized private sector resources went to low income African countries between 2012 and 2014.

“The efforts of IFIs have been well intentioned, but cannot meet the infrastructure investment needs of Africa.”– Rob Floyd Click To Tweet

Factory jobs

While it is evident that infrastructure investment is needed to achieve the 2030 Agenda for Sustainable Development, Africa’s infrastructure development since 2010 has been uneven and has not progressed much overall. What private investment does exist is heavily concentrated in sectors such as energy, on a very limited number of projects and in just a few countries such as Morocco and South Africa.

During the Annual Meetings there were of course myriad other meetings and events on climate, corruption, agriculture, and social development, etc. but the focus on jobs, technology and private sector development is a positive sign, as these are critical ingredients to economic transformation. As ACET noted in its first African Transformation Report in 2014, “transformation will come through diversifying African economies, boosting their competitiveness in world markets, increasing their shares of manufacturing in GDP, and using more sophisticated technology in production. Economies will then become much more prosperous, less dependent on foreign assistance, and much more resilient to shocks—mirroring the successes of Asian and Latin American countries over the past several decades.”

“The technology revolution is narrow in Africa. There is now greater mobile penetration than electricity penetration or paved road access or availability of medical care.”– Rob Floyd Click To Tweet

The World Bank/IMF 2018 Spring Meetings are right around the corner, and the global development community will have an opportunity to further economic transformation in Africa through enhanced investment, continued strong levels of official development assistance, and technical support to African governments. Jobs, technology and private sector investment are not the only ingredients needed, but they are necessary ingredients. Likewise, they need to be consistent ingredients with ongoing and enhanced focus within the crowded development space.

Written By

Rob Floyd

Director and Senior Advisor

African Center for Economic Transformation (ACET)

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