A law aimed at forcing local majority ownership of firms runs into economic reality and hardline nationalism at the same time
By Owen Gagare
The Zimbabwean government has apparently bowed to pressure by effecting changes to its controversial Indigenisation and Economic Empowerment Act, which compels non-indigenous investors to cede at least 51% of the shares in their companies to black Zimbabweans, but the furor and confusion around the legislation shows no sign of abating. After months of haggling, on January 4th this year Finance and Economic Development Minister Patrick Chinamasa and Youth, Indigenisation and Economic Empowerment Minister Patrick Zhuwao agreed to introduce changes to the Act. The turnaround was seen as an acknowledgment of the need to stimulate foreign direct investment (FDI), but has since been attacked by other members of the ruling party. Despite his apparent agreement to changes in indigenisation regulations, Mr Zhuwao has continued pushing for a hardline stance. On March 23rd he announced that the cabinet had passed a resolution to cancel the licences of non-compliant companies.
“Business has continued to disregard Zimbabwe’s indigenisation laws, as if daring our president and his government to do something about their contemptuous behaviour,” he said. The indigenisation law was enacted in 2007 ahead of the 2008 national elections, when the ruling party, ZANU-PF, turned to populist policies to shore up its waning support. At the time, the Zimbabwean economy was ravaged by hyperinflation, which peaked at 79.6 billion percent in November 2008, according to Professor Steve Hanke, an expert on exchange rate regimes at Johns Hopkins University, Baltimore. The government said it wanted to economically empower indigenous Zimbabweans by ensuring they acquired controlling stakes in foreign companies. Economists, business organisations and diplomats accredited to Zimbabwe questioned the policy, which they blamed for low investment levels in the country as compared to other countries in the region. According to the United Nations Conference on Trade and Development (UNCTAD), Zimbabwe recorded $545m in FDI in 2014.
By comparison, South Africa recorded FDI inflows of US$5.7 billion, Mozambique US$4.9 billion and Zambia US$2.4 billion. Nevertheless, ahead of the 2013 elections, the party again based its campaign on the idea of indigenisation, under the theme “indigenise, empower, develop and create employment”. It gained a controversial win at the polls, but businesses have resisted the regulations, which have proved an obstacle to new investment. The amendments to the Act will maintain a 51/49% ratio of local/foreign ownership for resource-based sectors of the economy such as mining, as well as other resources, including water, air, soil, animals and vegetation. However, non-compliant companies will no longer be threatened with seizure or closure, but will instead be required to pay an “indigenisation compliance levy” as a tradeoff for non-compliance, with a cap of 10% of gross turnover.
The new regulations will allow foreigners to own a controlling stake in companies operating in the non-resources sectors of the economy— including manufacturing, financial services, tourism, construction and energy—for up to 20 years, which may be extended. Previously the Act stipulated that a non-indigenous person could hold a majority share for five years from the date of commencing business. The regulations also make it easier for companies to comply with the legislation by awarding “empowerment credits” to companies that ensure “value addition, skills development and vocational training”, as well as socioeconomic development initiatives that include “enterprise development”, “preferential procurement” and the building of houses for workers. Under the new amendments, companies have until March 31st 2016 to submit their indigenisation plans to the Zimbabwe Investment Authority. Critics say the recent amendments change little, given that companies will still be expected to cede 51% of their shares.
“The fundamental principles remain unchanged and [the amendments] won’t remove the impediments to both domestic and international investors,” Eddie Cross, an economist, legislator and economic advisor to opposition leader Morgan Tsvangirai, told Africa in Fact. “The 10% levy will cripple every company in the country if implemented.” John Robertson, an independent economic analyst based in Harare, says the government should focus on creating an enabling environment that is conducive for both local and international investors. “Indigenisation should be a natural process, not something that is driven by the threat of punishment,” he said. “The amendments [make] everything worse. The new 10% requirement will destroy already existing companies and discourage new investors.” Zimbabwe National Chamber of Commerce chief executive Christopher Mugaga, also an economist, suggests that the term “indigenisation” is itself a problem. “It implies majority ownership by local or indigenous people, even if cosmetic changes are applied,” he told Africa in Fact.
