Africa: Jobs, justice, and equity
This year's Africa Progress Panel report , released on May 11 and available at http://www.africaprogresspanel.org/apr2012, like almost all international reports, has its quota of compromise language and generalities. But it also is very explicit in its focus on equity as well as growth, denouncing 'land grabs' and high levels of internal inequality in African countries. It highlights greater equality and social justice as not only the right thing to do but also as indispensable to sustained economic growth benefiting the majority of African people.
For anyone concerned with the future of the continent and its capacity to define its own path to development, this report is essential reading. It came a few days before the first Africa Human Development Report from the UNDP, released on May 15 and available at http://www.undp.org / direct url: http://tinyurl.com/7y4g52j, which stresses the imperative of food security for African development. [Excerpts from the Human Development Report will appear in a future AfricaFocus Bulletin.]
This AfricaFocus Bulletin includes the press release on the Africa Progress Panel report, and excerpts from the introduction and from the first part, which is entitled "Africa Rising - But while some Africans are rising others are not." Among excerpts included below is a box debunking the widespread notion of a large African middle class as "premature."
Africa Progress Report 2012 - Jobs, Justice and Equity: Seizing Opportunities in Times of Global Change
Press Release Africa Progress Panel warns that growing inequality threatens Africa's growth
New report says that African leaders must deliver on jobs, justice and equity to turn Africa's population boom into a demographic dividend and avoid "disaster"
11 May 2012, Addis Ababa - The 2012 Africa Progress Report, launched today by the Africa Progress Panel, warns that Africa's strong economic growth trajectory - which will see the region increase the pace of growth well beyond 5 per cent over the next two years - is at risk because of rising inequality and the marginalisation of whole sections of society.
Kofi Annan, Chair of the Africa Progress Panel, states in the report that, "Disparities in basic life-chances - for health, education and participation in society - are preventing millions of Africans from realizing their potential, holding back social and economic progress in the process." The report notes that Africa has seven of the world's fastest-growing economies, with 70% of Africa's population living in countries that have averaged economic growth rates in excess of 4 per cent over the past decade. However, the report also records that most countries are not on track to achieve the Millennium Development Goals by 2015, flagging slow progress in areas such as child nutrition, child survival, maternal health, and education.
The need for equitable growth is all the more critical, the report states, because of Africa's "profound demographic shift", which will see the continent's population double in three decades, and continue to rise into the second half of the twenty first century. The report highlights that today there are 70 million more Africans aged under 14 than there were a decade ago. Over the next decade that number will rise by another 76 million. The report calls for a "relentless focus" by policymakers on jobs, justice and equity to ensure sustainable, shared growth that benefits all Africans. Failure to generate equitable growth could result in "a demographic disaster marked by rising levels of youth unemployment, social dislocation and hunger." Africa's governments and development partners must urgently draw up plans for a big push towards the 2015 Millennium Development Goals, the report says.
The Panel's report identifies a range of challenges demanding urgent action on the part of governments, including:
Youth employment : Africa's youth population (15-24 year olds) will rise from 133 million at the start of the century to 246 million by 2020 - requiring another 74 million jobs over the next decade simply to prevent youth unemployment from rising. The report sets out an agenda for raising skills and generating rural jobs through off-farm employment.
Smallholder agriculture: In the absence of a concerted effort to raise the productivity of smallholder agriculture, the report cautions that Africa will remain vulnerable to food security crises. It identifies 'land grabs' by foreign investors and speculators as a major threat and urges African government to consider stronger regulation.
Education : The report calls for urgent action to tackle what it describes as a 'twin crisis' in access and learning. With 30 million children out of school and many of those in school failing to master basic literacy, Africa is illequipped to generate jobs and take its place in a knowledgebased global economy. The report calls for a strengthened focus on education and the creation of appropriate funding mechanisms.
Global economic governance and aid : The report notes that Africa still has a weak voice in areas - such as trade, finance and development assistance - that have a critical bearing on its citizens. The report adds that aid remains vitally important and that African governments and development partners must deliver on their commitments in a transparent and accountable way.
Caroline Kende-Robb, Executive Director of the Africa Progress Panel, says: "Africa is rising and African economies are growing faster than those of almost any other region in the world. However, the current pattern of trickle-down growth is not benefitting enough people. Indeed, benefits measured by poverty reduction, maternal health and childhood survival fall far short of what Africans have a right to expect. The report calls for renewed focus on jobs, justice and equity to ensure that Africa's impressive economic growth is translated into shared growth for all Africans."
Kofi Annan says: "The overall message of this year's report is positive. Africa is on its way to becoming a preferred investment destination, a potential pole of global growth, and a place of immense innovation and creativity. But there is also a long way to go - and Africa's governments must as a matter of urgency turn their attention to those who are being left behind. I believe Africa and its leaders can rise to this challenge. If they do, Africa will become more prosperous, stable and equitable. This is a prize which we all, wherever we live, will share."
