Jobs: The Next Piece of Africa's Growth Jigsaw
Africa’s recent economic performance has been impressive. With average annual growth of 5.1% over the past ten years, the continent is the second fastest-growing region in the world (IMF 2012). The share of people in extreme poverty is falling. Since 2000, 31 million African households have joined a 90 million-strong consuming class with discretionary income to spend or save1.
Explaining African Growth
Contrary to conventional wisdom, the majority of Africa’s growth has come from domestic spending and non-commodity sectors, rather than booming resource prices (Burk Global Institute 2010). Rather, improved macroeconomic and political stability and microeconomic reforms have laid the foundations for growth. Looking ahead, a young and rapidly growing workforce could be a potential demographic dividend, buoying growth. Africa is set to add 122 million to its labour force between 2010 and 2020 (Burk Global Institute 2012). By 2035, the continent’s labour force will be larger than that of any nation, including China or India. And this workforce will be better educated than in the past; by 2020, nearly half of all people of working age will have received some secondary or tertiary education.
Vibrant Domestic Markets
As Africa’s potential consumer army swells its ranks, there is every prospect of vibrant domestic markets being the lynchpin of growth. By 2020, Africa’s consumer class is projected to number nearly 130 million. A new Burk survey of African consumers reveals that they are exceptionally optimistic about their economic future, with 84% saying that they expect to be better off in two years.(Burk 2012). Consumers are internet-savvy and brand-conscious. In the survey, 58% of respondents said they choose clothes based on fashion. Reflecting these trends, Africa’s consumer industries are on course to expand by a further $410 billion by 2020, accounting for more than half the entire increase in revenue that businesses are expected to generate during this period.
Jobs: The Missing Piece of the Jigsaw
Couple all of this with a growing private sector, and many African countries have much more solidly grounded and diverse economies than outside observers might assume. But one big question mark hangs over this promising outlook: jobs. This is the missing piece needed to complete Africa’s growth jigsaw and ensure future prosperity and stability.
Over the past decade, growth has allowed Africa to create about 37 million stable, wage-paying jobs – a 50% increase. Still, nearly two thirds of Africa’s workforce today is struggling to get by in subsistence agriculture or informal self-employment. And the current rate at which the economy is generating wage-paying jobs is simply not fast enough to keep pace with the expansion of Africa’s labour force. So the continent urgently needs to speed up its creation of those stable jobs that underpin incomes, domestic demand, and social stability. The experience of other countries, and a closer look at the growth potential of different sectors within Africa, suggests that the continent can achieve this.
Lessons from other Emerging Economies
Data over many decades shows that when Thailand, South Korea, and Brazil had a similar level of per capita GDP as African countries today, they were creating stable jobs at double or triple Africa’s current rate. Our analysis suggests that Africa could accelerate job creation, adding up to 72 million stable jobs over the next decade. This would lift millions more out of poverty and create millions of new consumers, injecting a large dose of new dynamism into the region’s economy. Instead of taking Africa half a century to reach East Asian shares of stable employment today, it could take just 20 years. Roughly 60% of those 72 million additional wage-paying jobs could come from just three sectors that have already proven to be significant employment generators on the continent; agriculture, manufacturing, and retail and hospitality.
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