Zimbabwe National Chamber of Commerce chief executive Christopher Mugaga, also an economist, suggests that the term “indigenisation” is itself a problem. “It implies majority ownership by local or indigenous people, even if cosmetic changes are applied,” he told Africa in Fact. Writing in Zimbabwe Independent, a privately owned business weekly, Sternford Moyo, a corporate lawyer who also sits on various boards, called for a balance between the country’s need to stimulate investment and its need to ensure that communities benefit from it. The requirement that investors relinquish a controlling share in their investments is simply unrealistic, he said. “No right-thinking person will feel happy to invest his or her money and immediately lose control over the investment.” Zimbabwe was experiencing serious liquidity problems, he argued. The country’s economic environment was not conducive to sellers obtaining value for their investments, as demonstrated by a recent collapse in the value of securities listed on the Zimbabwe Stock Exchange (ZSE). (On December 31st 2015, the ZSE’s market capitalisation plunged to $3 billion from $4.3 billion in January of that year.)
A law that made it compulsory to dispose of shares in such an environment, said Mr Moyo, would be inherently unfair. The government’s attempts to develop empowerment legislation should not focus on shareholdings in existing entities, he added, questioning the logic of the government’s approach to resources, particular in mining. “One cannot have mining companies buying [the right to mine] a mineral in exchange for their shares and at the same time paying royalties for extracting a resource they will have paid for with their shares.” Like other commentators, Mr Moyo was also critical of the proposed empowerment levy, which would be impossible for most corporates to carry, and would in any case be virtually unenforceable given an environment in which no money was available to purchase shares. He called for further amendments to the Act. “Investors need confidence that they will be allowed to control and benefit from their investments,” he concluded. Currently Zimbabwe is experiencing a crippling liquidity crunch that has resulted in company closures and high unemployment.
Zimbabwe Congress of Trade Unions secretary general Japhet Moyo told Africa In Fact that 95% of Zimbabweans were not formally employed, with only 5% in formal employment, due to massive job losses. Zimbabwe‘s public debt is around $8.4 billion, according to the 2015 Mid-Term Fiscal Policy Review presented to parliament in August 2015 by Mr Chinamasa. Since his appointment in 2013, Mr Chinamasa has worked hard to reengage key institutions such as the IMF and the World Bank in an effort to create conditions that attract new finance from international lenders. Under the terms of a new programme, negotiated by Mr Chinamasa, the IMF has resumed its monitoring of the country, which includes evaluating the implementation of the country’s economic programmes. As part of this, the government has committed itself to clarifying and amending its indigenisation law. However, Mr Chinamasa has drawn flak from hardline ministers who view the amendments as an admission that the ruling party has failed to implement the programme and thus that it won the 2013 election on empty promises, according to senior ZANU-PF officials who spoke to Africa In Fact in confidence.
These ministers believe that amending the regulations will hurt the ruling party ahead of the 2018 elections. Mr Chinamasa announced changes to the indigenisation law on December 24th last year. On Christmas Day he was roundly criticised by the empowerment minister, Mr Zhuwao, who accused him of “treachery” for suggesting that the indigenisation legislation should be amended. Mr Zhuwao was supported by Higher Education Minister Jonathan Moyo, who tweeted that Mr Chinamasa was “out of order”. Although the indigenisation law is yet to be amended, Mr Zhuwao’s March announcement regarding the cancellation of the licences of noncompliant businesses has added further confusion and uncertainty to Zimabwe’s business environment.
Africa in Fact Issue 46: Youth. Ronak Gopaldas on 4IR in Africa, read by Adrian Galley.
Omoyele Sowore Photo: ‘Fisayo Soyombo
With every new election cycle, Nigeria is inching closer to producing its own Emmanuel Macron or Justin Trudeau. That hope is fuelled by the confidence with which the younger generation are aspiring to the highest Nigerian office.
A quick run through of the names and ages of candidates currently campaigning to take President Muhammadu Buhari’s job in 2019 is illustrative: Omoyele Sowore (47), Fela Durotoye (46), Thomas-Wilson Ikubese (47), Enyinnaya Nnaemeka Nwosu (40), Ahmed Buhari (40), Charles Udeogaranya (46), Mathias Tsado (41), Eniola Ojajuni (39), Olu James Omosule (48) and Tope Fasua (47).
Although there are some individuals in their fifties or sixties in the mix, the lineup of youth in the presidential race is heartwarming. Nigeria is a country where age — rather than such values as competence, moral presence or strength of character — often forms the main basis of respect. But youth are no longer the leaders of tomorrow; in Nigeria, young people want to be the leaders of today. And it appears they’re well on course.
