Promoting high-level Promoting high-level sustainable growth to reduce sustainable growth to reduce

unemployment in Africaunemployment in Africa

Issues PaperIssues Paper

Meeting of the Committee of Experts of the 3rd Joint Annual Meetings of the AU Conference of Ministers of Economy and Finance and ECA Conference of African

Ministers of Finance, Planning and Economic Development

25-28 March 2010, 25-28 March 2010, Lilongwe, Malawi

Emmanuel NnadozieEmmanuel NnadozieDirector, Economic Development and NEPAD Division, UNECA

OutlineOutline

• Lessons from the global financial and economic crisis

• The great paradox and the need for a new approach and a new emphasis on employment

• Country specific growth strategy to address jobless growth

• Reinforcing the enablers• Explicit promotion of employment• Learning from success stories and building

strategic partnerships• What’s new in all of these?

Current Situation in AfricaCurrent Situation in Africa

• Since the outbreak of the global crises, African GDP growth has declined significantly to 4.9% in 2008, 1.6 % in 2009 but a projected recovery of 4.3% in 2010

• As a result of the crises, unemployment and poverty has been exacerbated

• ILO (2010) estimates that an extra 20million people in Africa are living on less than US$1 a day in 2009 compared to 2008

Lessons from the Global Lessons from the Global CrisisCrisis

1. Africa’s vulnerability to external shocks2. The impact was severe and extend beyond

growth to wider economy and social conditions3. The impact could have been worse had

macroeconomic fundamentals not been sound4. Because impact of the shock depended on the

nature of the economy—hence the need for diversification

5. The shock-induced collapse of growth in Africa shows its fragility and questions its sustainability

Policy lessonsPolicy lessons

• The crises provides a number of short- and long-term policy lessons to African policymakers such as;

-the need to increase policy space to cope with externalities,

-increase domestic resource mobilization-promote regional integration-economic diversification etc

• The biggest lesson is that the crisis has presented The biggest lesson is that the crisis has presented Africa with a great opportunity to look again at the way Africa with a great opportunity to look again at the way business has been donebusiness has been done

• Beyond crises, African countries need to reformulate their long term growth and employment strategies in order to reduce poverty.

The paradox of high growth The paradox of high growth and poverty ratesand poverty rates

• African countries witnessed a high commodity-driven growth before the global financial and economic crises in 2008

• This growth was jobless and did not translate to poverty reduction

• The challenge before many African countries is how to restart, accelerate and sustain growth and how to ensure that this growth leads to poverty eradication

The growth-employment-The growth-employment-poverty reduction nexuspoverty reduction nexus

• There are many ways of reducing poverty but the most sustainable way is through decent jobs

• Growth is the key to poverty reduction and employment is the vehicle through which growth can translate into poverty reduction

• Hence we emphasize the link among growth, employment and eradication of poverty

• This needs to be fully understood, fully accepted and fully embraced

What should African What should African countries docountries do

• Country specific strategy to address the paradox of jobless growth and persistence of poverty through:

– Igniting the engines of high level, job-creating and engines of high level, job-creating and sustainable growth sustainable growth to promote diversification

– Paying attention to the growth driversgrowth drivers

– Reinforcing the growth enablersgrowth enablers

– Promoting growth

– Learning from successful countries and building strategic partnerships to support growth strategies

Igniting the engines of Igniting the engines of growthgrowth

• Export of primary products is not a sustainable engine of growth!

