Africa’s economy to grow at 4% in 2019, but inclusive and pro-employment growth is crucial

As economies across Africa continue to strengthen, the continent’s real GDP growth is projected to accelerate to 4 percent in 2019 and 4.1 percent in 2020, from 3.6 percent in 2017 and 3.5 percent in 2018, according to the African Development Bank (AfDB).

“In 2019, 40 percent of African countries are projected to see growth of at least 5 percent. The challenge is to achieve a higher growth path that is inclusive and pro-employment,” notes AfDB in its 2019 African Economic Outlook (AEO).

Growth across the continent is expected to be driven by a mild recovery in commodity prices, as well as improved macroeconomic stability. While below China and India’s, Africa’s growth is projected to be higher than that of other emerging and developing countries. But it is insufficient to make a dent in unemployment and poverty.

More important than the growth rate is for the continent to achieve a higher growth path that is inclusive and pro-employment, the report notes.

According to the AfDB, about one-third of Africa’s youth aged 15–35 are unemployed and discouraged, another third are vulnerably employed, and only one in six is in wage employment. But the 2019 AEO states that Africa’s working-age population is projected to increase from 705 million in 2018 to almost 1 billion by 2030.

The report notes a 1 percent increase in GDP growth over 2000–14 was associated with only 0.41 percent growth in employment, meaning that employment was expanding at a rate of less than 1.8 percent a year, or far below the nearly 3 percent annual growth in the labor force.

“At the current rate of labour force growth, Africa needs to create about 12 million new jobs every year to prevent unemployment from rising,” the report states.

There are two major actions countries across Africa need to take to address the challenge of job creation.

Develop skills

In Africa, there is currently a huge mismatch between skills and labour market needs. But as deficient as educational systems in many African countries currently are, they do not get enough funding to cater to basic needs. It becomes a more daunting task to overhaul educational systems to be able to train youths ready for labour market needs. With governments in Africa continuing to vote inadequate funds for education, it may be time to focus on alternative funding that will ensure quality education that prepares youths for the future is available.

Also, governments need to be less political about development. When signing infrastructure deals with countries like China, one of the major components have always been knowledge transfer, but many countries on the continent are not deriving its full benefits. Hence, governments should focus on exploiting knowledge transfer opportunities and ensure such key into the overall economic development plan of their country.

Manufacture

“There is thus an urgent need in creating job in higher productivity sectors by developing a strong manufacturing sector,” notes AfDB in the 2019 AEO.

Africa is blessed with resources needed for production. But the continent has to be deliberate about producing most of the things it consumes. Apart from how a robust manufacturing sector can help countries in Africa produce enough to even export, much needed jobs can be created.

However, it will be difficult to achieve this without first removing barriers to doing business such as poor governance, low institutional quality, and inadequate infrastructure.

East Africa is the fastest growing region

About 40 percent of Africa’s projected 4 percent growth in 2019 will come from North Africa. East Africa is projected to be the fastest growing region in Africa this year, at 5.9 percent and 6.1 percent in 2020. Between 2010 and 2018, growth in East Africa averaged almost 6 percent, with Djibouti, Ethiopia, Rwanda, and Tanzania recording above-average rates.

Growth in Central Africa is gradually recovering but remains below the average for Africa as
a whole. Growth in this region is boosted by recovering commodity prices and higher agricultural output.

Southern Africa is expected to record moderate growth in 2019 and 2020 after a modest recovery in 2017 and 2018. Southern Africa’s subdued growth is due mainly to South Africa’s weak development, which affects neighboring countries.

The AfDB, however, notes that there are several risks that may affect its economic outlook for the continent, including escalation of trade tensions between the United States and its main trading partners, increased costs of external financing, extreme weather conditions due to climate change, as well as political instability and security problems in some parts of the continent.

Originally published at The Nerve Africa.