Taiwo George, the 34-year-old editor of TheCable, Nigeria’s third most-followed online newspaper, puts this down to a “rising youth consciousness to quit the blame game”. Now, young people want to influence political events from the centre. “Nigerian youth are becoming conscious of their role in politics,” He told Africa in Fact. “Unlike before, when they screamed from the sidelines, now they’re actively involved … They’re entering the political arena to contest, and they’re involved in advocacy as well.”
The call for change is gaining momentum. Next year, 30-year-olds will be eligible to contest the presidential election. Similarly, 30-year-olds will be eligible to contest some of the 36 state governorship seats on offer; 30-year-olds can now be senators, while 25-year-olds can win seats in the Federal House of Representatives and the state houses of assembly.
The age limits for these positions, in the order in which they have been listed, used to be 40, 35, 30, 25, 25. But in 2016, a coalition of youth groups united together to launch the “Not Too Young To Run” campaign — based on the principle that anyone who, at 18, isn’t too young to vote shouldn’t be too young to be voted for. An ambitious, if not audacious, target indeed. Yet considerable progress has been made. With 25-year-olds now eligible to seek legislative office, it is only a matter of time before the 18-year-old target is met as well.
After initial opposition from the upper and lower chambers, the “Not Too Young To Run” Bill was passed in July 2017. Two thirds of the 36 state assemblies followed suit in February this year to satisfy the legal requirements for turning the Bill into law. All that’s left is for Buhari to put pen to paper, and the deal is sealed.
In fact, Nigerian youth have always been involved in politics and elections, says ‘Sola Fagorusi, the programmes and media manager of Onelife Initiative, a non-profit organisation aimed at bringing sustainable social change to young people, but now their methods of involvement and the demography involved are changing.
Until recently, it was uneducated youth, largely living in villages or the outskirts of cities, who featured as party agents or aides to politicians, Fagorusi says. “Today, we are seeing youth engage in peer-to-peer mobilisation for voter registration and collection of the permanent voter card.”
An important part of this has been the capacity offered by the Internet, particularly as regards communication. Fagorusi, 35, attributes the success of recent youth campaigns to “the online amphitheatre, where unending conversations (both deep and shallow) about electoral issues are happening”.
The development has even influenced young people’s participation in primary elections, which were previously little more than “intra-party affairs”, he says. “Young people are also now starting political parties. There is the ANRP, for example – a political party by young people embracing both the elite and deprived. Young people in Nigeria today are doing more than just acting as the electoral umpire’s ad-hoc staff; they are claiming a stake simply by seeking positions within the party structure.”
But some young people are urging caution. The expectations created by the Not Too Young To Run excitement must be tempered with patience, says Rotimi Olawale, executive director of Youthhubafrica, a youth-led, non-profit organisation based in Nigeria that advocates education for girls and engaging in policy debates that impacts young people in Africa. Only when presidential assent is secure, he says, can youth truly start dreaming big politically.
“The most defining agenda for young people in Nigeria today is to crash the party,” Olawale says. “The success of this constitution amendment will see a lot of young people take up the challenge to run for office.” Meanwhile, he says the national, youth-led campaign to encourage young people to register to vote” has been “impressive”, and he is also excited by the rise in the number of “unconventional” political parties, which are providing a platform for youth political expression.
Sowore, one of the youngest 2019 presidential aspirants, recently launched an appeal to raise $2 million “via a clean, transparent and open manner to advance our movement and fund our election into the presidency without the interference of godfathers and godmothers”, as he puts it on his page on the site.
Although he started out as a rank outsider in the race to Aso Rock (Nigeria’s presidential villa), Sowore’s ambition to take on the country’s old guard sits well with the youth. Young people are either promoting his gofundme campaign or contributing to it, and by the time of writing in late May this year, some 575 people had contributed over $49,000. The old guard, meanwhile, sometimes lets its guard slip, and this does not go unnoticed. When Communications Minister Adebayo Shittu recently branded the 47-year-old “inconsequential” on live radio, young people leapt to his defence, saying the minister’s comment was “a slight” on the youth population.
A Sowore victory would have huge implications for the federal ruling class. His campaign machinery is manned entirely by young people, and his election would surely usher in a reign of Nigeria’s youngest-ever ruling elite. But even if he does lose, just the fact of his well-supported campaign will give momentum to efforts by young people to take the central political stage.
