[Column] Bob Koigi: Why Africa’s neglected economic sectors will be our saving grace in job and wealth creation
Kenya leads African counterparts in successfully absorbing majority of its population into the job market and although the labour force is on track to increase dramatically over the coming decade, creating a job market that comfortably accommodates everyone still remains a pipe dream.
Take the example of Tarus Wekesa a small scale second hand cloth dealer in one of Kenya’s capital downtown stalls who gets his income from the now robust informal sector. The erratic nature of his business means that he cannot support his family wholly and has to look for alternative revenue to also keep his business afloat. Business profit is seasonal, leaving him with nothing tangible to save. It is also not a walk in the park trying to get credit facilities from financial institutions who have traditionally shied away from investing in the informal sector on grounds of risk.
Wekesa is a fraction of millions of Africans potentially able to lift their countries and the continent’s economy but struggling to get attention from both government and the private sector. According to one report, more than 60 percent of Africans are engaged in low paying unpredictable informal jobs offering little security.
The report by McKinsey Global Institute dubbed “Job creation and inclusion growth” shows that although poverty in Africa is falling, with some 31 million moving to the middle class, more wage earning jobs need to be created to sustain gains and distribute the benefits to the majority of the people.
While officially unemployment in the continent is nine percent, 28 percent of the continent’s workforce is engaged in stable wage earning jobs with stable nets.
The majority in the continent workforce is to be found in the vulnerable informal sector jobs or subsistence agriculture.
“Despite the creation of 37 million new and stable wage-paying jobs over the past decade, only 28 percent of Africa’s labor force holds such positions. Instead, some 63 percent of the total labor force engages in some form of self-employment or “vulnerable” employment, such as subsistence farming or urban street hawking,” read a section of the report. If the trends of the past decade continue, Africa would therefore create 54 million new, stable wage-paying jobs over the next ten years—but this would not be enough to absorb the 122 million new entrants into the labor force expected over the same period.
However, by implementing a five-part strategy to accelerate the pace of job creation, Africa could add as many as 72 million new wage-paying jobs over the next decade, raising the wage-earning share of the labor force to 36 percent. In Kenya, 32 percent of the 15 million workers are in stable wage earning jobs with 59 percent in some form of vulnerable informal sector jobs.
The report further notes that Africa has potential to create between 54 million and 72 million more stable , wage paying jobs in the next eight years.
While oil and gas and other natural resources have been the recent gold mines in many African countries, experts note that despite having the potential to boost GDP, petroleum sector creates few jobs. “Oil does not directly employ a lot of people , it is capital intensive but not labour intensive,” said Kenneth Okwaroh a research analyst with Development Initiatives, a non governmental organization on aid and poverty eradication on a recent forum in Nairobi.
Analysts at McKinsey suggest that much of the job growth must come from manufacturing, agriculture, retail and hospitality. This avers that governments should identify a labour intensive sector with a global competitive advantage and strong domestic demand.
For example, Kenya has been cited as a nation that can benefit from manufacturing, given its good infrastructure and access the sea through the port of Mombasa.
The over 100 million people in the East African Community can also provide the incentive of setting up a manufacturing base in Kenya. Already, the export processing zones (EPZs) in the outskirts of Nairobi have already created numerous formal wage earning jobs for thousands in the country.
Manufacture of consumer goods such as shoes, clothes and automobile parts would make Kenya create more formal jobs according to former World Bank lead economist to Kenya Wolfang Fengler.
“The fact is Africa is East Africa is much better located than East Asia to major markets such as Europe and America,” observed Fengler.
Experts have also noted that smallholder intensive agriculture has also become a new source of income and job creation in Kenya as middle class tries their luck in urban and peri urban agriculture.
Egg production, vegetable and flower enterprises on the outskirts of major cities and towns have spawned new incomes and created new formal jobs.
Kenya would also open up more job opportunities if it learned from other African counterparts for example deepening public private sector like Mali successfully has. Mali’s exports of mangoes to the European Union grew sixfold between 2003 and 2008 after a concerted public–private program helped the country build integrated road, rail, and other infrastructure necessary to access export markets.
These moves cut the transit time for shipments in half. In Rwanda, on the other hand streamlining the procedures needed to open a business dramatically increased the number of new companies, from only 700 a year before the reform to 3,000 a year today, an area Kenya is still grappling with even as more investors express interest in setting up shop in the country.
Multiple award winning Kenyan journalist Bob Koigi is Chief Editor East Africa at Africa Business Communities