Jobs in Africa: Designing better policies tailored to countries’ circumstances

Dar es Salaam, Tanzania – one of the many cities in Africa that is expected to see sharp population increases – will need rapid job creation to keep pace with its swift population growth. The city’s new bus transit system – completed in 2015, with a $290 million credit from the International Development Association, the World Bank’s fund for the poorest countries – is now reducing transportation costs, easing traffic and promoting private sector development.
Photo: Hendri Lombard / World Bank

Africa’s working-age population is expected to grow by close to 70 percent, or by approximately 450 million people, between 2015 and 2035. Countries that are able to enact policies conducive to job creation are likely to reap significant benefits from this rapid population growth, according to the Africa Competitiveness Report 2017, co-produced by the World Bank Group, the African Development Bank, and the World Economic Forum. The report also warns that countries which fail to implement such policies are likely to suffer demographic vulnerabilities resulting from large numbers of unemployed and underemployed youth.

It is estimated that between 2010 and 2020 75 percent of new entrants to the labor market will find work through self-employment or in microenterprises. Just over 20 percent will work for wages in the service sector, and only about 4 to 5 percent will find a wage-paying job in the industrial sector. Further, the largest projected growth in the working-age population is likely to occur in countries that currently have the lowest rates of formal sector employment (see figure below). If these trends continue, only about 100 million of the 450 million Africans expected to reach working age over the next two decades can hope to find stable employment opportunities. A growing population of increasingly educated and urbanized youth facing scarce economic opportunities could lead to political and social instability.



Source: World Bank, World Development Indicators, Feb. 2017 update.

The slow pace of job creation in Africa is not a new development. Are there reasons to believe that governments in Africa will be more prepared to act on it now than they were a few years ago? Perhaps this answer is a cautious yes. The quality of macroeconomic policies and levels of political stability has been improving for a number of years in many African countries. In addition, African governments are increasingly aware of the potentially destabilizing impact of growing idle youth populations. This awareness provides a useful starting point for constructive policy dialogue.
 
What can African governments do to accelerate job creation to meet the needs of their aspiring youth populations? Beyond the traditional, though nevertheless valid, prescriptions such as stable macroeconomic policy, a supportive investment climate, and improvements in the quality of human and physical capital, countries can facilitate more rapid job creation through implementing policies suited to their specific circumstances that foster improvements in productivity and diversification: 

• For states in fragile and conflict-affected situations, targeted support to vulnerable regions and populations can be both stabilizing—via the creation of jobs—and growth enhancing.  
• For resource-rich countries, open trade policies and developing value chain links to extractive sectors can encourage the required economic diversification and job creation.  
• Fostering regional trade and integration is a major potential source of jobs and can help improve firm-level productivity, manufacturing development and economic competitiveness.   
• Support to microenterprises and agroindustry, key sectors of job creation in Africa, requires sector-specific interventions to increase productivity. Access to finance and appropriate skills is crucial for the former. Developing the latter requires reforms that envision agriculture not as a subsistence activity but as a potentially dynamic commercial sector. 
• Fostering the development of labor-intensive manufacturing is crucial not only for job creation, but also for accelerating structural transformation of Africa’s economies. 

If countries wait until today’s youth reach working age, it will already likely be too late to avoid demographic vulnerabilities.