Nigerian youth no longer want to be the stooges of politicians or to be cannon fodder for them — useful during election time, but expendable once in power. They do not object to being the governed, but their condition for that is that they too can aspire to, and achieve a role in government. In short, Nigerian youth are discontented with their role as political spectators. Now, they aim to be direct players in the political space.
Image: Graeme Williams
Is Africa ready for the future? Is the continent ready to tackle the technological disruption and challenges of a rapidly changing world? Importantly, are its young people ready to take up the mantle of change?
Africa’s youth have moved from relative obscurity in political deliberations to centre stage in continental forums and conferences from Cape to Cairo. This new focus stems from concerns about how to educate and employ the millions of young people in Africa and so improve their livelihoods.
There are also concerns around the question of how to counter the potential challenges for social, economic, political and security policy from a large, restive youth population.
Firstly, it is important to note that the gap between modern economies and African markets is growing. Leaders talk about the challenges posed by the fact that some 60% of Africans are under 30 years old, but they seem unable or unwilling to recognise that this has real implications for their countries. This is despite the constant reminders from scenario planners, technology buffs and consultants. A new world is upon us – one in which traditional sectors and jobs are being disrupted by technology and replaced with artificial intelligence and robots.
This trend has been given a name – the Fourth Industrial Revolution (4IR). The term was coined by the World Economic Forum to describe a digital age in which technology is disrupting existing business models and sectors and, importantly, jobs. Meanwhile, much of Africa is viewed as being stuck in the Second Industrial Revolution, with governments prioritising industrial programmes and skills that will be disrupted, and even marginalised, by current technology trends, which present both huge opportunities for tech-savvy young entrepreneurs but also major challenges for employment for millions of unskilled young Africans.
There are pockets of Africa – sectors rather than countries – that have leapfrogged into the Third Industrial Revolution, in which the technologies of ICT and electronics are the drivers of change. Africa’s underdevelopment has provided a clean slate for technological innovation that bypasses traditional models to address longstanding challenges.
Energy is an example. With millions of Africans still far from a power grid, renewable energy innovations are reaching across the continent. An initiative in Kenya, M-Kopa Solar, has in five years connected more than half a million homes to its pay-as-you-go solar solution for rural and low-income households. It is now rolling out in Tanzania, Uganda and Ghana. In another example, the mobile revolution has highlighted the enormous appetite for technology and entrepreneurship among Africans, particularly the youth. Africa has seen the highest mobile phone growth of any region over the past decade.
According to the Mobile Ecosystem Forum, the continent has a subscription penetration (percentage of the population) of 82%, which is expected to reach 100% by 2021. Much of this growth will come from the new generation. This is also increasingly being shown in the banking sector. According to the UN, 12% of adults in Africa have mobile bank accounts as compared with 2% of adults globally.
In Kenya it is as high as 58%. IBM CEO Ginni Rometty has coined the phrase “new-collar jobs” to describe work that doesn’t require a traditional degree but does require high skills levels in areas such as cyber security, data science, artificial intelligence and the cloud. This describes workers who sit somewhere between “blue collar” and “white collar” on the traditional work spectrum. She first raised it in 2016 in an open letter to then president elect Donald Trump, detailing ways she felt Americans could benefit from advances in technology.
The private sector, recognising the potential opportunity – and challenges – of Africa’s demographic, has stepped in, focusing efforts on these “new-collar” jobs. For example, IBM has, with the UN, launched a $70 million initiative to create jobs in Africa, focused on digital literacy. It aims to train 25 million youths over five years, kicking off in five countries – South Africa, Kenya, Nigeria, Morocco and Egypt.
The Rockefeller Foundation’s Digital Jobs Africa initiative offers skills training and linked job opportunities for Africa’s young people. More than 150,000 youths have already been trained and 455,000 connected to jobs. There are many other international initiatives of this kind. But these efforts are not limited to international interventions.
Africans are also coming to the party. A leading player is Nigerian philanthropist and businessman Tony Elumelu, chairman of Heirs Holdings. His foundation is spending $100 million on entrepreneur training programmes in Africa. Africa’s youths are its future and their fate cannot be left to chance, he told Africa in Fact. “Africa’s development will have at its heart young African innovators and their transformative ideas. Only they will create the millions of jobs Africa needs.”