[Following sections are excerpts. For full text, including figures and notes, visit http://www.africaprogresspanel.org/apr2012]
Commentary on Africa has suffered from extreme mood swings, with the pendulum moving from episodes of pessimism to bouts of euphoria. Twelve years ago, The Economist wrote off Africa, describing it as "the hopeless continent". That assessment was not atypical. After a decade of slow economic growth and even slower human development in the 1990s, few observers saw a bright future. How times change. Last year, The Economist ran with a very different cover headline: "Africa rising: the hopeful continent". According to the title of one widely cited report, Africa has now become a continent of economic "lions on the move," blazing a pathway to prosperity. The commentariat spotlight, to quote a few more reports, is now fixed on Africa's "rising middle class," the "dynamic African consumer market" and "growth opportunities for investors".
The extreme pessimism surrounding Africa a decade ago was unwarranted. So, too, is the current wave of blinkered optimism. Real gains have been made, but governments and their development partners need to reflect on the weaknesses, as well as the strengths, of the recent record - and assess both the risks and the opportunities that lie ahead.A mixed balance sheet
Africa's economies are consistently growing faster than those of almost any other region - and at twice the rate of the 1990s7. Improved economic management has contributed to the growth surge. Exports are booming and export markets have become more diversified. Foreign direct investment has increased by a factor of six over the past decade. Private entrepreneurs have emerged as a dynamic force for change, driving innovation and transforming outdated business models. There is an emergent middle class, although its size is often exaggerated. For the first time in over a generation, the number of people living in poverty has fallen. Fewer children are dying before their fifth birthday and more are getting into school. Young and not-so-young Africans are embracing new technologies that provide information, expand opportunities and connect people to one another and to the outside world. There have been setbacks and episodes of political violence, but democracy is growing deeper roots. Governance standards are improving.
Yet there is another side to the balance sheet. Countries across Africa are becoming richer but whole sections of society are being left behind. After a decade of buoyant growth, almost half of Africans still live on less than $1.25 a day8. Wealth disparities are increasingly visible. The current pattern of trickle-down growth is leaving too many people in poverty, too many children hungry and too many young people without jobs. Governments are failing to convert the rising tide of wealth into opportunities for their most marginalised citizens. Unequal access to health, education, water and sanitation is reinforcing wider inequalities. Smallholder agriculture has not been part of the growth surge, leaving rural populations trapped in poverty and vulnerability.
The deep, persistent and enduring inequalities in evidence across Africa have consequences. They weaken the bonds of trust and solidarity that hold societies together. Over the long run, they will undermine economic growth, productivity and the development of markets. They weaken confidence in governments and institutions. And they leave many Africans feeling that their societies are fundamentally unjust and their governments unresponsive. Economic growth alone is not enough. In this year's report, we look at three of the most critical ingredients for transforming a promising economic upturn into a sustained recovery and lasting human development - jobs, justice and equity. We highlight jobs because livelihoods play such a fundamental role in people's life-chances - and because Africa urgently needs to create jobs for a growing youth population. We highlight justice and equity because they are missing from the lives of too many Africans, making the present growth socially unsustainable.A growing demand for equity and justice
We live in a world of rapid and unpredictable transformations. Changes in demography and human geography are re-making societies, not least in Africa. Climate change is interacting with other pressures to reconfigure agricultural markets. Economic power is gravitating from West to East and North to South. The pace of technological innovation is accelerating and the face of social protest is changing.
The Arab revolutions of 2011 caught the world by surprise, as social movements challenged and toppled autocratic rulers across North Africa, the Middle East and the Arabian Peninsula. In Europe and the United States, the financial crisis has spawned new forms of social protest. In India, a mass social movement is demanding action to combat corruption. Villagers in a remote area of southern China successfully mobilised against autocratic officials responsible for overseeing land grabs. A shared sense of frustration and discontent with unresponsive governments, inequality and injustice links these movements.
Africa is not immune to the economic and political currents that are reconfiguring globalisation. Its leaders need to find a place in the global economic governance architecture of a multipolar world. Africa's own demography and human geography are changing. Failure to create jobs and opportunity for a growing and increasingly urbanised and educated youth population would have catastrophic consequences, socially, economically and politically. Having played a minimal role in creating dangerous climate change, Africa's farmers face some of the gravest risks. And the Arab Spring has not gone unnoticed by Africa's youth. The circumstances may be different, but young people in Africa also care about jobs, justice and equality - and governments ignore them at their peril.
