Africa Rising, But Not For Everyone: Employment Can't Keep Up With GDP Growth: Report

ADDIS ABABA, Ethiopia -- African countries have experienced incredible economic growth over the past several years, and this so-called Africa rising phenomenon has spawned an optimistic new narrative, supplanting outdated ideas about a continent plagued by poverty and riven by ongoing conflicts. The World Bank projects that GDP growth in sub-Saharan Africa will hit 4.9 percent this year, rise to 5.3 percent in 2014 and ascend to 5.5 percent in 2015.

But a new report from the United Nations Conference on Trade and Development poses a compelling question: What good is economic growth if it only benefits a fraction of the population? UNCTAD's "Least Developed Countries Report 2013" finds that although African economies are recording impressive GDP expansion, many citizens have yet to reap the benefits. The term "Least Developed Countries," or LDCs, refers to nations where standards of living are low, economic vulnerability is high, and per capita income is minimal -- typically less than $922. African countries account for 34 of the world’s 49 LDCs.

This year's report focused on employment, noting that the number of formal-sector jobs has not increased proportionately to the rate of economic growth; LDCs are expected to grow by an average of 5.7 percent this year, compared to 3.3 percent for real GDP globally. But between 2000 and 2012, employment in these 49 countries increased by just 2.9 percent -- well below average economic growth of 7 percent during the same period. "In terms of growth, they are doing okay," said UNCTAD's LDC Africa Division Director Taffere Tesfachew at the launch of the report here in Ethiopia's capital city. "But they still need to do more. That is the story."

At the heart of African LDCs' challenges is a youth bulge, which could become a liability if youth employment rates continue to lag. But, conversely, it could also become a boon -- often referred to as a ‘"demographic dividend" -- if the skills of an increasingly young population can be effectively utilized. "The LDCs face a stark demographic challenge as their population, about 60 percent of which is currently under 25 years of age, is expected to double to 1.7 billion by 2050," says the report. "The LDC youth population [aged 15 to 24 years] is expected to soar from 168 million in 2010 to 300 million by 2050, an increase of 131.7 million."

For these young people in developing countries, employment -- not economic growth alone -- will be key. But the UNCTAD report found that economic growth has done relatively little to ameliorate unemployment and poverty, especially in countries like Nigeria and Angola where revenues depend heavily on capital-intensive resource extraction enterprises that demand little in the way of labor.

Taffere pointed to Ethiopia as a good case study for the report, noting that the economy does not depend on capital-intensive resource extraction and that the government has adopted the recommended policy of devoting public funds to broad-based growth. The country has the world's sixth-highest rate of public investment as a percentage of GDP, and its third-lowest rate of private investment. GDP growth has averaged 10.6 percent annually during the past decade, though it slowed to 9.7 percent in the fiscal year ending this July, and the World Bank expects it to slow further to 7 percent annually over the next five years.

Also, at the report launch, Ethiopian State Minister Abraham Tekeste of the Ministry of Finance and Economic Development spoke highly of UNCTAD's report. "This is a very important agenda for African countries, including Ethiopia," he said. "There is a lot that we can learn from the report in terms of progress, challenges, and what we can accomplish in terms of growth, job creation and poverty reduction."

But although the Ethiopian government says it has "allocated 70 percent of the national budget to ‘pro-poor’ sectors including education, health, water and roads" this year, the country still has a ways to go; about one-third live below the national poverty line, and the unemployment rate is 17.5 percent.

Clearly, the challenges for LDCs in Africa and around the world are formidable. According to the UNCTAD report, these include dependency on low-value commodities, a reluctance to diversify from highly profitable capital-intensive enterprises, and a dearth of technical expertise and regulatory institutions. But in the long term, these difficulties must be overcome in order to ensure that Africa's rising tide lifts all boats.

"You can grow because tourism goes up; you can grow because you're exporting oil; you can grow because you're improving agricultural productivity," said Taffere. "How well that wealth is distributed is a different matter."