The African Development Bank Group (AfDB) has launched a “Jobs for Youths” strategy to create 25 million jobs over 10 years. African millionaire Ashish Thakkar, chairman of pan-African investment firm Mara Group, is a member of the AfDB’s Presidential Youth Advisory Group. He says it is vital that Africans acquire the right skills sets for the future.
“With artificial intelligence and everything else that is happening, the reality is that what we are training our youth for today may not be relevant in 10 years’ time,” he told Africa in Fact. “So it is important to see how we can create systems and thinking to get them to learn, unlearn, and relearn when necessary.” Similar initiatives are gaining traction. Technology hubs are driving innovation across the continent. According to the mobile operators’ association, GSMA, there were 314 technology hubs in 93 cities across 42 countries in 2017, and the number is growing.
Non-governmental organisations are playing a key role in delivering innovation to communities around Africa. But the initiatives currently in play are a drop in the ocean compared to the need. Meanwhile, the continent’s leaders, who might have been expected to take a lead in such an important matter, appear to be stuck in redundant ways of thinking that have not delivered development over the past few decades, let alone knowledge-based economies.
The continent’s developmental challenges are still enormous. Out of the 37 countries listed in the 2017 Low Human Development category of the UN Human Development Index, some 31 are African. This is what young people stand to inherit. The popular view that rising labour costs in China will lead to millions of low-skilled jobs relocating to Africa is optimistic, given the automation of work globally and the lack of skills and low productivity in Africa.
There is a concern that digital transformation could increase Africa’s income gap even further, given the challenges in education. The new skills and competencies required by 4IR are not being taught in schools in Africa, where thousands of children don’t have classrooms, let alone computers. Connectivity in Africa still trails behind at 21% as compared to the global average of over 40%, and more than 70% in the European Union, according to the International Telecommunications Union.
Rather than stimulating entrepreneurship, policymakers are regulating it. A general lack around the continent of enabling policy in this regard is acting as a handbrake on progress. Governments in Africa don’t understand the integral role that technology can play in an economy, according to Ghanaian Bright Simons, president of digital company mPedigree Network. They treat it as a marginal factor, and fail to see that it is a transformational sector that, properly stimulated, could increase economic inclusion and growth.
Africa is not short of young entrepreneurs with good ideas, ambition, energy and talent, which can be harnessed to drive more inclusive growth. Young people are also impatient for change. As their access to information increases, they will gain more power to hold their leaders accountable, and to push for a new political agenda that will allow them input into the processes and policies that shape their lives.
But digitally savvy young Africans across the continent are mostly being left to forge their own paths through a rapidly changing world. If Africa is to realise and build on the opportunities presented by 4IR, a radical mindset change at the policy level will be necessary. Policymakers should be seeking every opportunity to support, and not hinder, the modernisation of African economies. Young people are increasingly recognising that this is the only way to build a decent future for themselves, and one day, their children.
Children from Kuma Garadayat (North Darfur) Image: UNAMID
Africa’s youth employment and education trends are worrying. Over the next few years much of the continent will be affected by two trends, namely continued high levels of unemployment and continuing high fertility rates.
The latter, in particular, will lead to bulging youth populations in many countries around the continent. If not addressed adequately and quickly through appropriate policy actions the result will be disharmony – and possibly much worse – as well as even higher unemployment in the future. Africa’s working age population (those 15 years and older) will pass one billion people by 2030, according to United Nations (UN) statistics. That will be a 45% increase from 2105.
Of the 73 million jobs created in Africa between 2000 and 2008, only 22% were filled by youth, according to statistics from the International Labor Organization (ILO). The rate of unemployment among youth is currently estimated to be double that of adults in most African countries, according to the same study. The African Development Bank said in a 2015 report that creating new jobs and simply lowering the youth unemployment rate to that of adults would lead to an increase in Africa’s GDP of between 10% and 20%.
While the bank did not indicate a time frame, the increase would be significant even over a period of decades. More worrying, though, is that the structural composition of Africa’s labour force is not expected to shift significantly during this period. The African Centre for Economic Transformation (ACET), an economic policy institute based in Accra, Ghana, has argued that the lack of structural transformation of Africa’s economies could dampen opportunities for long-term economic growth.
A similar scenario may play out for employment in Africa. Unless structural changes emerge that are supported by robust and well-articulated policies, the labour force will neither respond to opportunities created by the Fourth Industrial Revolution (4IR; see the articles by ‘Gbenga Sesan, Dianna Games and Toby Shapshak in this edition of Africa in Fact), nor meet the needs of Africa’s youthful population.
