Posts

Economic_Opportunity_in_AfricaWhen it comes to creating jobs and economic opportunity in Africa, industries such as agriculture, mining and oil typically receive the most attention and investment from governments.

However, the cultural and creative industries are consistently overlooked as viable avenues for economic growth. These industries include food, film, fashion, textiles, literature, music, performing/visual arts, museums and more.

Africa is no exception to the massive potential benefits that these industries could yield. The recent worldwide growth of tourism serves to further generate increased exposure and outside interest as well.

Further, the labor-intensive aspect of the creative industries offers an opportunity to generate more skilled and unskilled jobs. Additionally, this is a sector where modern technology can be adopted at a relatively low cost of investment.

Though there is no shortage of creative talent in Africa, there are logistical and infrastructural obstacles.

These barriers include a lack of skilled managers and industry professionals, lack of avenues for training artists’ technical competence, poor packaging and lack of standardization of cultural products, and poor distribution systems.

In order to move forward, governments will need to increase investments and implement relevant policies for the cultural and creative industries. An increase in economic opportunity in Africa through the arts requires government support.

Global and regional supply chains across the continent should also be built that will, in turn, create new trade patterns for African economies. For this to happen, there needs to be increased collaboration between global and Africans brands, designers/manufacturers, and development partners and governments.

Though there is a lot of work to be done, recent developments point to the strong possibility of incoming progress in the future.

Efforts to direct focus to the arts and address obstacles have recently emerged. For example, at Economic Community of West African States (ECOWAS) stakeholder meetings in May 2015, the fifteen member states were urged to shift their focus from timber, cocoa and mineral exports to the introduction of relevant policies and funding for arts and cultural industries that will generate new economic opportunity in Africa.

In addition, ECOWAS members were called upon to support artists with training and offer them opportunities to collaborate with international partner organizations to help quality, standardization and packaging.

Further, the African Development Bank’s Office of the Special Envoy on Gender (AfDB) launched several initiatives in 2015. Such initiatives included Fashioeconomics, an event which brought together fashion designers and development partners to talk about the challenges of securing financing to build up the sector.

Additional forums and events regarding the fashion industry have also taken place, with participants highlighting the needs for innovative financing mechanisms to provide incentives to grow the industry.

Participants also highlight the need for fresh approaches to scale up African design firms through entrepreneurship, training and skills development, and boosting access to finance and global markets.

Anton Li

Sources: The Africa Report, XinhuaNet, Daily Nation, African Development Bank Group (AFDB)
Photo: Flickr

The Labor Market in Developing Countries – A Case Study
Any poverty reduction strategy must include measures that ensure people are employed. Spending on public goods and focusing on rendering basic life-sustaining services such as healthcare and sufficient nutrition are absolutely essential. Beyond the basics, however, long-term development strategies must target employment to drive economic growth and contribute to a prosperous environment.

South Africa represents an interesting case study of the labor market in the developing world. It has the potential for a large amount of growth, yet is plagued by persistent unemployment. It is neither among the poorest developing nations, nor has it experienced robust growth. Across the spectrum of development, it is somewhere in the middle, and therefore the challenges it faces are broadly representative of much of the developing world’s challenges.

A 2015 World Bank report on the state of the labor market in developing countries provides an enlightening description of South Africa’s predicament. The report describes a “youth bulge,” where a young population saturates the labor market, dampening wage growth. The antidote to this economic affliction is investment in skills development and policy reforms which enhance market entry and private sector expansion.

South Africa, after the end of apartheid in 1994, managed to reduce absolute poverty via a social grant system. However, the grant system simply doesn’t measure up to the average salaries of even low-skill labor. Unemployment and inequality are still quite high in the country, so innovative economic solutions are necessary to create the kind of long-term growth which will help those remaining at the bottom of the economic ladder.

In South Africa, and sub-Saharan Africa in general, as many as 11 million young people will join the labor force every year, and will continue to do so for at least the next decade. With sufficient opportunities, this increase in labor supply could translate to a lot of economic growth. However, unemployment is rampant in South Africa, and long-term strategies for growth and poverty reduction must focus on harnessing the burgeoning young workforce to be effective.

One way of doing so is by investing in worker education and training. Presently, the availability of skilled labor is quite low. Unemployment remains high even among a growing college-educated workforce. A combination of private-sector worker training and public-sector skills development and educational subsidies could drive the expansion of a diverse, skilled workforce. This would encourage multinational firms to hire locally, as well as promote home-grown business growth.

Some private firms already recognize the need for greater investment in a skilled workforce. The Rockefeller Foundation’s Digital Jobs Africa initiative aims to create tech-based employment opportunities for African labor markets. The MasterCard Foundation also has an education and skills training program for disadvantaged African youth.