1. Economic Growth: Moving to the Premier League
In the world economic growth league, Africa has moved from the lower echelons to the premier division. After a downturn in 2008, recovery from the global economic crisis has continued (Figure 2). Some of the fastest-growing economies in the world are in Africa (Figure 3). Seven in every 10 people in the region live in countries that have averaged economic growth rates in excess of 4 per cent for the past decade. From 2005 to 2009, Ethiopia recorded higher growth than China, and Uganda outperformed India. In 1996, there were 13 countries with inflation rates above 20 per cent; since the mid- 2000s, there have been no more than two. Much of this growth and rebound is due to improved policies.
Africa's economic prospects remain promising. Growth in SubSaharan Africa is expected to recover to 5.3 per cent in 2012 and 5.6 per cent in 2013, underpinned by strong export demand, rising commodity prices and firm domestic demand, and buttressed by government infrastructure spending.
It is not just the headline numbers that are impressive. GDP per capita is also rising. Growth is more diversified, more resilient - and in some countries less dependent on exports of primary commodities. Revenues from natural resources account for no more than onethird of Africa's growth over the past decade. While the price boom in global commodities has certainly contributed to Africa's recovery and the regional terms of trade improved sharply in 2010 and 2011, domestic consumer markets are also growing and Africa's private sector is an increasingly powerful engine for growth.
Export diversification has also played a vital role in supporting strong growth. Before 2000, Africa's fortunes were strongly tied to those of Europe and the United States. These are still critically important markets. But deepening ties with Brazil, Russia, India and China - the BRICs - as well as Gulf countries and Turkey, helped first to insulate Africa partially from the global economic downturn, and then to drive recovery. The bulk of the "BRIC effect" has operated through trade (see Part II, Section 3). But the economic linkages go beyond trade. Chinese foreign direct investment into Africa has grown rapidly over the past decade.2. The Record on Poverty: Constrained by Inequality
Economic recovery has been accompanied by accelerated progress towards most of the Millennium Development Goal (MDG) targets. Africa has started to turn the corner on reducing poverty. Between 1999 and 2008, the last year for which data are available, the share of Africans living on less than $1.25 a day fell from 58 to 48 per cent. More encouraging still, the rate at which poverty is falling appears to have gathered pace. The World Bank's most recent estimates suggest that the number of poor people in the SubSahara region fell by around nine million between 2005 and 2008.
Other social indicators have also improved. Compared with a decade ago, Africa's children are less likely to die before their fifth birthday, women are less likely to die from complications of pregnancy or in childbirth, and more children are getting into school. The average annual rate of reduction in underfive mortality has accelerated, doubling between 1990-2000 and 2000-2010. Measured by the rate of reduction, 6 of the 14 best-performing countries in the world - including Ethiopia, Ghana, Malawi and Niger - are in Africa. The number of out-of-school children has fallen by 13 million.
The overall record on poverty, however, does not match Africa's economic growth. There are still 386 million Africans struggling to survive on less than $1.25 a day and Africa accounts for a rising share of world poverty. At the start of its growth surge in 1999, Africa accounted for 21 per cent of the world's poverty. By 2008, that share had reached 29 per cent. And while much has been made of the growth of Africa's middle class, this group remains small (Box 2).
Some of the countries with the strongest economic growth have a mixed record on reducing poverty. In Mozambique, for example, household survey evidence showed no decrease in national poverty from 2002 to 2008 and in the Central regions there was a marked increase in poverty. Tanzania has been one of the world's fastest-growing economies. Yet from 2000 to 2007 income poverty fell only from 35 to 33 per cent, according to household budget surveys. Taking into account population growth, this amounts to an additional one million Tanzanians living below the poverty line. Economic growth reduced poverty in Africa, but less than might have been anticipated, with Africa's poor receiving too small a slice of the expanding wealth cake.
Africa's wealth disparities are among the biggest in the world. One widely used measure of inequality, the Gini index, captures the concentration of household income or expenditure (the higher the index, the greater the inequality). In China, where political leaders have identified rising inequality as a threat to social stability and future growth, the Gini index is 42. There are 24 countries in Africa with higher inequality scores than China. In Mozambique, Kenya and Zambia, the Gini index is between 45 and 55, while in Botswana and South Africa it is over 60.
The poorest 20 per cent in Sub-Saharan Africa typically receive 6 per cent or less of national income; and the poorest 40 per cent in most cases receive less than 15 per cent (Figure 6). In many countries, the pattern of economic growth is reinforcing these inequalities. One recent poverty assessment for Lesotho, which has one of the world's highest levels of income inequality, concluded: "The main reason for the high poverty rate is not slow economic growth but high inequality." That verdict has a far wider application in Africa.
The lesson to be drawn is not that growth is unimportant. The challenge is to harness economic growth to a more equitable distribution of opportunity and income. Meeting this challenge requires public policy action on two fronts. First, governments need to mobilise revenues from growth and invest those revenues in the basic services and economic infrastructure that offer poor people greater opportunities (see Part V). Second, governments need to foster an environment that enables the creation of jobs and more resilient livelihoods, so that poor people can contribute to economic growth, "produce" their way out of poverty and secure a greater share of the benefits from growth.
