Social distress due to joblessness, inequality hurting EA’s economic progress

In spite of impressive economic growth in the region, political and social upheavals due to rising unemployment and inequality in East Africa are likely to erode the gains from this expansion, a new report warns.

The latest Africa Economic Outlook report notes that belts of economic prosperity are concentrated around the capital cities — Nairobi, Kigali, Kampala, Dar es Salaam and Bujumbura — while poverty is widespread on the outskirts and in the countryside.

This means that capital cities continue to attract more private and public investment, including soft and hard infrastructure, in comparison with rural areas, which creates wide regional income disparities.

“Limited investment opportunities limit the potential of rural areas to drive growth for their inhabitants, leading to social distress,” notes the report titled Regional Development and Spatial Inclusion.

“If the proceeds are not shared equitably, the impact of rapidly expanding economies may ultimately become more destructive for the society.”

East Africa is among regions on the continent that are most vulnerable to political and social upheavals, according to the report.
It further notes that current policies have not proved effective at speeding up job creation in productive sectors, and that participation in the wealth accumulated over the past decade is limited, calling into question the effectiveness of the bloc’s economic policies.

“This means that in the decades to come, a fast rise in urban and rural populations and the constraints of global competition will make it difficult for the region to achieve economic transformation,” says the report, adding that the level of risk in East Africa is particularly high due to the rapid population growth.

It shows that East Africa’s current population of an estimated 400 million will increase in the next five years to approximately 650 million, peaking at 800 million in 2050, well ahead of other regions in Africa.

According to Henri-Bernard Solignac-Lecomte, head of Europe, Middle-East & Africa at the Organisation for Economic Co-operation and Development (OECD) Development Centre, the biggest challenge facing policy makers in East Africa is job creation and equal opportunities, because rapid population growth increases the demand for those opportunities.

“What you need to do is to make sure opportunities exist everywhere — both in cities and rural areas — so that people can make the choice of where they want to live and work,” Mr Solignac, who is also among the lead authors of the report, told The EastAfrican.

Tanzania’s population currently stands at about 50 million people, and is projected to rise to 100 million by 2025.

“This is not going to come from urban dwellers; there is still rapid population growth in rural areas,” said Mr Solignac. “Governments need to create opportunities for these people everywhere.”

Southern Africa, Central Africa and North Africa are projected to have relatively stable population growth rates over the next decade, the report shows. This will be from less than 100 million currently on average across the different regions to a maximum of 300 million by 2050.

West Africa is witnessing high population growth close to East Africa’s, and is projected to grow from over 300 million currently to over 700 million in 2050.

Tackling the demographic challenge, experts argue, will require a combination of policies including increasing skills developments, addressing gender inequalities and stepping up job creation.

“Increasing investment in girls’ education could lead to a faster demographic transition and a steeper decline in birthrates than anticipated,” argues Mr Solignac. “It will also lead to better skills so that people can be employed more productively with higher incomes.”

Produced annually by the African Development Bank (AfDB), the OECD Development Centre and the United Nations Development Programme (UNDP), the report warns that social demands are on the rise, and this is likely to lead to more public protests.

In 2014, top drivers of public protests were employment-related — claims for wage increases and better working conditions — followed by demands for better public services, according to the report.

“In every African country, there is a belt of prosperity around urban areas and the farther you move away from the urban areas, the more you find pockets of poverty. These things cause social distress and sometimes violence because what happens is that there are very few opportunities, especially for young people,” said Steve Kayizzi-Mugerwa, acting chief economist and vice-president of AfDB.

Unemployment, he argues, forces young people either to migrate or resort to violence and other expressions of extremism.

The report shows that the majority of Africa’s population is likely to remain rural until the mid-2030s. By 2050, sub-Saharan Africa’s rural population is expected to increase by two-thirds, or 400 million more people.

Spatial inequalities can lead to significant migration flows, as migrants seek better opportunities elsewhere, notes the report.