For example, according to 2017 ILOSTAT data, Africa’s labour sector share in agriculture will decline from 67.5% in 2015 to 61.5% in 2030 for low-income countries. As another example, Africa’s labour sector share in trade and transport will decline from 25.1% in 2015 to 24.3% in 2030 for upper middle-income countries.
These incremental shifts will not allow Africa to capitalise on global trends in employment, which are now mainly driven by technology and innovation. Likewise, 2017 ILOSTAT survey data covering 25 African countries shows a very low labour sector share in manufacturing – only between 6% and 8% of total employment. That share is expected to decrease between 2015 and 2030, just when manufacturing could be driving employment generation.
The troubling labour trends are coupled with poor education outcomes. Last year, the McKinsey Global Institute (MGI) calculated that Africa needs to enroll 33 million young people in vocational and training education in secondary schools, whereas there were only four million enrolled in 2012. According to the 2018 World Development Report, Learning to Realise Education’s Promise, fewer than 7% of children in primary school are basically proficient in reading, while just 14% are basically proficient in mathematics.
The report notes a wide range of challenges, including children often suffering from illness or income deprivation. At the same time, teacher absenteeism is a significant challenge, as is the basic education of teachers in many countries. While many African countries certainly do face policy challenges when it comes to youth employment and skills agendas, it is also true that the types of jobs likely to be created over the coming decades may offer significant potential upsides.
For example, according to a working paper by James Bessen in 2016, it is estimated that computer use is associated with a 0.3% rise in overall national employment. Likewise, productivity growth (for example, from enhanced technology and innovation) in an industry tends to generate positive employment spillovers elsewhere in the economy, according to a 2017 study by David Autor and Anna Salomons. A one-unit increase in new automation leads to a 0.2% increase in the employment to population ratio, according to a 2017 article by Katja Mann and Lukas Putterman.
The new economy is also expanding opportunities. For example, online job sites and social networking platforms allow for a more diversified labour market participation, particularly for young women and disadvantaged groups. New jobs are being created that did not exist before, and market-entry space has been created for entrepreneurs – particularly regarding social enterprises. While there are concerns about job losses associated with automation and technology, we feel that the pace of change will likely allow Africa to see a net positive benefit over the medium term.
However, even with strong policy design and implementation, not all sectors will contribute equally to employment growth in Africa. It is likely that a few particular sectors will be the primary economic drivers. The ICT service sector has strong prospects in business process outsourcing (BPO), which is likely to bring more people into the labour markets, including women. Some studies indicate that one in four jobs in the United States have been – or could be – offshore in the future, according to a 2013 working paper by Alan S. Blinder and Alan B. Krueger. Interesting business models for medical services are developing that are increasingly taken offshore to countries such as India, China, the Philippines and South Africa. In India, the BPO industry already employs more than three million workers, 30% of who are women. In the Philippines, BPO employs 2.3% of all workers, according to the World Development Report 2016, Digital Dividends.
A delegate at the youth-led meeting entitled “1 + 4 = 16 Targeting Poverty and Education for Peace” at the UN, 2016 Photo: DPI/UN
Agriculture also has significant potential to provide additional and higher-income jobs for the future, mostly due to high-end technology. Drones are being used for remote sensing, farm equipment is increasingly robotised to improve precision agriculture, and “telephone farming” is enabling city dwellers to farm remotely with access to irrigation, lighting, heating and weather-station data with smart-phone technology. According to a recent report by ACET, Agriculture Powering Africa’s Economic Transition, employment in Africa could be significantly boosted by the development of agricultural value chains, including agro-processing, input manufacturing and agricultural services. These sub-industries could open a host of productive employment opportunities in non-farm sectors.
Many of these jobs are likely to be attractive to Africa’s expanding population of educated youth, most of who do not think of “farming” as an appealing vocation. In the long term, bringing more young people into farming is essential for replacing the ageing traditional smallholders who are now the backbone of African agriculture.
While, according to the ILOSTAT data, the share of jobs in manufacturing will decline over the coming period, it will continue to be an important sector for employment. A few countries, such as Ethiopia, are starting to capitalise on the emerging opportunities in this sector. African manufacturing has traditionally lacked automation to boost productivity and competitiveness. Automation, of course, requires upskilling and improved infrastructure. The existing high-tech infrastructure could be adapted; indeed, in many cases it is only being expanded now, for example, with cellular networks and industrial electricity grids.