One South African company that provides a sustainable growth model that suits South Africa’s labor market conditions is Sibanye Gold. Sibanye Gold is a mining company which provides significant worker training and educational resources to its employees. The company also engages in profit sharing. The mining industry is naturally supportive of a localized labor force, for much of their workers come from areas surrounding mines. Unfortunately, socially sustainable companies like Sibanye are hamstrung by a hostile policy environment that does not support them, or worse, buries them in bureaucracy. Sibanye CEO Neal Froneman said, “[Industries such as mining] should be nurtured by the government. But it is not. It is despised.”

Clearly, private interventions alone will never create the kind of opportunities for which a growing, skilled labor force can take advantage. Real change needs to happen at a governmental level, specifically by creating public policies that diversify economic opportunity and create the kind of conditions where companies like Sibanye Gold can thrive. Doing so will harness the economic energies of a massive young workforce, providing a pathway to grow out of poverty.

Derek Marion

Sources: World Bank, Devex, The Conversation, Daily Maverick
Photo: Brookings

Economic_Opportunity_in_Ethiopia
Thirty years ago, Ethiopia was hit by a crippling famine that set it on a path of sluggish growth and poverty. However, that is beginning to change, as aid and economic opportunity in Ethiopia are growing tremendously.

In the past several years, Ethiopia has averaged around 10% growth, a staggering number and an incredible economic opportunity for foreign investors. The country was attracting only about $100 million in foreign direct investment seven years ago, but in 2014 Ethiopia drew in $1.2 billion. The country is taking a state-led approach to attracting investment; it just wrapped up its 5-year Growth and Transformation Plan. This plan is intended to expand social services and infrastructure, ensure macroeconomic stability, and enhance agricultural and manufacturing productivity. The net result of these changes has been a more stable investment environment, and international investors are beginning to take notice.

These investors include China, Turkey, India, some European firms and the United States. China is especially involved in infrastructure projects, having constructed a passenger railway in Addis Ababa, the nation’s capital, in addition to the construction of several dams. Turkey, India and China have all recognized Ethiopia as a good new manufacturing hub, with some of those countries’ largest manufacturers of paint, shoes and textiles relocating to the country and taking advantage of the cheaper labor costs and tax incentives.

As foreign investment in Ethiopia strengthens, the United States remains somewhat reserved in taking advantage of Ethiopian markets. In 2013, the World Bank ranked Ethiopia 127 out of 185 countries in terms of the ease of doing business. The U.S. State Department also describes how bureaucracy and a restriction on investing in key industries can hinder business objectives. American investors have traditionally been wary of investing in countries dominated by state-owned enterprises such as telecommunications, power and finance industries of which the Ethiopian government still controls.

Despite sluggishness by U.S. investors, a few key enterprises are taking advantage of the increased affluence in the country. Boeing recently signed a deal with Ethiopia’s largest airline to provide 20, 737 MAX 8s, worth a total of $2.1 billion, and with a provision to possibly supply 15 more. This deal is a huge indication of the growth potential of Ethiopian industries, which only 30 years ago were nowhere close to capable of generating demand for expensive aircraft produced by Boeing. A few U.S. private equity firms such as KKR and Blackstone have also made deals in the country, investing in infrastructure and floriculture, more evidence of a shift in the investment climate.

Ethiopia’s economic successes have both been enhanced and supported by international aid efforts in the past several decades. The country was among the most successful in hitting Millennium Development Goals benchmarks—halving child mortality, doubling access to clean water and quadrupling primary school enrollment in the past 15 years. These advances have no doubt provided a solid foundation for Ethiopia to transform into the rapidly emerging market it is today.

Despite double-digit growth, Ethiopia still needs help. While its economic successes have lifted millions out of abject poverty, the country still ranks 173 out of 186 countries on the U.N. Human Development Index, which measures quality of life. Per capita income is about $560, among the lowest in the world. And addressing public health challenges is an ongoing issue; malnutrition and infant mortality are still relatively high.

Growth, emerging markets and aid go hand-in-hand. While Ethiopian economic successes should be celebrated as a pathway to reducing poverty, they should also be taken as an indication of the effectiveness of previous poverty reduction efforts. There is a synergy between existing economic growth and continued foreign aid, which can enhance the quality of life for the poorest in Ethiopia, ensuring that Ethiopia becomes the next best place for the United States to do business.

– Derek Marion

Sources: Ethics And Internatioal Affairs, The Africa Report, Financial Times, US State Department, World Bank
Photo: Flickr