The two goals of growth and equity are not mutually exclusive. The central objective should be economic growth that increases equity and creates jobs. Indeed, a wealth of evidence is now showing that greater equity can boost growth and strengthen the rate at which growth converts into less poverty. Conversely, high levels of inequality act as a brake on growth, limiting the potential for development of markets and investment.
The recent experience of Rwanda is instructive. The 2011 Household Living Conditions Survey documents a triple win of high growth in income, falling inequality and a steep decline in poverty. From 2005 to 2010, average incomes rose from US$333 to US$540, inequality fell (the Gini coefficient dropped from 0.52 to 0.49) and poverty declined from 57 to 45 per cent, resulting in one million people lifted out of poverty. African governments might also look to wider international experience. One country with most-reduced poverty since 2000 is Brazil - and here, too, success has been built on strong growth and improved income distribution. Inequality constrains poverty reduction, and, as highlighted later in this section, social disparities are also acting as a brake on progress toward other MDGs.BOX 2: Rising slowly - an African middle class
As even a brief visit to any major African city confirms, retail sectors and higher-income housing markets are booming. According to the World Bank, economic growth 'is creating an emerging African middle class of hundreds of millions of consumers." The African Development Bank claims that one-third of Africans are already middle class. Major consultancy firms like McKinsey and Accenture have also celebrated the rise of middle-class consumer markets in Africa.
Such conclusions are premature. After a decade of high growth, almost half of all Africans still live below the $1.25 a day poverty line. Another 30 per cent - 246 million people - live in the poverty grey area, on between $1.25 and $2.50 a day. Only 4 per cent of Africans have an income in excess of $10 a day (Figure 4). In other words, the vast majority of what commentators describe as Africa's middle class has either moved just across the $1.25 threshold, or is living well within the gravitational pull of the poverty zone.
Analytical work by the Brookings Institution provides another view. Using a range of $10-$100 per day for membership of a "global middle class," Brookings finds that Africa accounts for just 2 per cent of the world's middleclass population, and 1 per cent of purchasing power.
3. Looking for Work: The Employment Challenge
Employment is the engine of social development. It is through their jobs that people generate income, plan for the future, and contribute to wealth creation, social cohesion and share in national prosperity. Economic growth in Africa is creating employment, but not on the required scale. As demographic pressures mount, it is imperative that governments across Africa develop more employment-intensive patterns of growth at higher levels of skills and productivity.
Every year, 8 million to 10 million young Africans make the difficult transition from school to work. While youth unemployment is a concern, African participation rates in the labour market are among the highest in the world. This is for the simple reason that, in the absence of functioning social welfare systems, young people have no alternative but to work. Not that employment is an automatic escape from poverty. Most Africans work in insecure, low-wage and often hazardous employment, with no prospect of developing their skills. In Nigeria, Mozambique and Burundi, for example, over 60 per cent of young people in employment earn less than $1.25 a day.
Employment creation in the formal sector falls far below the level required to absorb new market entrants. Moreover, most new entrants lack the skills they need to enter firms operating at higher levels of productivity and wages. As a result, the overwhelming majority of young people are destined for employment on farms, rural enterprises or in the informal sector.Despite growth, labour markets remain informal
Africa's decade of growth has done little to alter underlying labour market conditions. Agriculture still accounts for almost two-thirds of livelihoods. Across most of the region, livelihoods are dominated by smallholder farming, off-farm employment in rural areas, and informalsector enterprises, including household businesses and micro-enterprise. Small companies and the informal sectors dominate manufacturing. In Ethiopia, for example, only 5 per cent of people engaged in manufacturing activities work in firms with 10 or more employees.
To make progress, governments need to provide the conditions that enable formal-sector wage employment, predominately in the private sector, to grow rapidly. Even in fast-growing economies like Ghana, Rwanda, Tanzania and Uganda, formalsector employment is starting from such a low base that it has failed to keep pace with the growth of new entrants to the workforce. In Uganda, waged jobs grew at 13 per cent a year between 2003 and 2006, but this absorbed less than one in five of new labour-market entrants.
As estimates by the World Bank underline, even on the most optimistic assumptions about the growth rate of wage jobs, the majority of Africans will remain in informal jobs until well after 2020. Given Africa's underlying demography, the structural transformation to a labour market dominated by private wage employment will take several decades. While more must be done to facilitate the growth of private wage employment, this should not divert attention from three key sectors for labour-intensive growth:
- smallholder agriculture and the scope for raising productivity and employment through a Green Revolution (we highlight the critical role of agriculture in Part II);
- rural household enterprise, which represents the fastestgrowing livelihood sector in most lowincome countries;
- the urban informal sector, which will need to absorb a growing share of Africa's young people as human geography changes.
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