Achieving macro-economic stability and sustaining growth in Africa will need to take the continent’s large and growing youth population into account – especially as currently, the bulk of this population is excluded from meaningful economic participation.
While Africa’s young and growing population presents the continent with a historic development opportunity, global studies have found that economic inequality is detrimental to long term GDP growth. A standard deviation rise in inequality impedes per capita GDP growth by 0.5 to 0.8 percentage points. As such, the current challenge for Africa is to ensure that long term economic growth is not compromised by a vicious cycle of high population growth and high inequality.
Since technology and the means and methods of generating economic growth are changing so rapidly, Africans need to develop the elasticity to leverage growth in a new global economy demanding very different skills sets.
For example, today, relevant education is more than just literacy and numeracy. The most ‘in- demand’ jobs today did not exist 10 to 15 years ago. According to the World Economic Forum, 65% of children currently entering primary school will work in jobs that do not exist today.
These challenges require Africa to re-look at how its policy environments intersect with new technologies to create sustainable growth through domestic diversification, regional trade and export-led growth.
Low employment and in-elasticity of growth can be addressed by getting governance right.
The elimination of graft and public waste is also critical in lightening individual tax burdens, deepening local investment and reducing dependence on global capital markets. Labour market flexibility and reform is equally critical. Combining labour flexibility with macro-economic flexibility, especially in the foreign exchange markets, is key to attracting job-generating inward capital flows.
The private sector can help shoulder the load in the provision of social overhead capital, like transport infrastructure, energy and tech-enabling infrastructure – delivered through private public partnerships.
Africa’s SME potential for inclusive growth
Africa’s SME sector is already one of the largest employers in Africa. Developing the skills sets appropriate for growing domestic SME sectors able to support export-led growth, requires a combination of private sector investment and skills transfer.
Taking Africa’s green revolution global
Agriculture also stands out as a game changer, especially for youth inclusion. Agriculture is already the largest employer in Africa. Government policy allied with private sector investment in energy, transport, agro-processing and agri-supply chain technologies has the potential to shift this sector onto a higher – and more inclusive – growth trajectory. With the right polices, investment and infrastructure, and functioning Commodity Exchanges, African agriculture can rapidly evolve from an employer of labour and supplier of subsistence, into a globally-competitive hard-currency generating export sector.
The last decade has demonstrated the resilience of Africa’s more diversified economies – especially in delivering growth through change and in the face of global economic headwinds.
Those African economies that have focussed on developing multiple export-led sectors disciplined by global markets have sustained impressive growth in the face of global uncertainty – through the generation of multiple hard currency earnings. If foreign investment is freed to flow to those sectors of the economy with the greatest chance for export-led growth, investment can act as a driver of economic diversification.
Technology presents new growth opportunities for all
Technology is completely changing how Africans transact, acquire skills, build and use infrastructure - and access capital.
World class banks vital
Banks are the pivots around which economies develop, people transact and through which wealth is created and protected. Financial institutions are vital for growth in Africa – especially for accessing global capital, deepening domestic and regional capital markets, and driving financial inclusion.