How the region can get out of the trap of jobless growth
Given the difficult global context, the continued resilience of economic growth in the East African region over the past few years has been quite remarkable.
But, this strong performance has increasingly been accompanied by growing (and sometimes quite vocal) concerns over the quality of the growth — particularly the extent to which growth has been conducive to broad-based poverty reduction and employment creation.
Countries are confronting a number of major economic and social challenges — accelerating processes of urbanisation, population pressures, and, as pointed out by the recent State of East Africa Report, high degrees of income inequality.
Despite a much improved economic performance in the 2000s after two decades of economic stagnation, across the region a lot of social and economic aspirations have still not been fulfilled.
One revealing manifestation of all this, cited in UNECA’s new “Tracking Progress Report 2013:
Towards High Quality Growth and Structural Transformation in the Eastern Africa Region,” is that, although $1.25-a-day poverty has been reduced in relative terms in the region (from 65 per cent of the population in 2000 to 54 per cent of the population in 2011), the absolute number of citizens living below the international poverty line has actually increased, from 155 million to 166 million over the same period.
This paradox — growing wealth but more poor people — is a sure sign that more needs to be done to make sure that the proceeds of growth are invested well for the future development of the region.
The majority of the countries here have articulated elaborate plans to reach middle-income status over the course of the next 10-20 years. Such ambition is laudable and should be supported.
With the generally favourable macroeconomic context and on the strengths of our important natural resources endowments and improving risk profiles, we have a window of opportunity at the moment to change our fortunes permanently, and move definitively out of the status of aid-dependent low-income countries firmly into middle income status.
But, that window may not remain open indefinitely. The risks to regional growth are multiple, and too numerous to enter into in detail here. Some are exogenous — for example, global commodity prices (upon which part of the improvement in regional performance has depended) may decline, or demand from Asia — which so effectively cushioned the region from the negative impact of the slowdown in the US and Europe since 2008 — may slow.
Arguably, however, the more serious risks come from within; for instance, if job creation does not manage to keep pace with the rapidly expanding workforce, social unrest could end up undermining the whole growth process.
At the heart of all this then is the need to create more employment opportunities. In our Economic Report on Africa 2011, UNECA was one of the first organisations in the region to use the term “jobless growth.”
The list of things for governments to do to address this problem is a long one — getting the basics right (macroeconomic fundamentals, rule of law, strong and capable institutions that can stay the course and operate over long-term horizons, etc), reviving planning, raising investment rates, enabling creativity and entrepreneurship development, and using local content judiciously to promote the establishment of domestic-led firms and fostering the creation of the small and medium-sized enterprises that are the seedbed of job creation.
Of equal importance is the need to raise the ambition and quality of our educational programmes (what our report terms “educational deepening”), expand Africa’s infrastructure stock to reduce transaction costs and boost competitiveness, prioritise manufacturing and domestic value addition, explore economies of scale arising from regional value chains, and make Africa’s rapid urbanisation a driver for the continent’s growth, innovation and economic and social transformation.
Fortunately, leaders in East Africa have internalised the challenges, recognised the opportunities and have captured the aspirations and goals of their nations in long-term visions and other blueprints.
A fluid dialogue between government, key stakeholders and international organisations is fundamental to ensuring that the visions and supporting policies respond to the needs of the people. We can learn from best practice, certainly, but we also need to adapt to local circumstances.
This article was written by Antonio Pedro, Director of the United Nations Economic Commission for Africa’s Sub-regional Office for Eastern Africa, (UNECA SRO-EA) based in Kigali. It was published in the EastAfrican newspaper on 4 January 2014.
