Africa’s economy rebounds without jobs

What happens when an economy grows rapidly without generating jobs?

Yesterday I was talking about Ghana’s economy with a Ghanaian who is doing business in Hong Kong. On paper things are booming:

Ghana’s economic growth accelerated to an annual 23 percent in the first quarter as the West African nation began producing oil for export, the country’s statistics agency said….Expansion was led by a 162 percent jump in mining and quarrying, which includes the oil industry, while agriculture grew 39.2 percent. Ghana began production of oil from its offshore Jubilee field in December. Output is about 70,000 barrels a day and may climb to 120,000 next month, according to the field’s operator, London-based Tullow Oil Plc.

But on the ground, things are bit more nuanced. Yes, there are signs of growth and change everywhere (in the cities, at least). But poverty and unemployment are still the norm across much of the country. Youth unemployment remains particularly troubling.

There’s much talk about African economic growth outside of the extractive industries, but in Ghana at least, the extractive industries — and oil in particular — are behind the high GDP growth numbers. Unfortunately, however, the oil industry is not generating the kind of employment that can make a difference.

I’m posting an article from East African Business Week on economic growth without jobs. A reminder if one is needed, that numbers without interpretation don’t tell the whole story:

Alimamy Bangura, a rice farmer in Makeni, eastern Sierra Leone, is unlikely to read the 2011 Economic Report on Africa written by experts of the African Union (AU) and the UN Economic Commission for Africa (ECA).

The report forecasts a 5 per cent economic growth rate for the continent this year. “I am just excited that the rains have come at the right time,” Alimamy told Africa Renewal. “I got some fertilizers from the government, and everyone wants to eat rice in this country.”

Alimamy’s prospects of a better life this year may go beyond just a decent harvest. That is because the doom predicted by some analysts for Africa in the wake of the global financial and economic crisis in 2008 and 2009 did not last. Rather, Africa’s economy is once more in an upswing.

The latest report announced a 4.7 per cent growth rate in 2010, surpassing the global average of 3.6 per cent. The anticipated 5 per cent for 2011 is more icing on the cake.

In 2009 Africa’s growth slowed sharply to 1.6 per cent. But that was still far better than the performance of the developed world, whose economy that year actually shrank by 2.2 per cent.

According to the AU and ECA report, the factors supporting Africa’s growth include good economic polices, enhanced tourism, more activities in the service sector, an increase in commodity prices and higher demand for African exports from emerging economies.

Many African countries are already reaping the benefits of growth. According to the UN Food and Agriculture Organization, Sierra Leone produced 200,000 tonnes of rice in 2004, well short of domestic requirements of 550,000 tonnes. But production rose to 784,000 tonnes in 2009, resulting in self-sufficiency, with some excess for export. The boom in the information and technology industry is revving up the economies of many countries (see Africa Renewal, April 2011). In addition there is an increase in foreign direct investment, particularly in Africa’s extractive industries.

The report further highlights worrisome levels of unemployment in Africa. “The growth rates are still below the levels needed to make a significant impact on unemployment and poverty reduction.”

While growth will be higher still in 2011, it will be a “jobless recovery,” the report says. That will be because investors will likely concentrate on the extractive sectors, particularly oil, gold and diamonds, producing limited “forward and backward links with the rest of the economy” and thus bringing few jobs.

A major problem confronting the continent is youth unemployment. The report argues that a “persistent high youth unemployment rate is a cause of concern and a potential source of political instability.”

According to the South Africa-based Institute for Security Studies, a think tank, “Young impoverished people, many of whom probably did not vote,” contributed to post-election violence in Nigeria.

In order to generate jobs, Africa needs foreign investment in diverse sectors. Walmart, a US-based retail company, is set to inject $2.4 billion into South Africa’s Massmart. Many see that as an example of an investment capable of generating higher job numbers.

The projected 5 per cent growth for 2011 should not be taken for granted. The report states that achieving this growth will depend on “the growth of [Africa’s] major trading and development partners.” Other potential risks could be linked to the “levels of inflows of remittances, official development assistance, elections-related political disturbances and adverse weather conditions.”

MONDAY, 04 JULY 2011 KINGSLEY IGHOBOR

 

 

 

 

This entry was posted on Monday, July 4th, 2011 at 11:39 pm.