Competitiveness Boost Urgently Needed to Meet Africa’s Demographic Challenges

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ImageDURBAN, South Africa, May 4, 2017—Without urgent action to address stagnating levels of competitiveness, Africa’s economies will not create enough jobs for the young people entering the job market, according to a report released today. If current policies remain unchanged, fewer than one-quarter of the 450 million new jobs needed in Africa in the next 20 years will be created.

These are among the key findings of the Africa Competitiveness Report 2017, a biennial publication jointly produced by the World Economic Forum, the African Development Bank, and the World Bank Group.

Priorities to meet the changing demographics include policy reforms to improve the quality of institutions, infrastructure, skills and adoption of new technology. House construction and better urban planning present opportunities for short-term competitiveness gains.

The report finds that the ability of Africa’s economies to generate enough jobs for its young and growing population rests on the successful implementation of urgent reforms to boost productivity. Competitiveness is defined as the set of institutions, policies and factors that determine the level of productivity—and hence future prosperity—of a country. The report, which covers North Africa and Sub-Saharan Africa, comes at a time when growth in most of the region’s economies has been slowing after a decade of sustained growth. Further stagnation is likely in the absence of improvements in the core conditions for competitiveness.

Compounding the challenge to Africa’s leaders is a rapidly expanding population, which is expected to add 450 million more to the labor force over the next two decades. Under current policies, only 100 million new jobs would be created during this period, according to the report.

Africa’s young, dynamic population does, however, possess the potential to lead an economic revival in the region backed by targeted short- and long-term reforms in key areas, the report finds. Priority action areas for improved competitiveness are:

Short term:

  • Prioritizing sector-specific reforms in labor-intensive sectors such as agribusiness, construction, and micro-enterprises can stimulate near-term job creation.
  • Targeted support can address acute economic issues for vulnerable regions and populations in fragile countries.
  • Open trade policies can help foster regional economic integration.
  • Developing value chain links to extractive sectors will encourage economic diversification in resource-rich countries.
  • Increased housing construction through investment, better urban planning, and less red tape will create jobs and address severe shortages of housing stock.

Long term:

  • Strengthening institutions is a pre-condition to enable faster and more effective policy implementation. Failure of implementation in the past has often been attributed to weak institutions.
  • Improved infrastructure is needed to enable greater levels of trade and foster businesses growth.
  • Greater adoption of technology will be critical to boosting lagging productivity.
  • Developing the right skills will help Africa remain competitive in a rapidly changing global economic landscape.

“Removing the hurdles that prevent Africa from fulfilling its competitiveness potential is the first step required to achieve more sustained economic progress and shared prosperity,” said the World Economic Forum’s Richard Samans, Managing Director Centre for the Global Agenda.

“To meet the aspirations of their growing youth populations, African governments are well advised to enact polices that improve levels of productivity and the business environment for trade and investment,” said the World Bank Group’s Klaus Tilmes, Director of the Trade & Competitiveness Global Practice, which contributed to the report. “The World Bank Group is helping governments and the private sector across Africa take the steps necessary to build strong economies and accelerate job creation in order to benefit from the potential demographic dividend.”

“African cities have to update their urban plans, taking into account demographic and economic developments in the last decades. This is crucial to address the shortage of urban infrastructure and availability of land for residential housing. This is important as a massive investment is needed for the continent to lower the housing backlog, thereby improving the lives of urban residents, and to create employment for the youth,” said African Development Bank’s Abebe Shimeles, Acting Director of Macroeconomic Policy, Forecasting and Research Department. “In its new business delivery model, the Bank has created a unit to specifically focus on cities and urban infrastructure.”

The Africa Competitiveness Report combines data from the Forum’s Global Competitiveness Index (GCI) with studies on employment policies and city competitiveness. Also included in the report are detailed competitiveness profiles of 35 African economies. The profiles provide a comprehensive summary of the drivers of competitiveness in each of the countries covered by the report, and are used by policy-makers, business strategists and other key stakeholders, as well as those with an interest in the region.

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