JOHANNESBURG – The African Development Bank (AfDB) painted a bleak picture of employment creation in Africa, calling for focus on the manufacturing sector and intra-Africa trade to arrest the continent’s spiralling unemployment.
The bank forecast growth in southern Africa to remain moderate in 2019 and 2020 after a modest recovery in 2017 and 2018. “Southern Africa’s subdued growth is due mainly to South Africa’s weak performance, which affects neighbouring countries,” it said. The lender also found that investment is highest in north and east Africa, at 25 to 27 percent of gross domestic product (GDP), and lowest in West Africa, at 15 percent of GDP.
The bank’s director of macroeconomic policy forecasting Hanan Morsy said at the current rate of labour force growth, Africa needed to create about 12 million new jobs every year to prevent unemployment from rising.
“Manufacturing-driven growth has the highest impact on job creation,” Morsy said. The bank in its Africa Economic Outlook report, however, warned that the continent was still battling with a lack of infrastructure issues. The bank said the continent’s infrastructure needs were $130 billion (R1.8 trillion) to $170bn a year, with a financing gap of $68bn to $108bn.
The AfDB also said that while the continent still collected more than $520bn a year in domestic taxes, it was still victim to widespread tax evasion.
Illicit financial flows accounted for 5.5 percent of GDP in sub-Saharan Africa and had cost $1 to $1.8trln over the past 50 years.
However, the Abidjan-based lender heralded the Continental Free Trade Agreement (CFTA), signed last year by 44 African countries as “offering substantial gains for all African countries”.
The bank has also identified five key trade policy actions that could potentially bring Africa’s total gains to 4.5 percent of its GDP, or $134bn a year. This included eliminating all applied bilateral tariffs in Africa, removing all non-tariff barriers on goods and services, and negotiating with other developing countries to reduce their tariffs and non-tariff barriers by 50 percent. Data from the bank showed that intra-regional trade was only 12 percent of the trade on the continent.
Paul Clark, an Africa fund manager at Ashburton Investments, said the need for African governments to follow through with domestic policies to enable the full implementation of the CFTA was key.
“If we’re looking for the “Next China after China” it could be right under our noses. A continent growing at these high rates will surely surpass the current Asian and Indian subcontinent high growth regions,” Clark said.