Africa

“Informal Employment Sector” In Africa Hampering Economic Growth

Abidjan, Cote d’Ivoire – Jan 17, 2019: “Africa’s general economic performance continues to improve, with gross domestic product growth reaching an estimated 3.5 percent in 2018, about the same as in 2017 and up 1.4 percentage points from the 2.1 percent in 2016.”

africa

Continent of Africa

The statement is contained in the foreword of the just released African Economic Outlook 2019 Report of the African Development Bank Group (ADB).

On jobs, growth and dynamism on the continent, the report which is not the official position of the ADB summarizes that:

  • Africa’s labor force is projected to be nearly 40 percent larger by 2030. If current trends continue, only half of new labor force entrants will find employment, and most of the jobs will be in the informal sector. This implies that close to 100 million young people could be without jobs.
  • The rapid growth achieved in Africa in the past two decades has not been pro-employment. Analysis of growth episodes reveals better employment outcomes when the growth episodes were led by manufacturing, suggesting that industrialization is a robust pathway to rapid job creation.
  • African economies have prematurely deindustrialized as the reallocation of labor has tilted toward services, limiting the growth potential of the manufacturing sector. To dodge the informality trap and chronic unemployment, Africa needs to industrialize.
  • Key factors impeding industrialization, particularly manufacturing growth, are limited firm dynamism. Firm growth and survival are held back by corruption, an unconducive regulatory environment, and inadequate infrastructure.
  • Estimates from Enterprise Surveys show that 1.3–3 million jobs are lost every year due to administrative hurdles, corruption, inadequate infrastructure, poor tax administration, and other red tape. This figure is close to 20 percent of the new entrants to the labor force every year.
  • Small and medium firms have had very little chance of growing into large firms. Such stunting, coupled with low firm survival rates, has stifled manufacturing activity in most African countries.
  • Reviving Africa’s industrialization requires a commitment to improve the climate that supports firm growth. Industrial policies could benefit from assessing production knowledge and identifying competitive products to inform the design of robust national and subnational industrial strategies.

 

SOUTH AFRICA INFORMAL HAIR TRADE

SOUTH AFRICA INFORMAL HAIR TRADE

The report cited the prevalence of the “informal employment sector” as a key issue in the growth of the labor force.It referenced the  International Labor Organization’s definition of the informal employment sector  as, “…non-contracted jobs that are not regulated or protected and that confer no rights to social protection.5 Informal jobs include noncontracted jobs in the formal sector, as well as all jobs in the informal sector, and account for more than half of all jobs worldwide. Typically, statistics on informal employment exclude agriculture; when agricultural jobs are included, the share of informal employment rises to almost 61 percent worldwide.”

The challenge for Africa is that if no meaningful change is adopted, jobs created will trend more towards the informal sector for nearly 100 million Africans by 2030. Factors associated with the perpetuation of the informal sector system in most places are attributed to economic recession, high unemployment, low productivity employment and lower wages.

Women are disproportiantely impacted; a higher proportion of women’s employment (79 percent) than of men’s (68 percent) except in North Africa”, the report says.

market women in africa

Market Women In Africa

In order to address the issue, African countries have to firstly understand the barriers which impact the perpetuation of the informal sector such as labor regulations, creation of stable, better and high paying jobs and a well prepared workforce; especially among the youths and women.

1999 – 2010 data disclosed in the report says that there is over 80% informality in low income African countries like Burkina Faso, Niger, Madagascar, Sierra Leone, Ethiopia, Tanzania, Cameroon, Mali. Zambia and Benin. The informal sector under 80% exit for countries like Liberia, Ghana, Uganda, Zimbabwe, Kenya and Lesotho.

South Africa and Mauritius have low unemployment and rank under 20% informal sector.

In reference to growth acceleration between 1958 – 2016, ten African countries made the list in Manufacturing, Service, Agriculture and Mining and include, Boatswana, Egypt, Kenya, Mauritius, Morocco, Namibia, Uganda, Ghana, South Africa and Burkina.

Boatswana led in all sectors of growth followed by Egypt.

“Industrial development has been called the “quintessential escalator for developing countries.”21 It has the potential to create decent jobs on a large scale, stimulate innovation, and enhance productivity across all sectors. Within industry, manufacturing exhibits unconditional labor productivity convergence and could be a powerful driver of aggregate income convergence.22 However, even though the industry sector exhibits stronger effects than other sectors on the elasticity of employment to growth during growth acceleration episodes, there are indications that Africa is experiencing premature deindustrialization.

miners in africa

Miners in Africa

That is a major concern for job creation potential in high-productivity sectors and for long-term prosperity. Despite lower initial shares of industry (manufacturing, construction, and utilities) in employment and the economy in Africa than in other regions, industry’s shares have been growing very slowly…”, the ADB Report says.

Some obstacles to doing business in Africa include the lack of finance, unreliable or lack of electric power, political instability, corruption and knowledge and high taxes and regulations.

According to the report, “…The 2019 Outlook  shows that macroeconomic and employment outcomes are better when industry leads growth…”

By Emmanuel Abalo

West African Journal Magazine