However, spatially unequal provision of public services fuels migration that is economically inefficient: Migrants looking for better public services may not find more productive economic activities in their new places of residence.

Migrating

At present, according to the Gallup World Poll, 29 per cent of people in sub-Saharan Africa want to move away from their current areas, and dissatisfaction with local public services accounts for 60 per cent of the variation in migration intentions, compared with 20 per cent for discontent with personal living standards.

Many migrants thus find low-paying informal jobs and still end up in poverty, often in the slums.

Experts argue that to reduce inequality and achieve inclusive growth, East African policy makers must prioritise spatial inclusion — defined as the objective of connecting people to assets and public goods, regardless of where they live or work.

“The policies are not quite obvious. Light industries where you will be able to generate many jobs — not for export. Some countries cannot even produce a matchbox, bread… this will create employment,” said Mr Mugerwa.

Spatial inclusion may also be pursued through policies promoting the development of regions, including those that are lagging behind by connecting them to one another.

The report shows that poverty across Africa has a strong spatial dimension, and regional disparities are a major obstacle to the structural transformation of economies.

They cut off remote areas from growth poles, deprive citizens of services, and prevent farmers and businesses from accessing markets.

And according to the Afrobarometer study, based on surveys in 34 African countries between October 2011 and June 2013 by a team of social scientists, the growing protests trend in South Africa may be an example of just such causes and effects of popular dissatisfaction with economic management despite a decade of growth.

In East Africa, the survey reveals that Kenya, Tanzania and Uganda — which have all sustained high levels of growth in the past decade, especially Tanzania (7.0 per cent) and Uganda (6.9 per cent) — are among the five countries with some of the worst dissatisfaction levels in Africa.

If economic growth is being driven by sectors that create limited employment, and the benefits of growth accrue only to a few, then glowing GDP growth figures will offer little solace to those who want to escape poverty, according to the study.

The report notes that after peaking in 2013, at levels more than five times higher than 10 years before, protests started to decrease slightly in 2014. This trend reflects an easing of tensions in most African countries, which contrasts with heightened tensions in a limited number of hot spots.

The political normalisation of countries that had been in crisis, particularly since the Arab Spring, partly explains the overall decline in the intensity of protests.

FACT BOX

Africa’s population of 1 billion in 2010 should double by 2050, although the magnitude of the increase will vary across the continent. South Africa and North Africa will be less affected.

The rapid growth of Africa’s workforce will increase the pressure on labour markets. The workforce is expected to increase by 910 million people between 2010 and 2050, with 830 million in sub-Saharan Africa and 80 million in North Africa.

The estimated numbers of youth joining labour markets this year are about 19 million in sub-Saharan Africa and 4 million in North Africa.

Over the next 15 years, the figures will be 370 million and 65 million respectively, or a yearly average of 24.6 million and 4.3 million new entrants.

The upcoming growth in Africa’s workforce represents two-thirds of the growth in the workforce worldwide.

GDP

Assessing the performance of African countries in terms of GDP per capita shows that only a few of them have engaged in a convergence process with high income countries.

In particular, sub-Saharan Africa’s GDP per capita as a share of the OECD average has stagnated: it declined slightly in the 1990s before returning to just 7 per cent in 2013.

Between 1950 and 2009, there six converging countries: Botswana, Egypt, Lesotho, Mauritius, the Seychelles and Tunisia.

Another six – Cabo Verde, Chad, Ethiopia, Gambia, Tanzania and Uganda – initiated the process, mostly in the 2000s.

The more recent convergence of Algeria, Cameroon, Ghana, Namibia, Niger and Senegal which must continue to be consolidated, according to the report.

The World Bank (2015) forecasts that by 2030, despite major efforts in the context of current policies, 19 per cent of Africa’s population will still be living in poverty.

Those 300 million people will then represent 80 per cent of the global population living on less than $ 1.25 a day in 2005 purchasing power parity.