Africa’s business
and political leaders are buoyed by the continent’s growth prospects. But
Donald Kebaruka, African Development Bank president is cautious. He argues that
African countries must now pay attention not to just GDP growth, but its
quality and sustainability.
Currently, Africa’s growth is powered by a confluence of
factors, including foreign direct investment, the rise of the middle class and
a surge in global demand for commodities, especially by China. African
countries have also liberalized their economies, removing growth-stifling
distortions. Moreover, a growing middle class is driving demand for goods and
services.
Kenya’s last population
census showed that out of 14.3 million people in employment, only 2 million
people were employed in what is considered as the modern formal economy. 3.1
million people were employed in the informal sector. The remaining, 64 percent
did not work for wages. This is precisely why many pundits doubt the sustainability of Africa’s
growth, arguing that the ingredients for sustained and inclusive growth are
lacking.
The patterns we see in Kenya underlays Africa’s growth
uncertainty and undermine its capacity for structural transformation. Unlike
Africa, East Asia converged more rapidly with the West because they transformed
their farming populations into middle-income industrial workers and exported a
wide range of sophisticated manufactured goods. In Kenya, like many African
countries, today manufacturing contributes 18 percent, of GDP, just like in the
1970s.
Africa’s much
celebrated rapid urbanization is not supplying African cities with high quality
human capital to fuel innovation and creativity. These new unskilled urbanites
find low paying jobs in the service sector, such as transport, hospitality,
retail, security and construction, not in manufacturing industries. Moreover,
private or public sector investment in modern industries has not grown and
remains too tepid to power consequential structural transformation.
Experts have long
held that dominant feature of Africa’s economic landscape – the informal sector
or Jua Kali – is serving a vital
social safety net function in urban areas by absorbing new immigrants from
collapsing rural economies. However, it cannot provide the sorely needed
productive dynamism of modern industrial society.
Over a decade of
credible growth and economic expansion and increased domestic consumption has
raised the expectation of Kenya’s youth. However the economy has failed to
deliver high quality wage paying jobs in sufficient numbers. According to
recent Economic Survey data, the working age population is growing by 800,000
per year while the economy is adding a paltry 50,000 wage paying jobs in the
formal sector.
Economic growth
that does not make available broad opportunities or alienates large sections of
the population, especially the youth, is a recipe for social instability. A
sense of inclusive economic growth and of an equitable society is the bulwark
of social cohesion and political stability. In young country such as ours,
where 51 percent of the population is aged between 15 and 54 years of age,
social sustainable and equitable growth is central to national stability.
In my view GDP
growth will not eliminate poverty or bring about economic inclusion, regardless
of how strong or long. There is no such thing as trickle down. To have a truly
transformative impact, economic growth must be supported by robust social
policy, which promotes investment in high quality tertiary education, including
vocational training.
It will be
difficult to improve the quality of Africa’s human capital sufficiently to
power structural transformation. According to a UNESCO report published in
2009, gross enrollment in Africa’s higher education was just 5 percent,
compared to 11 percent in India, 20 percent in China and 70 percent in OECD
countries.
Africa’s lack of
sufficiently educated and skilled work force is profoundly depressing. An audit
conducted in 2011 revealed that only 10 percent of Kenya’s civil servants have
post-secondary education. This is hardly surprising given that only 22.8 percent
of Kenya’s population has more than primary school level of education.
Even where
governments, donors and the private sector have invested in education, there
has been limited improvement in quality. Competency in numeracy and literacy among
primary school leavers across East Africa is deplorable. Thoughtless expansion
of university education has eroded the quality of higher education, producing
functionally illiterate graduates who now swell the ranks of unemployable
youth.
Africa’s high GDP
growth owing to liberalization, commodity booms, growing domestic consumption and
prudent fiscal management are reason for optimism. But the fundamentals
necessary for inclusive, transformational and durable economic growth are
lacking.
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