Moreover, a 2018 study from Karishma Banga and Dirk Willem te Velde of the Overseas Development Institute (ODI) indicates that African countries have a window of opportunity to move into somewhat less automated sectors, where technology installation has been slower. Automation varies greatly across sectors, with automotive and electronics sectors at the forefront while food processing and furniture production lag behind. This provides an opportunity for local and regional focused manufacturing.
Even as these industries become susceptible to automation, the 2018 report by ODI points out that Africa’s lower labour costs mean that African countries will have about a decade or longer to adjust before cost of robots fall enough to replace human labour.
This window should be used to build manufacturing capabilities and a continued focus on improvements in basic infrastructure such as a reliable power supply, telecommunications and roads – combined with a targeted approach to building industrial capabilities.
There are multiple approaches whereby African governments can immediately address the medium-term demand for skills for youth. Capitalising on the so-called “demographic dividend” represented by the high proportion of young people will not be automatic; it will require effective and ongoing policy implementation.
Firstly, Africa’s economies must create sufficient productive jobs, which requires strong and sustained growth. The Brookings Institution (2018) estimates the required economic growth to be in a range of between eight and nine percent. Industrial policies should favour labour intensity. Sectors such as agriculture and agro-processing, infrastructure, wholesale and retail trade, and tourism are particularly good candidates relative to their current growth rates and their economy-wide (infrastructure) or multi-sector (tourism) multiplier effects.
The transformation of the continent’s economies is crucial to ramp up growth. Clearly, governments will need to engage industry much more deeply and constructively than they have in the past. From a demand-side perspective, industry will need to be involved in improving skills quality and in enhancing access to technical and vocational training.
This can be facilitated by establishing skills councils and by industry participation in the quality assurance and assessment of learners. Government/industry collaboration on staff and student internships and training partnerships would be a critical element in this, based on national, regional and global best practice.
Likewise, governments will need to rapidly address regulatory and investment climates to expand job creation for youth. While making it easier to do business and improving the investment climate are important to industrial policy in particular, they are crucial regarding employment more generally.
This is because technologies are new and regulatory authorities, which tend to be conservative and understaffed, may not be nimble enough to develop needed regulations or may create stifling regulation based on poor understanding or unwarranted fears. Kenya, for example, has been at the forefront in creating a regulatory framework conducive to mobile banking, but fairly erratic in the development of drone regulations.
At first, the country banned drones but then it introduced punitive drone regulations, charging exorbitant fees for their use. A recent ACET survey indicates a low level of awareness among policymakers of new technologies and their relevance to creating youth employment opportunities.
However, some governments are taking experimental approaches to help increase understanding. For example, South Africa’s Reserve Bank will allow experimentation with block-chain technology – a secure transaction ledger database that is shared by all parties participating in an established, distributed network of computers – in the banking sector because this will allow the institution to better understand them and thus to devise an appropriate regulatory regime.
Governments will not only need to expand and deepen skills development but focus on quality of skills for youth. Investment is needed in modern competencies for teachers and instructors, as well as updated teaching, learning and training facilities. While there has been some movement toward ICT-supported learning, it is not widely adopted or supported in most African nations. Enhanced cellular and broadband capabilities will enable African countries to leverage existing learning platforms.
But, of course, this will require adequate financing, which cannot be provided only by the public sector. African governments will need to establish dialogues and partnerships with the private sector to jointly finance quality skills development.
Finally, it will be necessary to improve access to – and perceptions of – technical and vocational education training (TVET) for and among Africa’s youth. Currently, perceptions of TVET among African policymakers and youth alike are that it is less prestigious, and less likely to result in improved socio-economic status, than tertiary academic education. TVET is therefore poorly funded, while facilities often do not cater to girls or people with disabilities. Governments need to invest more in understanding the demand for technical skills, and to make formal, concerted efforts to match skills to demand.
Presently, the opportunities are greater than the challenges as regards ensuring that Africa’s young people are provided with the skills that enable them to get jobs and build livelihoods. But all stakeholders will need to work together – and work quickly. In most instances, the required policy actions can be derived from global and regional best practices. That is not to say they are easy; there will be winners and losers. But it is imperative to manage the wins and losses now if we are to avoid losing an entire generation of young people, who are the future of Africa.