• Ignite the dynamic engines of high-level, job creating and sustained growth and diversification

• The engines of growth must be driven by high productivity sectors with important spillover effects on the rest of the economy– Agricultural modernisation– Construction– Textiles– Manufacturing– Services

Critical growth driversCritical growth drivers

• Adequate supply of factors of production is not a sufficient condition for sustainable growth; certain growth drivers must be in place for growth to occur at high and sustainable levels

• Pay attention to the growth drivers– Human and physical capital and technology and innovation

• Industrial policy if necessary• National and regional agricultural value chains• Strengthen and support the private sector• Address the challenges of the informal sector, small

businesses and microenterprises

Strengthening the critical Strengthening the critical growth driversgrowth drivers

• Growth depends on the quantity/quality of available production factors as well as the efficiency with which these production factors are used

• Productivity growth, technology and structural change are essential for high-level sustainable long-term growth

Reinforcing the enablersReinforcing the enablers

• Economic analysis shows that countries that have grown at significantly high and sustainable levels have provided

-an enabling environment marked by peace and security,

-quality institutions and infrastructure -support for the private sector

• We are talking about the “Developmental State”– setting a long term developmental vision for economic

transformation and poverty reduction• Planning is back!• Strong and functional institutions• Infrastructure• Good governance• Good policies

Employment friendly Employment friendly strategies/policiesstrategies/policies

• Lessons from emerging countries include– effective country-specific planning, growth

strategies and regional coordination– macroeconomic stability and policy flexibility– striking the balance between government

interventions and market autonomy– adaptation and application of technology to

production processes– investment-friendly conditions– effective governance and capacity building etc.– Knowing that what it takes to start growth is not

necessarily what it takes to sustain it

Employment promotionEmployment promotion

• Employment strategies– Creating new decent jobs depends on accelerating

economic growth as well as on employment-friendly macroeconomic and sectoral policies plus what the ILO does very well

• Employment mainstreaming– Mainstreaming employment into national development

strategies though systematic promotion of mutually reinforcing policies and creating synergies in support of employment goals

• Labour market reforms– Addressing unfavorable labour market conditions

including insufficient demand and supply of skilled labour, etc

Lessons from success storiesLessons from success stories

• ECA study on Lessons from East Asia and Latin America• Implement good policies for sustainable growth and employment

– Resist the temptation to revert to populist policies that appeal to people’s sentiment but hurt long-term growth and employment in the economy

– Import liberalization without export diversification will lead to no good• Introduce institutional reforms to improve attractiveness to foreign

investment• Shift from reliance on export of primary and mineral products to the

export of manufactured and processed products• Institute effective industrial policy• Strengthen innovative and technological capabilities• Seize windows of opportunities at the early stages of product life-

cycles• Provide incentives for the labour force to move away from low-

productivity to high productivity informal-sector activities

In addition…In addition…

• Don’t reinvent the wheel improve on it

• Establish and strengthen south-south cooperation to support country growth strategy

• Develop a strategy to engage China

Role of Key StakeholdersRole of Key Stakeholders

• Implementation of declarations and commitments on decent work still remains a major challenge for African governments

• African countries need to realize that employment should be the central focus of macroeconomic policy in particular the budget process.

• Employment friendly strategies must be time bound, measurable and agreeable by all stakeholders

• Employment targets must be part of government budgets and they should be effectively implemented and monitored

What’s new in all these?What’s new in all these?• The theme of the meeting is not new.

– Should we be asking: “What is new?” or “should we be asking: “what is fundamental to Africa’s development?”

• Nonetheless, of note is…– The emphasis we place on the lessons and opportunity that

the global financial and economic crisis offers, which Africa must seize

– The way we have articulated the issues: • growth is good but insufficient for development, which means that

in addition to occurring at high levels, it must be sustained, job-creating and shared to improve human welfare

– The renewed emphasis on employment and the need to link it to growth and povertyeradication to achieve the MDGs and the objectives of AU and its NEPAD programme

What is new?What is new?

• The articulation of the key role of the developmental state and those of other key stakeholders and in this regard, the emphasis we place on the issues of… – structural diversification, human and physical capital

accumulation, employment mainstreaming, employment targeting, igniting the engines of growth, regional growth poles, industrial policies, public-private partnerships and south-south cooperation

• The presentation of success stories from Africa and elsewhere and lessons that can be drawn from these success stories.

ConclusionConclusion

The road from growth to poverty eradication is paved not with a fixation on low inflation but with an unrelenting

attention to employment—I mean decent jobs!EN

Thank You!Thank You!

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